Schneider Electric is trying to rally the semiconductor industry at large to expand its use of solar, wind, and other renewable-energy sources to run chip fabs and the sprawling supply chains that support them.
The company is partnering with big names in the semiconductor realm, including Intel and Applied Materials, the world's largest semiconductor and display equipment maker, to launch a new program called “Catalyze.” The effort is all about encouraging chipmakers and their suppliers to work together to expand the use of renewable energy and, in turn, reduce the growing carbon footprint of chipmaking.
The new program comes at a time when construction of new fabs is on the upswing, especially in the U.S., as companies aim to stay ahead of demand that could propel the global chip market to $1 trillion by 2030.
The U.S. is also poised to roll out more than $50 billion in subsidies and other incentives created by the Chips and Science Act. The goal is to motivate chipmakers and suppliers to build domestic fabs and expand existing ones.
The construction boom presents a rare chance for the industry to drive up demand for renewables, said Hans Royal, senior director of client development in Schneider’s renewable-energy division. “These companies may have more influence with local governments to create new renewable-energy solutions that didn’t previously exist.” When scouting different locales, they may even require access to renewable energy as a condition for building a fab in the first place.
“This opportunity may be less available in more established industries where there is less ‘new’ factory or economic development happening,” continued Royal. “The semiconductor industry is now also in a unique position where it requires significant energy for manufacturing, but its existence is also critical for enabling smarter and more efficient technologies."
Power-Hungry Fabs
Chipmaking is one of the most complex and expensive endeavors in the world of manufacturing, and semiconductor firms devour vast amounts of electricity to run the state-of-the-art equipment in their fabs.
The largest, most advanced fabs run around the clock and can consume more than 100 megawatt-hours (MWh) of electricity per hour—even more than oil refineries and automotive plants, according to a report by McKinsey.
The industry’s power consumption is so voracious that some fabs can run up utility bills as high as tens of millions of dollars per year. Electricity often accounts for up to 30% of the operating costs of a high-end facility, which can contain 1,000 or more manufacturing tools. The chipmaking industry expelled more than 40 million tons of carbon—equal to the annual emissions of five million homes—in 2020 alone.
But the power demands of fabs—and therefore, the overall carbon footprint of making chips—will only keep rising as companies ramp up their production and move to smaller, more advanced process nodes.
Against that backdrop, Applied Materials, Intel, and other big names in the $500 billion semiconductor industry are setting goals and taking steps to adopt more renewable energy and even reduce the energy that they need to buy in the first place.
"Switching to renewable energy is an important step to reduce greenhouse gas emissions," said Keyvan Esfarjani, Intel’s global operations officer, in a statement.
Intel stated it already procures 93% of the electricity used to run its fabs and other operations around the world from renewable sources, even while aggressively building up its manufacturing capacity.
By 2030, the semiconductor giant’s plans include the exclusive use of renewables for electricity, and it’s also investing $300 million in efforts to conserve energy. However, these efforts only influence the company’s Scope 1 and Scope 2 emissions produced directly by Intel and its energy use. They leave out the Scope 3 emissions that stem from thousands of other companies up and down its value chain, including those that supply everything from manufacturing equipment for its fabs to raw materials used to make chips.
“The expansion needed to support the growth of the market is incredible, as is the need for energy to support that growth,” said Royal. “We need to encourage as many of these companies to transition to renewable energy as possible, to mitigate some of the environmental impact.”
The “Power” of Collaboration
Encouraging thousands of suppliers around the world to use more renewable energy is hard enough. But the complexity of the value chain adds to the challenge. There are also difficulties involved in defining where one supplier’s carbon emissions end and another’s begin.
The Catalyze program is trying to tackle the problem through collaboration. Schneider said it plans to offer training and resources to help put these suppliers on the path to adopting more renewable energy.
One goal of the Schneider-run program is to get companies across the semiconductor supply chain to combine their energy purchasing power, thus motivating utilities to invest more in renewables.
Through the program, Schneider Electric plans to present suppliers—which may not be able to manage on their own—with an opportunity to participate in the market for utility-scale power purchase agreements (PPAs), in which several companies team up to negotiate a long-term contract for energy.
It will also work to increase awareness of the availability of renewable energy in regions where large portions of the semiconductor supply chain are located and educate companies on how best to track their sustainability goals.
For Applied Materials and Intel, the collaboration is also an opportunity to assist suppliers that have made commitments to reduce their carbon emissions and push other semiconductor firms to consider joining.
Furthermore, the companies that take part in Catalyze will combine efforts to figure out new focus areas over time and identify suppliers that it would make sense to engage as part of the new program, said Schneider.
Reaping Renewable Rewards
Fabricating chips in a more sustainable way is possible. But given how rapidly the industry is expanding, it may be a challenge to convince chipmakers to take the time to explore their renewable-energy options.
But the semiconductor industry is starting to figure out that it needs to chart a more sustainable path for growth in the years ahead, said Royal. Renewable-energy sources have other perks, too, he pointed out.
“Additionally, it’s important to note that leveraging renewable energy in many areas of the world can have many co-benefits to companies while they’re in growth mode,” he said, including the potential for energy savings and reducing exposure to volatile electricity pricing.
