Taiwan’s net zero push

If you have used an Apple iPhone or a computer made by Acer, HP and Dell, then you have relied on the know-how of Taiwanese industry and its mastery of global supply chains.

But for a place renowned for the nimbleness of its industry, Taiwan is now facing a new challenge – the transition to net zero emissions. It is a transformation which Australia – with its deep ties supplying more than $24 billion of raw materials to Taiwan annually – and New Zealand may be instrumental in helping deliver.

ORIGINS

To understand how this is happening – and how it can develop – we need to see where Taiwan came from.

The question facing Taiwan a generation ago was whether it would be able to gain a toehold in value-added manufacturing. It would take a leap ahead in 1976 by convincing American corporation RCA to share semiconductor technology.

Today Taiwan is the biggest semiconductor supplier in the world, producing about 60 per cent of global stocks. It also controls about 90 per cent of the more advanced semiconductor market.

To put it in a broader perspective, within a generation most consumer and industrial devices that require the conducting of electricity came to rely on Taiwan’s industry. Everything from communications devices to signals systems and computing.

To power this industrial development, without any natural resources of its own, Taiwan relied on a domestic nuclear power industry and imports of coal.

CHANGE

Taiwan’s dominant role in global semiconductor sector is perversely what is making the island’s transformation to net zero so critical.

The major buyers of Taiwanese semiconductors and technology products - from Apple to AMD - are now making their own ambitious plans to go carbon neutral. Apple, for example, wants to be net zero by 2030, 20 years sooner than Intergovernmental Panel on Climate Change targets.

There are also domestic pressures at play. In 2016 the incoming government – mindful of Japan’s 2011 Fukushima nuclear accident – committed to moving away from nuclear power. At the same time Taiwan unveiled a commitment to renewable energy aligned with the 2015 Paris Agreement, even though it was not party to the accord.

The goal was to have 20 per cent of energy generation from renewable sources by the end of 2025.

Despite having no background in such technology, Taiwan has worked to position itself as a centre for excellence in renewables – in much the same way it started its transformation into a semiconductor hub some 40 years ago.

At the heart of Taiwan’s technology sector is TSMC - Taiwan Semiconductor Manufacturing Co – which was founded in 1987 by Morris Chang. It is the world’s largest dedicated independent semiconductor foundry, has a dominant global market share and is Taiwan’s largest company.

TSMC serves major brands such as Apple, AMD, Mediatek, Qualcomm, Broadcom, Nvidia and Intel while other large Taiwanese technology players serve Google, Amazon and Microsoft.

In addition, an increasing number of international semiconductor players such as Micron and ASML are investing in Taiwan as demand for the advanced chips produced there remains strong. The energy intensive nature of semiconductor production mean requires an urgent move towards cleaner and green energy sources.

THE WAY AHEAD

Last year Taiwan produced the “Taiwan’s Pathway to Net-Zero Emissions in 2050” document which aims to promote research, development and innovation in key areas. By guiding the green transition of industry, it plans to drive a new wave of economic growth.

The strategy considers everything from the transition of the energy and industrial sectors to changes to the day-to-day life of Taiwanese.

On its city streets, the target is to have both electric vehicle and scooter sales to reach 100 per cent of the market by 2040.

In their homes, the Taiwanese are being asked to eat food with a lower carbon footprint and create less garbage – everything from clothes to cutlery.

Off its coastline, industry is building floating offshore wind turbines to produce 40-55 gigawatts of energy by 2050. Three demonstration offshore wind farms already operate with a further 14 in the pipeline.

The largest wind farm project, the Hai Long Offshore Wind Project, will generate an expected capacity of 1,022 megawatts when completed in 2026, enough to power an estimated 1 million Taiwanese households.

On its rooftops and open spaces, solar panels will produce an estimate 30 gigawatts of power by 2030, up from 7.7 gigawatts in 2021.

Through its grid, the government wants power generation from hydrogen to reach 9 to 12 per cent of its energy mix by 2050. State-owned CPC Corp is building out Taiwan’s capability to produce hydrogen for industrial usage.

In its forest, soil and marine environments, Taiwan wants to focus on a carbon sink and sequestration that removes 10 million metric tons of carbon dioxide by 2040. These goals are having an impact as companies act.

The tech industry in Taiwan consumed about 22 per cent of total electricity output in 2022.

While the tech industry is striving to improve energy efficiency, TSMC is taking the lead.

It was the first semiconductor company to join the RE100 initiative and recently raised its goal for sourcing renewable energy to 60 per cent by 2030 (from 40 per cent) and reaching 100 per cent by 2050. It is also one of the largest users of the wind-farm generated electricity in Taiwan.

Other major semiconductor players, display panel suppliers and component manufacturers in Taiwan are joining the rush  to increase the use of green electricity.

The Taiwan Stock Exchange has also raised the bar for listed companies on ESG reporting by mandating requirements for more thorough commitments and disclosures. The Financial Supervisory Commission has issued the "Roadmap for Sustainable Development of Companies" to promote the disclosure of greenhouse gas inventory information of listed companies in stages. 

To achieve such goals Taiwanese companies will need key partners.

AUSTRALIA AND NEW ZEALAND’S ROLE

Taiwan currently imports 52.7 per cent of its coal and 36.9 per cent of its liquefied natural gas from Australia.  If Taiwan is to reach net zero it will need alternatives to these fuels and Australia may offer a long-term solution in the form of hydrogen production.

Similarly, New Zealand is promoting geothermal power and has a long history of operating this form of power generation under its Taiwan economic cooperation (ANZTEC) framework.

Operating in Taiwan since 1980, ANZ has been part of the journey in Taiwan’s transformation into the world’s semiconductor powerhouse. The bank has also played a role by financing offshore windfarms and solar energy projects over the last 15 years.

As the world moves towards net zero, mutually beneficial trade will play a huge role in meeting such goals – and meeting them more quickly.

Both Australia and New Zealand have enjoyed long trade and economic relationships with Taiwan. And we can expect both countries to play a key role in helping Taiwan achieve its net-zero goal target.

John Duthie is Head of Taiwan Research & Analysis and Chelsea Chu is Head of Corporate Coverage, Taiwan at ANZ Institutional.