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Taiwan's leader tells residents to conserve water as the island faces worst drought in 56 years

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Key Points
  • Taiwan's President Tsai Ing-wen has called on residents to conserve water and prepare for shortages as the island faces a drought.
  • Taiwan did not experience a typhoon in 2020 and faces its most severe water shortage in 56 years.
  • Typhoons typically produce huge amounts of rainfall.
Taiwan President Tsai Ing-wen speaks during a press conference at the presidential office in Taipei on January 22, 2020.
Sam Yeh | AFP | Getty Images

Taiwan's President Tsai Ing-wen has called on residents to conserve water and prepare for shortages as the island faces a drought, following months of scant rainfall and a lack of typhoons making landfall last year.

In a Facebook post over the weekend, Tsai said that Taiwan did not experience a typhoon in 2020 and faces its most severe water shortage in 56 years. Typhoons typically produce huge amounts of rainfall. She explained that the government set up an emergency response center to deal with the drought.

Tsai added that the government is monitoring water conditions throughout the island and that it will take steps to ensure a stable supply of water for industries and households.

Local reports said last month that the island stepped up nationwide water restrictions and mobilized emergency water resources, including a desalination plant in Hsinchu County, as officials anticipate the dry season will last until May.

Tsai said in her post that a military transport aircraft was dispatched to carry out cloud seeding over the Shimen reservoir in the north — one of the largest water catchment areas in Taiwan. That reservoir is currently at only 49.13% storage capacity, according to the Water Resources Agency. Other reservoirs on the island are also at alarmingly low levels, with Te-Chi reservoir at 10.19% capacity and Tsengwen at 15.22%.

Taiwan's industries are bracing for potential disruption due to the water shortage.

Chipmakers have reportedly been buying truckloads of water for their foundries in preparation for meeting future water demand. Reuters reported last month that the Taiwan Semiconductor Manufacturing Co (TSMC), the world's largest contract chipmaker, was ordering small amounts of water as a "pressure test." It told the news wire that it had not yet seen any impact on its production.

If the water shortage disrupts Taiwan's semiconductor sector, it could potentially have global ramifications as the industry faces a chips supply crunch due to a spike in demand for consumer electronics like smartphones, tablets and PCs last year.

The chip shortage is particularly prominent in the auto industry where carmakers are expected to lose billions of dollars in earnings this year. Semiconductors are crucial components for cars in areas like infotainment systems and more conventional parts such as steering and brakes. Carmakers expect to sell fewer cars due to the supply crunch.

Still, the current water scarcity has not had any major impact on production in Taiwan's semiconductor industry, according to Gokul Hariharan, managing director and co-head of Asia technology, media and telecom research at JPMorgan.

Hariharan, who has extensively covered the semiconductor space in Taiwan, explained that a water shortage around the second quarter of the year is a common occurrence as it coincides with firms ramping up chip production. Seasonal rain and replenishment of reservoirs usually happen in late Q2 or in the summer during Q3, he told CNBC.

"I would say it doesn't seem like companies are going to have to stop production as things stand, they are running at about 100% utilization right now and I think we're not really looking at huge capacity expansion this year," he said. That implies the amount of water that semiconductor firms consume during their production process will not drastically increase in the near term.

While the sector is unlikely to see a production disruption per se, Hariharan said that supply conditions will remain tight for some time. "There will be some degree of new measures being instituted by companies, in terms of how much water recycling they need to do," Hariharan said.

Last week, Taiwan's Ministry of Economic Affairs head, Wang Mei-hua, said that the island's chipmakers are already producing at full capacity to meet global demand.