Urgent Need for Decarbonization in Semiconductor Manufacturing
Authored by Gaurav Tembey, Mike Lyons, and Jan Hinnerk Mohr
Over the past two decades, the semiconductor industry has grown at least twice as fast as the broader economy. This accelerated growth, however, has come with environmental consequences. According to BCG’s analysis, carbon emissions of the top semiconductor manufacturing companies have been increasing year-over-year without signs of slowing down, unlike other comparable energy-intensive industries (e.g., automobile, oil & gas) whose carbon emissions are now trending downwards. Semiconductor manufacturing is inherently a high energy intensity operation. In fact, the Scope 1 & 2 emissions of top semiconductor manufacturing companies are greater than those of the largest global automotive companies.
In this article, we share the overall GHG emissions of the semiconductor industry, its trends, and the underlying root causes — all developed through our own independent modeling. In conjunction with the ongoing COP27 summit, we hope that this article sparks a conversation within the industry on the urgency of action, and the steps needed to decarbonize semiconductor manufacturing.
GHG emissions in semi manufacturing are trending upwards
In order to understand the full scope of emissions from the industry, we built our own proprietary model to track industry’s emissions profile over the years. Given the standards of reporting and data quality in the industry are not up to par currently, we had to do substantial clean up on the available data in our model to produce these estimates and analyses.
By our estimates, the industry produced an estimated 210 MMT CO2e across Scopes 1, 2, and 3 in 2021, which is equivalent to residential emissions of more than half the households in the US. More worryingly, these emissions have consistently grown at the rate of 10% CAGR over the previous three years.
These emissions were calculated across the entire value-chain of activities: Scope 1 (direct emissions produced), Scope 2 (emissions due to procured electricity & energy), and Scope 3 (emissions produced due to CapEx, raw materials, transportation, distribution, post processing, etc.).
When we compare the top companies in semiconductor manufacturing to top global automotive companies, we find that the former are producing as much, or more, carbon emissions as the latter. However, the trend of the emissions is worth noting here. Automotive companies have made substantial progress in establishing a clear downward trend in their year-over-year emissions, in-part because automotive industry receives much more public scrutiny for carbon emissions, while semi manufacturing has historically slid under the radar in comparison.
Structural headwinds to progress
In order to understand root causes, we assessed whether emissions have changed on a per-wafer basis. The average GHG emission per wafer has remained at a standstill, if not slightly increased, over the past three years for the top six semi manufacturers.
We trace the primary drivers of this limited progress to two drivers. First, the industry has not switched to renewable energy in substantial manner. Some players have made significant strides, such as Intel which is leading the industry by moving ~80% of global electricity consumption to renewable sources. But the majority of electricity consumption in the industry still comes from traditional sources.
The second driver is node advances. As the industry continues its march towards increasingly advanced process nodes, each newer node is increasingly energy intensive and GHG intensive.
This data, which comes from imec, shows us that technological innovation is creating headwinds that slow down progress in reducing carbon emissions.
Changing the trajectory
Despite these headwinds, the industry is not standing still. We’ve observed growing awareness and focus across the industry around GHG emissions based on multiple conversations that we have had recently. There has been meaningful progress in some areas, such as Intel’s sourcing of renewable energy. Moreover, the European semiconductor industry has collectively reduced absolute PCF emissions by 42% in the past decade. However, there is still a clear need for a greater sense urgency to bring about more substantial changes in order to change the trajectory of emissions curve in semiconductor manufacturing.
In our conversations with the industry players, we also see a desire to do more. In order to support this change, we will publish a follow-up article on the potential mitigation actions, and the resulting trajectory we could achieve through concerted, collaborative efforts. If we accelerate the level of awareness and action on GHG emissions, we can change the current trajectory and build a sustainable future for the semiconductor industry and the planet.
