(Bloomberg) -- Day and night, trucks arrive at the Southern Taiwan Science Park to pour concrete for what will become the world’s most advanced chip factory.It’s a giant undertaking that befits the out-sized ambitions of Taiwan Semiconductor Manufacturing Co., the world’s go-to chipmaker. The TSMC facility’s estimated cost of $20 billion is about three times that of Elon Musk’s Tesla Inc. gigafactory near Berlin.It’ll have a carbon footprint to match.Demand for semiconductors is surging as life becomes increasingly digital, with chips the key component of applications from washing machines to artificial intelligence.But all that computing power comes at a cost. Silicon Valley talks a lot about sustainability, yet the reality is that chip-making is a hugely resource-intensive business.In an October 2020 paper, researchers led by Udit Gupta of Harvard University used publicly available sustainability reports from companies including TSMC, Intel Corp. and Apple Inc. to show that as computing becomes increasingly ubiquitous, “so does its environmental impact.”Information and computing technology is expected to account for as much as 20% of global energy demand by 2030, with hardware responsible for more of that footprint than the operation of a system, they found. “Chip manufacturing, as opposed to hardware use and energy consumption, accounts for most of the carbon output,” the researchers concluded.As implied by the title of the paper — “Chasing Carbon: The Elusive Environmental Footprint of Computing” — that’s a little-known fact, and an uncomfortable one for governments pushing high-end chip making.President Joe Biden’s drive to set up cutting-edge fabrication plants, or fabs, in the U.S. risks colliding with his climate friendly agenda, while the European Union’s plans to build chip production could test its commitment to be the first climate-neutral continent by 2050.Semiconductor companies broadly acknowledge there’s a footprint issue, although stress the actions they are taking to mitigate their emissions.There’s a paradox at play. The industry touts technological advances that have enabled chips to become incredibly powerful while operating with far greater efficiency, slashing energy use during their lifetime. Yet with billions of transistors now crowded on to a single chip, producing them is increasingly elaborate work.It takes three to four months for a disc of silicon to go through the multiple stages required to process them into the finished product. The wafers make their way along rows of machines that layer on microscopic materials, burn in patterns and scrape off the unneeded portions in procedures that are fully automated. Rinsing with huge amounts of ultrapure water is a key component. And with each new generation, more electricity, water and greenhouses gases are required.The upshot is that the most advanced chipmakers now have a larger carbon footprint than some traditionally more polluting industries. In 2019, for example, company disclosures show that Intel’s factories used more than three times as much water as Ford Motor Co.’s plants and created more than twice as much hazardous waste.“The general trend is the energy consumption is increasing, the water consumption is increasing as all chips become more and more complex,” said Marie Garcia Bardon, a senior researcher at the Imec nanotechnology center in Belgium who does pioneering work estimating aspects of the industry’s carbon footprint.Taiwan with its finite resources is on the horns of the dilemma that poses for both industry and government. TSMC is a major driver of the economy as well as a key player in efforts to overcome a global shortage of chips, hence a strategic asset as Taiwan seeks to keep China, which claims the democratically-governed set of islands at its own, at bay. At the same time, signs of environmental strain raise questions over Taiwan’s vulnerability to climate change — and that of the global semiconductor supply chain.Chip plants in Taiwan called in water trucks earlier this year to ensure supply during a drought caused by the absence of monsoon rains. TSMC’s water consumption has increased almost fivefold in the last decade, and in 2019 amounted to the equivalent of 79,000 full Olympic swimming pools.Power use is more dramatic still: TSMC’s annual electricity consumption is estimated by Greenpeace at 4.8% of Taiwan’s entire usage, and more than that of the capital, Taipei. Greenpeace says that will rise to rise to 7.2% once commercial production comes online of TSMC’s newest fabs that will shrink the process further from the current leading-edge of 5 nanometers, or billions of a meter, to 3nm chips.“For the future of Taiwan’s economic development, the biggest challenge that the electronics industry faces is whether it can bear the weight of its carbon emissions and electricity consumption,” researchers led by Kuei-tien Chou of the National Taiwan University wrote in a paper published in October 2019.TSMC is a key supplier to Apple, and it’s the iPhone maker’s commitment to become carbon neutral by 2030 that is driving much of the change throughout the supply chain. TSMC has pledged to be using 100% renewable energy by 2050, and in July last year signed a deal to buy the full output of a 920MW offshore wind farm to be built in the Taiwan Strait by Orsted AS of Denmark as part of Taiwan’s transition from coal.“TSMC continues to develop more advanced and efficient technologies to reduce energy/resource consumption and pollution per unit during the manufacturing process,” as well as during product use, the company said in a statement, adding that it will continue to increase its renewable energy use and reduce its greenhouse gas emissions.The advent of environment, social and corporate governance, or ESG, is forcing chipmakers to respond, according to Kyle Harrison, an analyst at BloombergNEF. For many of them, “the risk is they could lose significant sources of revenue if they don’t start taking ESG reporting and decarbonization more seriously,” he said.The industry is keen to show how hard it’s working to address its emissions.Samsung Electronics Co., which with Intel is TSMC’s only rival at the cutting-edge of chip making, said in a statement that it went 100% renewable for all operations in the U.S., Europe and China, and is adding solar arrays and geothermal power generation to its South Korean campuses at Pyeongtaek and Hwaseong. It’s improving energy efficiency and reducing the use of harmful substances, CEO Kinam Kim said in March. SK Hynix Inc., also of South Korea, issued a $1 billion green bond earlier this year.Intel, the world’s largest chipmaker, said that it was already among the top three users of renewable energy in the U.S., and that chip manufacturers have voluntarily reduced carbon emissions for more than 20 years. Intel treats and returns some 80% of the water it uses and has a goal to raise that to 100%.The risk, however, is the overall environmental impact still grows, as chips become a geopolitical pawn in U.S.-China tensions and countries rush to build more advanced fabs to increase self reliance.TSMC said on April 1 that it plans to spend $100 billion over the next three years to expand its fabrication capacity, while Samsung is committing $116 billion over a decade on its foundry business. Intel plans to build two more fabs at a cost of $20 billion in Arizona. China is pumping billions into trying to catch up, and many chipmakers don’t report their emissions.Both the industry and governments stress that semiconductors are key to cutting emissions through innovations such as efficient energy grids and electric vehicles. Digital technology can help reduce global emissions by 15% “and outweigh the emissions caused by the sector,” according to a spokesperson for the European Commission, the EU’s executive.A senior Biden administration official said the U.S. wants new chip facilities to be built where the energy they consume is clean power, such as solar or wind. The president has made his commitment to tackling the climate crisis clear, the official said, citing $35 billion for innovation to help establish the U.S. as a global leader in clean-energy technology.Still, it’s far from easy for big industry players to clean up chip making all the way down the chain.ASML Holding NV, which has a virtual monopoly on the lithography machines required to etch out the most advanced chips, is tackling its direct emissions by using renewable energy for its plants, recycling parts and and making technological advances that boost efficiency. It still projects its overall carbon footprint will grow through 2025 since most of its emissions are so-called scope 3, meaning a large proportion come from the use of its products by customers. In a candid assessment, ASML said in its 2020 annual report that meeting energy savings targets for its latest machines depend on overcoming “strategic technical challenges” that “are particularly tough to solve.”Gary Dickerson, chief executive officer of California-based Applied Materials Inc., the world’s largest maker of chip equipment, said the responsibility lies with industry leaders to ensure that advances made possible by semiconductors are sustainable.The world is “at the biggest inflection of our lifetimes,” he said, contrasting developments with the industrial revolution powered by coal and oil. “It had a very meaningful, positive impact on the world,” he said in an interview. “But the legacy is not so great from a climate change point.”For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.