Artificial intelligence is thirsty: water is the most traded commodity in the world

All the new technologies that surround us use semiconductors in the manufacture of microchips, integrated circuits and diodes. In the production of semiconductors, a medium-sized factory consumes as much water as a city of 58,000[1] inhabitants. Water is the most "traded" raw material in the world. The "virtual water trade" is 400 times greater than that of oil. ChatGPT drinks half a litre of water for every 20 commands. Data centres use water mainly for cooling, while in a semiconductor factory water is an important component of almost every part of the manufacturing process.

The following figures summarise the annual water consumption of the biggest players in data centres and semiconductors. In other words, how much water they consume. Many of these factories are located in drought-prone areas.

Source: Bluefield Research, Bloomberg, JP Morgan, Semiconductor Digest

Investment opportunities for 110-180 billion US dollars

In a growing semiconductor market, the availability of water is not only a critical risk factor that must be considered, but can also provide market opportunities for suppliers offering water treatment solutions with different quality characteristics. The investment in a new semiconductor factory can amount to tens of billions of dollars. The largest share is accounted for by investments in equipment, followed by building construction. Experts estimate that private investment in new semiconductor factories worldwide will reach around 2.27 billion US dollars. Investments in water-related infrastructure account for an estimated 110 to 180 billion US dollars.

Source: Semiconductor Industry Association, company reports, JP Morgan

Three key topics

Ultrapure water

Ultrapure water is water that has been purified to the strictest standards and therefore contains very few impurities. These properties are important in semiconductor production, among other things, in order to avoid product defects. More than 75% of the water used in this industry is used in the production process to rinse away impurities, which is done in several stages. An ultrapure water treatment system in a new factory account for 1-6% of the total capital cost.

Water filtration technology

As part of the water treatment process in semiconductor factories, the water is recycled in several filtration rounds. This helps to reduce water consumption. Types of filtration treatment include microfiltration, ultrafiltration, nanofiltration and reverse osmosis. Reverse osmosis is the most widely used treatment among the largest semiconductor manufacturers, as it has the strongest suppression performance among the alternatives, i.e. it removes the most impurities.

Desalination and reuse of water

To reduce the growing thirst of semiconductor factories, alternative water sources have been sought in recent years in addition to fresh water. Water reuse has become an important policy focus in areas where the semiconductor industry is beginning to experience water scarcity. Sources for this can be wastewater from households and municipalities. Desalination is now also emerging as a good new alternative, where several desalination plants have been built close to semiconductor factories. This can help solve water supply problems during droughts that affect many of the countries and areas where the factories are located.

[1] CWR