Sustainability in the chip supply chain

The causes and consequences of climate change make the news daily. With the 2030 deadline of the Paris Agreement approaching, public awareness has gone up. Companies have also jumped on the bandwagon, pledging to reduce their emissions (to zero) and rolling out ESG programs across departments. For example, in the semiconductor industry in the past six months, Intel, Micron, and SMART Global Holdings (SGH) announced their commitments and efforts toward a more sustainable future. SGH, the parent of SMARTsemi’s SMART Modular Technology, has committed to achieving a total of 75% renewable energy at its global operations by 2025.

The chicken or the egg

Semiconductors have an important role to play in achieving climate goals. They are integral to myriad innovations and solutions to combat global warming, including wind turbines, photovoltaic cells, and electric vehicles. Many smart devices in everyday life are not only intended to make life easier but also to reduce energy consumption and increase efficiency. Goldman Sachs recently calculated that 169 industries in the US are feeling the impact of the chip shortage, which illustrates the increasing dependency of the global economy on semiconductor chips.

Paradoxically, however, the chip industry itself has an undeniable contribution to the climate crisis as it consumes vast amounts of energy, raw materials, and water while creating hazardous waste. With an ever-growing demand for chips, the challenge is to decouple the exponential growth in needed capacity from its rising environmental impact. As the pressure rises on all industries to do their part in reducing the environmental impact, engineers, designers, and procurement specialists are not only looking for the right IC for the application. Every component they select has an influence on the carbon footprint of the overall product. Sustainability strides in the semiconductor chip industry will have a butterfly-effect on the decarbonization of the industries relying on them.

The tables are turning

It is not surprising that the entire industry is paying attention, including suppliers, distributors, and OEMs. Reducing the environmental footprint for the future of our planet is not only the right thing to do; the effects of global warming are increasingly impacting the complex value chain itself. Floods, droughts, and heat waves immediately affect fabs or suppliers in the region that is hit. However, due to the interdependency of the supply chain, markets feel the repercussions globally. While those natural disasters may be a consequence of climate change, they are largely out of the control of the industry players. On the flip side, through carbon pricing mechanisms, semiconductor businesses are encouraged to reduce their greenhouse gas (GHG) emissions as they feel the consequences in the operation’s bottom line.

Not a one-man-show
While short-term goals and pledges keep everyone along the supply chain on the right track, the semiconductor industry as a whole is targeting a 50% GHG emission reduction in the next ten years, according to McKinsey & Co. Not an easy task. Staying on the 1.5°C pathway is a concerted effort that demands endurance and commitment. No company can reach its sustainability goals without the external engagement of suppliers, partners, customers, and industry peers. Life-long applications inherently focus on product lifetime extension, which is - albeit often overlooked - very effective in reducing climate impact. Qualifying the right component early in the design stage and building a strong relationship with all the links in the supply chain are key to developing sustainable quality products.