Global Trends of Enhancing Sustainability by ICT Products

The United Nations Climate Change Conference (COP28), which concluded on December 13, 2023, reached an agreement by negotiators from 198 countries to commit to transitioning away from fossil fuels in energy systems and accelerating actions to achieve net zero before 2050. This is the first time in the history of the climate summit that the term “fossil fuels” was explicitly mentioned in the resolution. This resolution, however, did not include “phasing out fossil fuels” as expected by various European and American countries, but used a more neutral word “transitioning.” In addition, the resolution recognized that global carbon emissions will peak before 2025 and promised to phase out “inefficient fossil fuel subsidies.”

In pursuit of practical solutions, the Global Enabling Sustainability Initiative (GeSI) SMARTer2030 report projected that by 2030, information and communication technology (ICT) products could lead to a reduction of 1.25 billion tons of CO2e, equating to 1.97% of global emissions in various global industry sectors. The primary contributors to this reduction are identified in key sectors, with smart manufacturing leading the charge at 22%, followed closely by smart transportation (21%), smart agriculture (17%), smart construction (16%), and smart energy (15%), accounting for a total of 91%.

2030 ICT CO₂e Abatement Potential by Use Case (GeSI, 2015).

As the frontrunner in carbon reduction, smart manufacturing encapsulates a multitude of critical applications for energy-saving opportunities:

• Virtual Manufacturing: This involves the fusion of cyber-physical systems (CPS) with the industrial internet of things (IIoT), and machine-to-machine (M2M) technologies to create digital twins of physical manufacturing and simulated manufacturing. This integration optimizes efficiency in production processes, enhances resource utilization, and reduces energy consumption for better sustainable industrial practices.
• Customer-Centric Production: Incorporating customer preferences into both the development and production phases, it fosters a tailored strategy that minimizes waste and optimizes energy usage. It also adopts decentralized production networks and distributed manufacturing models to increase energy efficiency by reducing transportation-related energy consumption.
• Circular Supply Chains: As a pivotal component in enhancing the sustainability of smart manufacturing, circular supply chains engage in practices such as remanufacturing products, components, and waste, as well as adopting circular packaging. This not only reduces the overall demand for new resources but also minimizes the environmental footprint typically associated with the disposal of manufacturing by-products.
• Smart Services: These services help create a cross-sector ecosystem that seamlessly integrates both upstream and downstream manufacturing processes. The interconnected services enhance operational efficiency, reduce energy-intensive tasks, and contribute to a more sustainable and interconnected smart manufacturing environment.

Contribution to Sustainability by Taiwan Semiconductor Industry

The EU’s Carbon Border Adjustment Mechanism (CBAM) serves as a strategic tool by imposing a “carbon price” on imports of high-carbon-intensity items. This compels product companies and their upstream/downstream suppliers to work together for emission reduction of their products and manufacturing processes. The long-term strategic goal for CBAM is to realize a 55% reduction in EU industries’ CO2 emissions between 1990 and 2030.

Initially, CBAM will mainly apply to steel and other industrial goods such as iron, aluminum, fertilizers, ammonia, and cement imported into the EU starting in 2027. Although semiconductors are not among the initial list of high-carbon-intensity items, due to semiconductor manufacturing’s nature of high energy consumption, the increasing pressure for the semiconductor industry to reduce energy consumption and enhance sustainability in the near future should not be underestimated.

The semiconductor industry in Taiwan holds a prominent position, not only for its significant economic contributions but also due to the attention it draws regarding carbon emissions and electricity consumption. In 2021, the top 10 carbon-emitting companies accounted for 39% (about 107 million metric tons). These companies include electricity, petrochemical, steel, plastic, cement, and semiconductor industries. The semiconductor industry, known for its advanced chip manufacturing processes with high value but requiring higher electricity consumption and carbon emissions, often becomes the focus of attention from media and environmental groups.

The high value of Taiwan’s semiconductor industry can be demonstrated by a research study of the Industry, Science and Technology International Strategy Center (ISTI) of ITRI. In 2022, the semiconductor industry in Taiwan reached US$ 160 billion in revenues with employment of 327,000 people. When the additional outputs based on supply chain industries (indirect) and disposable income used in related service industries (induced) are included, the semiconductor industry also generated an additional 127% in revenues and 279% in employment.

Total Revenues and Employment Generated by Taiwan’s Semiconductor Industry (IEK Consulting, 2024).

According to another study (2021) conducted by ISTI of ITRI, the semiconductor industry in Taiwan has demonstrated strong performance in electricity consumption competitiveness, an index defined by the ratio of “an industry’s total value added” to “its total electricity consumption.” Compared to other industry sectors in Taiwan, the semiconductor industry created a value of 26.8%, higher than the overall manufacturing industry (NTD 59.7 value-add per kWh vs. NTD 47.1).

Despite already surpassing the overall average within Taiwan, the electricity consumption competitiveness of the semiconductor industry can still be improved in three key directions: (1) vertical integration of advanced wafer manufacturing, packaging, and testing to increase added value; (2) product efficiency review to assess power efficiency from a product perspective and phase out of inefficient products; (3) global presence expansion by strategically planning investments and establishing facilities to leverage complementary technology, materials, and talent outside Taiwan.

According to another study by ISTI of ITRI, ICT products with embedded semiconductors manufactured by TSMC and used in AI computing, 5G, HPC, among others, are estimated to currently contribute to global energy savings of over 200 billion kWh by 2030, roughly more than four times the electricity consumption for production. In other words, for every kWh of electricity used in production by TSMC in Taiwan, its IC products can be used in smart electronic products or services to save 4 kWh of electricity globally. With advantages in chip market share, computing speed, and expanded application scope, there is a future trend of increasing energy-saving benefits year by year.

Furthermore, still another study by ISTI of ITRI adopted the simulation models from the American Council for an Energy-Efficient Economy (ACEEE) for different scenarios of energy-saving effects based on the use of electronic products with embedded semiconductors. The results indicated that by 2030, the global ICT products could save approximately 11.8% of the world’s total electricity consumption (3.9 trillion kWh). Within the ICT products, the contribution by global semiconductors will be about 28.4%. Considering that the semiconductors produced by Taiwan account for 32.8%, Taiwan’s semiconductor industry could help reduce the world’s total electricity consumption by about 360 billion kWh, representing 1.1% of the global total electricity consumption.

Taiwan’s Semiconductor Industry Contributes to Global Electricity Saving (IEK Consulting, 2024).

Of the 360 billion kWh saving by 2030, Taiwan’s semiconductor products are expected to make an even more significant impact on global energy saving, contributing to an estimated saving of 22% (80 billion kWh) from smart manufacturing. ICT products with embedded semiconductors can enable smart manufacturing applications in cyber-physical systems (CPS), industrial internet of things (IIoT), embedded system production technology, data analytics and cloud computing, 3-D printing, as well as drones and robotics.

Also, from smart transportation, Taiwan’s semiconductor products are expected to assist in global energy savings of 21% (76 billion kWh) by 2030. Energy-saving benefits include traffic control and optimization (e.g. automated driving, autonomous vehicles, driverless cars), connected private transportation (e.g. car/route sharing, intermodal transport), and smart logistics (e.g. fleet management and optimized routes, digital warehouses, operational agility).

Although the semiconductor industry in Taiwan faces environmental concerns for its carbon emissions and electricity consumption, its electricity consumption competitiveness outperforms other manufacturing sectors. Moreover, products manufactured by TSMC are expected to contribute to a significant impact on global energy savings, including an estimated total of 43% from smart manufacturing and smart transportation. This underscores the potential positive impact of Taiwan's semiconductor products on global energy efficiency in the coming years.

Regarding global policies, there is a critical concern related to the EU’s 2050 net-zero emissions goal and CBAM. The mechanism’s imposition of carbon price on Scope 3, which includes suppliers, distributors, and product use of imported products to the EU, raises potential challenges. For example, the semiconductor industry in Taiwan, currently manufacturing and assembling products or modules locally before exporting to brand companies overseas, may face additional financial and societal burdens due to CBAM’s carbon levies. There is a call for recognizing the benefits of ICT products with embedded semiconductors in reducing carbon emissions and electricity consumption through carbon credits or reduced carbon prices. The suggestion is that, similar to industries like Tesla in the sustainability sector, semiconductor contributions to enhancing sustainability should be acknowledged, and ICT products and their suppliers should receive proportional carbon credits for their positive environmental impact.

Outlook to Leverage Taiwan’s Semiconductor for Sustainability

The call for green transformation in Taiwan, driven by the urgency of addressing climate change, has become a new paradigm for establishing industry or corporate competitiveness. Not only has the National Development Council (NDC) published Taiwan’s Pathway to Net-Zero Emissions in 2050, providing actions to achieve 2050 Net-Zero Emissions, but the National Science and Technology Council (NSTC) has also developed the 5-year Chip-based Taiwan Industrial Innovation Program in 2023 to solidify Taiwan’s international competitive advantage in semiconductors. This program aims to leverage Taiwan’s strengths in semiconductor manufacturing and packaging, extending them to the front-end IC design, thereby establishing Taiwan as an international hub for IC design.

Key elements of the program focus on using IC design as an engine for international innovation, with a commitment to:

• establishing a global IC design training and innovation hub in Taiwan
• utilizing Gen AI to drive industrial innovation
• strengthening the foundational environment to attract global talent
• accelerating innovation in industrial technologies, and
• attracting international startups and investments to Taiwan.

The program’s goal is to enable industrial innovation across various application sectors, including smart agriculture, smart homes, and autonomous vehicles, all highly related to enhancing sustainability.

While Taiwan has built the semiconductor industry as the foundation rock with more than 50 years of development, the semiconductor sector continues to position Taiwan as a global key partner. Therefore, it is crucial for Taiwan to help drive global carbon reduction by enhancing industrial value and improving energy efficiency through the empowerment of new semiconductor technologies and smart applications. Taiwan can effectively assist the world in moving towards the goal of net-zero sustainability in three major directions:

1. Resource Efficiency: Having the control over scarce resource inputs, such as water and electricity, is essential for maintaining a competitive advantage in the semiconductor industry. Ensuring superior resource efficiency indicators is crucial for sustaining Taiwan's position.
2. Green Energy Investments: Evaluating the feasibility of diverse green energy investments includes assessing long-term contracts for group purchase of green energy, self-construction, and self-generation of green energy.
3. Global Contribution to Sustainable Development: Grasping worldwide trends in AI and global manufacturing supply chains represents a golden opportunity for Taiwan in the next stage to contribute to global goals related to sustainable development. In the post-pandemic era, Taiwan could become an indispensable key partner in the global resilient industry ecochains, accelerating digital and sustainable twin transformation and leveraging diverse applications and services in technology, humanities, and innovation. The vision is encapsulated in the concept of “Smart Taiwan Value” to assist the world in envisioning a better future.

In conclusion, Taiwan’s semiconductor industry, with its influential role in energy-saving initiatives, is poised to be a key global leader in resilient industry ecochains, demonstrating a commitment to a sustainable future through collaboration with global partners.

本文經編輯後刊載於2024年3月26日【ITRITODAY第116期】
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