ESG Trends in the US and Globally for Semiconductors

The semiconductor industry is essential for technological advancement and economic growth. As the industry expands, its environmental and social impact is under increasing scrutiny. Environmental, social, and governance (ESG) factors are becoming key considerations for semiconductor companies, investors, and customers alike. This report delves into the ESG trends within the semiconductor industry, both in the United States and globally, with a particular focus on global companies expanding their presence in the US and their respective ESG initiatives.

ESG Trends in the Semiconductor Industry

The semiconductor industry faces inherent ESG challenges, including substantial energy and water consumption, waste generation, and the use of hazardous materials¹. However, a growing emphasis on sustainability is emerging, driven by several factors:

• Increased Regulatory Scrutiny: Governments worldwide are implementing stricter environmental regulations and reporting requirements, compelling semiconductor companies to adopt more sustainable practices².
• Investor Pressure: Investors are increasingly integrating ESG factors into their investment decisions, leading to greater scrutiny of semiconductor companies' ESG performance³.
• Customer Demand: Customers are increasingly demanding sustainable products and services, including semiconductors³.
• Reputational Risk: Companies with poor ESG performance face reputational damage, which can impact their brand value and customer loyalty³.

Specific ESG Risks

The semiconductor industry faces specific ESG risks related to its operational nature and global footprint:

• Climate Change-Related Risks: The geographical concentration of semiconductor production makes the industry vulnerable to climate change-related events like droughts and floods, which can disrupt the supply of components and impact water-intensive production processes⁴.
• Environmental Impact of Waste and Chemicals: Semiconductor manufacturing involves the use of chemicals and generates wastewater and solid waste, including heavy metals, which can pollute local ecosystems if not managed responsibly⁵.
• Resource Depletion: Semiconductor production requires a significant amount of water, energy, and raw materials, contributing to environmental degradation and resource shortages⁶.

Technology and Human Capital

The increasing use of AI tools in semiconductor design presents both challenges and opportunities:

• AI and Labor Shortages: The industry is witnessing a growing expenditure on AI tools for chip design, which has the potential to address labor shortages and reduce reliance on human capital⁴.
• Responsible AI Development: As AI plays a larger role in chip design, semiconductor companies must consider the ethical implications of AI and ensure responsible AI development practices⁴⁷.

ESG Audits and Facility Enhancement

ESG audits are becoming increasingly important for identifying potential improvements in semiconductor facilities:

• Identifying Areas for Improvement: ESG audits can help pinpoint potential enhancements, from efficient lighting solutions to upgrading chillers and exhaust fans to energy-efficient alternatives².

Collaborative Partnerships for Decarbonization

Semiconductor companies are recognizing the importance of collaborative partnerships in achieving decarbonization goals:

• Joint Efforts for Renewable Energy: Companies like TSMC are working with their suppliers to jointly procure renewable energy as part of carbon reduction efforts in their supply chains².

End-of-Life Management and Circular Economy

The industry is increasingly focused on the responsible disposal and reuse of semiconductor equipment and components:

• Recycling and Reuse: There is a growing emphasis on the recycling and reuse of equipment and components to address end-of-life disposal challenges and promote a circular economy⁵.

Green Financing for Sustainability

Semiconductor companies are utilizing green bonds to finance sustainability initiatives:

• Green Bonds for Facility Upgrades: Companies like SKY Hynix are issuing green bonds to finance facility upgrades and improve energy efficiency⁸.

In response to these trends and challenges, semiconductor companies are implementing various ESG initiatives, including:

• Reducing Greenhouse Gas Emissions: Companies are setting targets to reduce their carbon footprint by using renewable energy, improving energy efficiency, and investing in carbon capture technologies⁹⁸.
• Conserving Water: Companies are implementing water-saving technologies and recycling water to reduce their water footprint⁸.
• Minimizing Waste: Companies are reducing waste generation and increasing recycling rates⁵.
• Using Safer Materials: Companies are phasing out hazardous materials and using more environmentally friendly alternatives⁶.
• Improving Labor Conditions: Companies are ensuring fair labor practices and safe working conditions throughout their supply chains.
• Promoting Diversity and Inclusion: Companies are increasing diversity in their workforce and leadership.

Strong ESG performance is not only an ethical imperative but also a strategic advantage for semiconductor companies. It can enhance their reputation, attract investors, and improve their competitiveness in the market³¹⁰.

Global Semiconductor Companies Expanding in the US

The US is attracting significant investment from global semiconductor companies, driven by factors such as government incentives, a skilled workforce, and a growing market¹¹. The CHIPS and Science Act, enacted in 2022, provides subsidies and incentives to promote semiconductor manufacturing in the US¹². This Act aims to bolster domestic semiconductor production, enhance supply chain resilience, and promote technological research and innovation in the United States¹². It also includes provisions to support workforce development and STEM education¹².

These companies are bringing their ESG initiatives to their US operations and seeking partners and vendors that align with their sustainability goals.

ESG Initiatives of Global Semiconductor Companies in the US

This section provides a more detailed look at the ESG initiatives of the global semiconductor companies expanding in the US.

Intel

Intel has a comprehensive ESG framework called RISE, which aims to create a more responsible, inclusive, and sustainable world³². Their key ESG initiatives include:

• Net-zero greenhouse gas emissions: Intel has committed to achieving net-zero greenhouse gas emissions across its global operations by 2040¹⁸.
• Renewable energy: Intel is transitioning to 100% renewable electricity for its operations¹⁹.
• Water stewardship: Intel aims to achieve net-positive water use by 2030, meaning it will replenish more water than it consumes¹⁹.
• Waste reduction: Intel is working towards zero waste to landfill by 2030¹⁹.
• Supply chain responsibility: Intel requires its suppliers to report on responsible labor practices, responsible minerals and chemicals, and environmental footprint²⁰.

Intel's Requirements for Vendors and Partners:

Intel actively promotes responsible sourcing and expects its suppliers to adhere to the same high standards of environmental and social responsibility²⁰. They require suppliers to report on their labor practices, the responsible sourcing of minerals and chemicals, and their environmental footprint²⁰. Intel emphasizes collaboration and transparency in its supply chain, working with suppliers to improve sustainability performance and address ESG risks³³.

TSMC

TSMC is committed to environmental protection and actively integrates green management into its operations¹⁵. Their key ESG initiatives include:

• Green manufacturing: TSMC focuses on climate and energy, water management, circular resources, and air pollution control¹⁴.
• Renewable energy: TSMC is increasing its use of renewable energy and promoting a low-carbon semiconductor supply chain¹⁵.
• Water stewardship: TSMC is committed to water conservation and reuse¹⁶.
• Responsible supply chain: TSMC works closely with its supply chain partners on human rights and environmental protection¹⁵.

TSMC's Requirements for Vendors and Partners:

TSMC requires its suppliers to comply with its Code of Ethics and Business Conduct and adhere to regulations on human rights and conflict-free minerals³⁴. They conduct sustainability risk assessments and encourage major suppliers to join the Responsible Business Alliance (RBA)³⁵. TSMC emphasizes local supply chain optimization, working with suppliers to conserve electricity and water, and reduce waste³⁵.

Micron

Micron has integrated sustainability into its business strategy and set ambitious ESG goals³⁶. Their key ESG initiatives include:

• Net-zero greenhouse gas emissions: Micron aims to achieve net-zero greenhouse gas emissions by 2050²².
• Renewable energy: Micron is on track to source 100% renewable electricity in the US by the end of 2025²⁴.
• Water stewardship: Micron is working towards reusing, recycling, or restoring 100% of the water used in its operations²³.
• Waste reduction: Micron aspires to recycle or recover 100% of its hazardous waste²³.
• Responsible sourcing: Micron has a Supplier Requirements Standard that outlines its expectations for suppliers regarding environmental and social responsibility²⁵.

Micron's Requirements for Vendors and Partners:

Micron has a comprehensive Supplier Requirements Standard that outlines minimum requirements for quality, business processes, manufacturing, compliance, and documentation²⁵. This standard covers various aspects of environmental and social responsibility, including compliance with environmental regulations, responsible sourcing of materials, and ethical labor practices³⁷.

Wolfspeed

Wolfspeed's business is built on the power of silicon carbide and the innovative possibilities unleashed by the technology²⁶. Their key ESG initiatives include:

• Environmental protection: Wolfspeed aims to minimize resource usage and lessen the environmental footprint of its production process²⁶.
• Social responsibility: Wolfspeed prioritizes the health and well-being of its communities and adheres to rigorous guidelines for material sourcing, supplier selection, and employee safety²⁶.
• Community engagement: Wolfspeed actively supports community engagement and educational initiatives²⁶.

Wolfspeed's Requirements for Vendors and Partners:

While specific requirements for vendors and partners were not found, Wolfspeed emphasizes responsible business practices and aligns its activities with the UN Sustainable Development Goals (SDGs)³⁸. This suggests an expectation for partners and vendors to uphold similar values and contribute to a sustainable future.

Texas Instruments

Texas Instruments (TI) has a long-standing commitment to responsible, sustainable manufacturing²⁷. Their key ESG initiatives include:

• Renewable energy: TI has committed to using 100% renewable electricity in its US operations by 2027 and worldwide by 2030²⁷.
• Greenhouse gas emissions reduction: TI has set goals to reduce its greenhouse gas emissions²⁸.
• Water conservation: TI is focused on conserving water and reusing or recycling water in its operations²⁸.
• Waste reduction: TI aims to achieve zero wasted resources²⁹.

Texas Instruments' Requirements for Vendors and Partners:

TI emphasizes responsible, sustainable manufacturing and expects its partners and vendors to align with its values and ambitions³⁹. While specific requirements were not explicitly found, TI's commitment to corporate citizenship suggests an expectation for partners to operate in a sustainable and socially responsible manner⁴⁰.

GlobalFoundries

GlobalFoundries (GF) is committed to environmental sustainability and responsible manufacturing³⁰. Their key ESG initiatives include:

• Net-zero greenhouse gas emissions: GF aims to achieve net-zero greenhouse gas emissions by 2050³⁰.
• Carbon-neutral power: GF aims to use 100% carbon-neutral power by 2050³⁰.
• Waste management: GF focuses on recycling and reusing waste from its manufacturing processes³⁰.
• Employee health and safety: GF prioritizes the health and safety of its employees³¹.
• Diversity, equity, inclusion, and belonging: GF is committed to creating a diverse and inclusive workplace³¹.

GlobalFoundries' Requirements for Vendors and Partners:

GF recognizes the increasing importance of ESG for its stakeholders and holds itself accountable for its environmental sustainability and other ESG measures¹⁰. While specific requirements for vendors and partners were not explicitly found, GF's commitment to responsible sourcing and human rights criteria suggests an expectation for partners to uphold similar standards¹⁰.

ESG-Compliant Facility Management and Vendor Services

Global semiconductor companies expanding in the US are seeking partners and vendors that align with their ESG initiatives. This has created a growing demand for ESG-compliant facility management and vendor services in the semiconductor industry.

Some of the US-based companies that specialize in ESG-compliant facility management and vendor services for the semiconductor industry include:

• SILA: SILA provides ESG-focused facility management solutions that prioritize environmental sustainability, social responsibility, and robust governance practices⁴¹. Their services are designed to enhance environmental sustainability, promote social responsibility, and ensure strong governance, while delivering long-term financial benefits for clients⁴¹.
• CLS Facility Services: CLS Facility Services supports ESG facilities management goals by helping organizations manage and measure the performance and costs of their critical assets⁴². They offer a range of services, including energy management, waste management, and sustainability reporting, to help clients achieve their ESG goals⁴².

These companies offer a range of services to help semiconductor companies achieve their ESG goals, including:

• Energy management: Optimizing energy consumption, implementing renewable energy solutions, and reducing greenhouse gas emissions.
• Water management: Implementing water-saving technologies, recycling water, and reducing water consumption.
• Waste management: Reducing waste generation, increasing recycling rates, and ensuring responsible waste disposal.
• Hazardous materials management: Ensuring the safe handling and disposal of hazardous materials.
• Sustainable procurement: Sourcing materials and services from environmentally and socially responsible suppliers.
• ESG reporting and compliance: Assisting semiconductor companies with ESG reporting and compliance requirements.

Comparative Analysis of ESG Initiatives

While all the companies discussed demonstrate a commitment to ESG, their approaches and focus areas vary. Intel stands out with its comprehensive RISE framework and ambitious goals for net-zero emissions, water stewardship, and waste reduction. TSMC emphasizes green manufacturing and responsible supply chain management, while Micron focuses on integrating sustainability into its business strategy and achieving net-zero emissions. Wolfspeed prioritizes environmental protection and social responsibility, while Texas Instruments focuses on renewable energy and resource conservation. GlobalFoundries emphasizes a holistic approach to ESG, encompassing environmental sustainability, social impact, and responsible supply chain management.

A comparative analysis reveals some best practices:

• Setting ambitious goals: Companies like Intel and Micron have set ambitious long-term goals for net-zero emissions and water stewardship, demonstrating leadership in sustainability.
• Integrating ESG into business strategy: Micron's approach of integrating sustainability into its business strategy ensures that ESG considerations are embedded in decision-making processes.
• Collaborating with suppliers: TSMC's efforts to engage suppliers in joint renewable energy procurement and sustainability initiatives highlight the importance of collaboration in achieving ESG goals.
• Focusing on specific material issues: Wolfspeed's focus on environmental protection and social responsibility reflects a targeted approach to addressing material ESG issues.

Conclusion

ESG is becoming increasingly important in the semiconductor industry, driven by regulatory scrutiny, investor pressure, customer demand, and reputational risk. Global semiconductor companies expanding in the US are bringing their ESG initiatives to their US operations and seeking partners and vendors that align with their sustainability goals. This has created a growing demand for ESG-compliant facility management and vendor services in the semiconductor industry. The US government is actively supporting ESG initiatives in the semiconductor industry through various incentives and policies, including the CHIPS and Science Act.

The semiconductor industry has the potential to contribute to a more sustainable future through its products and technologies²²³⁹. Semiconductors are essential for enabling technologies that promote energy efficiency, renewable energy, and sustainable development. As the industry continues to grow and evolve, collaboration and innovation will be crucial for driving sustainable practices and creating a more responsible and sustainable semiconductor ecosystem.

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