While TSMC leads the global semiconductor race, it’s facing a growing problem that’s not about chips or tech. It’s about energy. As the company behind Apple, NVIDIA, and countless U.S. tech giants, TSMC’s energy struggles in Taiwan could have ripple effects across the entire American tech ecosystem. Here’s why this matters now more than ever.
1. By 2025, TSMC consumes 12.5% of Taiwan’s total electricity.
2. With TSMC’s ongoing factory expansions, it’s expected to use 24% of Taiwan’s electricity by 2030.
3. Industrial power demand in Taiwan is rising quickly, not just because of TSMC.
4. That’s because semiconductors, Taiwan’s core industry, require massive amounts of energy.
5. In May 2024, Taiwan’s new president, Lai Ching-te, announced plans to turn Taiwan into an “AI Island.”
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6. But AI consumes even more electricity than semiconductors.
7. This means Taiwan’s electricity demand will continue to surge, driven mainly by corporate needs.
8. In 2023, one of Taiwan’s competitive advantages was its low electricity costs.
9. By the end of 2023, Taiwan’s industrial electricity rate was around $0.12 per kWh, lower than South Korea’s $0.13 per kWh and significantly cheaper than Japan’s $0.17 per kWh.
10. Even nighttime rates were lower in Taiwan. Large-scale factories using ultra-high voltage paid between $0.021–$0.028 per kWh, South Korea charged $0.035 and Japan’s rates were even higher.
11. A company using 10 million kWh of high-voltage industrial power per month would pay about $1.7 million in Japan, $1.3 million in South Korea, but only $1.2 million in Taiwan.
12. Although Taiwan’s electricity rates seem low, they’ve already risen significantly.
13. Industrial power rates increased by 15% in 2022 and another 17% in 2023.
14. Electricity costs have continued to rise since 2024.
15. In 2024, rates jumped as much as 25%, with an average increase of 15%. A similar hike is expected in April 2025.
16. Semiconductor companies like TSMC, which consume massive amounts of electricity, faced the highest rate hikes—up to 25% in 2024.
17. The Taiwanese government is trying to limit residential electricity price increases by focusing rate hikes on industrial users.
18. If the expected rate hikes happen in April 2025, Taiwan’s industrial electricity prices will be on par with South Korea.
19. One of TSMC’s competitive advantages over Samsung—lower electricity costs—will disappear.
20. This issue traces back to 2016.
21. In January 2016, Taiwan’s Democratic Progressive Party (DPP) came to power and started phasing out nuclear energy.
22. After major earthquakes in Japan and Taiwan, former President Tsai Ing-wen announced plans to shut down all nuclear plants by 2025.
23. Tsai aimed to replace nuclear power with a mix of 50% LNG, 30% coal, and 20% renewable energy.
24. Taiwan had six nuclear reactors, with a new plant under construction in New Taipei City.
25. Five of the six reactors were shut down between 2019 and 2024.
26. Construction of the new reactor was halted in 2021, despite being over 90% complete, following a public referendum.
27. With five reactors offline, only one nuclear plant in Pingtung County remains operational.
28. That last reactor is scheduled to shut down in May 2025.
29. Before phasing out nuclear power, nuclear energy accounted for 12% of Taiwan’s electricity. By May 2025, that figure will drop to zero.
30. The problem? While Taiwan successfully phased out nuclear power, renewable energy hasn’t met expectations.
31. The goal was to have renewables make up 20% of the energy mix by 2025, but they currently account for only 9.5%.
32. Coal power has been reduced due to environmental concerns, leaving Taiwan to rely on LNG for 90% of its electricity.
33. After Russia’s invasion of Ukraine, global LNG prices soared. Since Taiwan imports 100% of its LNG, its national power company has faced growing deficits.
34. Taiwan had no choice but to raise electricity prices. However, with the 2024 presidential and legislative elections, residential rates were mostly left unchanged.
35. That’s why industrial users like TSMC have borne the brunt of price increases.
36. While TSMC’s strong profit margins can absorb higher electricity costs, power outages are another major concern.
37. When the power reserve margin drops below 10%, the risk of blackouts increases.
38. With the last nuclear plant shutting down in May 2025, Taiwan’s power reserve margin is expected to fall to around 7%.
39. In June 2024, a massive blackout hit the Taipei area, affecting companies like NVIDIA and Foxconn.
40. Since 2019, Taiwan has experienced four major blackouts, impacting millions of households.
41. President Lai Ching-te recently formed a National Climate Change Committee, which includes many members advocating for a return to nuclear power.
42. The current discussion is about potentially restarting nuclear operations after Lai’s term ends in 2030.
43. Even if discussions begin, restarting nuclear projects won’t be easy.
44. Since the nuclear phase-out, university nuclear engineering programs have dwindled, and many experienced workers have left for jobs overseas, leading to a talent shortage.
45. Taiwan had its reasons for phasing out nuclear power.
46. Like Japan, Taiwan is highly prone to earthquakes.
47. A large mountain range runs through the center of Taiwan.
48. Most earthquakes occur on the Pacific side of the island.
49. However, key cities and major manufacturing hubs like TSMC are located on the western plains, facing China.
50. Semiconductor production is extremely sensitive—just a brief shutdown can ruin all the wafers in the production line.
51. After an earthquake, every part of the equipment must be inspected for even the slightest misalignment, adding to costs.
52. Earthquakes on the Pacific side cause delays, but the core infrastructure often remains intact.
53. Earthquakes with magnitudes above 7 on the western side (facing China) pose a much greater risk.
54. The most dangerous earthquakes for TSMC are those above magnitude 7 occurring on the western side of Taiwan.
55. Since 2024, Taiwan has experienced an increasing number of earthquakes.
56. On April 3, 2024, Taiwan was hit by its strongest earthquake in 25 years, originating from the Pacific side.
57. On January 21, 2025, a 6.4 magnitude quake damaged 60,000 TSMC wafers, with aftershocks continuing.
58. Another 5.6 magnitude earthquake struck on January 30, 2025.
59. Given the frequency and trend, Taiwan could face a major earthquake beyond typical aftershock levels.
60. Like Japan, Taiwan’s seismic risks make it hard to confidently restart nuclear projects, despite energy shortages.
61. Taiwan’s power shortages are already affecting industries, with new data center construction approvals being put on hold.
Alphazen Insights
TSMC faces growing risks from rising industrial electricity costs, power shortages, and the threat of major earthquakes. While the Taiwanese government aims to keep power prices lower than other asian countries especially South Korea (Samsung)’s, this will be challenging. And if a magnitude 7+ earthquake strikes from the west, the impact on Taiwan—and the global tech supply chain—could be severe.
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