A third of semiconductor production could be hit by climate change disruption in the next decade, potentially hampering the AI and EV revolutions.
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A new report from advisory firm PricewaterhouseCoopers (PwC) revealed that around 32% of global semiconductor production could face climate change-related copper supply disruptions by 2035. That is quadruple the level seen at present.
Water Shortage
The main danger, it seems, is a shortage of water, which is crucial for copper production processes such as smelting and refining.
Chile, the world’s largest copper producer, is already grappling with water shortages that are slowing down production. By 2035, most of the 17 countries supplying the chip industry will be at risk of drought, PwC said. That includes China, Australia, Peru, Brazil, the U.S., Mexico, the Democratic Republic of Congo, Zambia, and Mongolia.
The last global chip shortage during the spike in demand following the pandemic lockdowns led to factory shutdowns, bashed the automotive industry, and halted production lines across other chip-dependent sectors.
That’s because semiconductor chips are vital in the manufacturing of electric vehicles as well as powering AI systems. However, semiconductor stocks such as Nvidia (NVDA), which is looking at solidifying its chip supply lines, and EV maker Tesla (TSLA) were untroubled by the news.
“It cost the U.S. economy a full percentage point in GDP growth and Germany 2.4%,” PwC project lead Glenn Burm said in the report.
No Copper Match
Copper is used to make the billions of tiny wires inside every chip’s circuit. Even if alternatives are being researched, PwC said that there is currently no match for its price and performance.
The risk will only increase over time if innovation in materials does not adapt to climate change, and a more secure water supply is not developed in the affected countries, PwC said.
“Around half of every country’s copper supply is at risk by 2050 – no matter how fast the world reduces carbon emissions,” the report says.
Chile and Peru have taken steps to secure their water supply by increasing mining efficiency and building desalination plants.
However, PwC estimates that 25% of Chile’s copper production is at risk of disruptions today, rising to 75% within a decade and to between 90% and 100% by 2050.
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