In News 37 and 38, TEJ introduced what to disclose in the TCFD report and the climate change risks and opportunities disclosed by the semiconductor manufacturer-wafer duo. This article continues to explore the situation upstream of semiconductors. IC design companies have issued TCFD reports in Taiwan, including MediaTek, PixArt Imaging, Faraday, Global Unichip, Elite Sem Memory, Realtek, and ELAN. The completeness of the contents disclosed in each sustainability report varies. Use the TCFD reports in these 7 companies’ 2020 and 2021 sustainability reports for sorting and comparative analysis.
Table 1: Climate-related risks and opportunities exposure for seven companies
Table of Contents
Physical risks of MediaTek include water shortages, power shortages, typhoons, and floods. The interruption of water and power supply will cause its most important IT data center, which supports R&D design, to fail, and the impact will be immediate. If typhoons and floods are large in scale and last for a long time, office equipment will be damaged, thereby affecting the regular operation of the company.
The original TCFD disclosure structure is quite similar to MediaTek’s risk. It only evaluates physical risks and identifies three physical risks: water shortage, power shortage, and typhoons and floods. In addition, in terms of opportunities, PixArt Imaging needs to increase the capacity of renewable energy installations and purchase green power certificates to identify energy sources and resource efficiency that are climate-related opportunities.
The part of transition risk includes regulations, technology, market, and goodwill. Regulations include greenhouse gas-related and energy-related regulations. Technology must be transformed into low-carbon tech in response to market demand. The market is the gradual increase in customer demand for low-carbon services or products. Companies with high carbon emissions and low resilience will reduce customer trust and affect goodwill.
In terms of physical risks, there are short-term typhoons and rainstorms and long-term risks of water restrictions, power cuts caused by rising average temperatures, and supply chain disruptions. In addition to equipment damage caused by typhoons and rainstorms, water restrictions will cause the ice water machine to fail to operate, and the average temperature will increase the cost of electricity, so Faraday needs to pay attention to and deal with this risk.
Part of the opportunity is the efficient recycling of resources and energy conservation to obtain government subsidies and improve resilience. There are also climate-related opportunities to develop low-carbon products and services to meet customer needs and develop new markets.
Transition risks of Global Unichip include regulations as well as technology. Although Global Unichip did not specify which regulations are involved in the regulation risk, according to the characteristics of the industry, carbon-related and renewable energy-related regulations should be transition risks. The technical risk is that Global Unichip must develop more competitive products in the face of the market’s requirements for low-carbon products.
Physical risks include immediate typhoons, floods, water and power cuts, and long-term increases in average temperatures. These natural disasters can result in the equipment or productivity being affected.
Despite the risks of transitioning to low-carbon products, there are opportunities to enter new markets. In addition, improving resource efficiency, building solar power to avoid risks caused by power outages, and improving resilience to climate change will be this company’s opportunities.
The transition risks of Elite Sem Memory include rising energy prices and stricter fuel/energy/environmental regulations requirements. The increase in energy prices is based on the requirement to reduce greenhouse gas emissions. The trend to reduce carbon will increase energy prices, as will the cost of investing in more efficient equipment. Tighter fuel/energy/environmental regulations will result in increased operating costs.
Regarding physical risk, Elite Sem Memory believes that increased extreme weather events will lead to the loss of property and equipment and even further to operational interruption.
In terms of opportunities, developing low-carbon products to meet customers’ needs for low-carbon products or increasing the possibility of entering relevant markets is an opportunity for Elite Sem Memory.
Realtek’s transition risks are related to carbon and renewable energy in terms of regulations. In addition, the international emphasis on renewable energy-related issues is also a significant risk, and Realtekmust increase the construction of solar power generation equipment. Finally, customers’ requirements for green products also make Realtek invest in research and development of low-energy consumption products to meet customer needs.
Regarding physical risks, Realtek believes that typhoons, droughts, floods, power outages, and average annual temperature increases will affect operations.
ELAN’s transition risks include low energy consumption in technology, green energy requirements from customers in the market, and international regulations. Therefore, ELAN must develop new low-energy-consumption technologies and use materials that meet customer and international regulatory requirements, from raw materials to finished products. When ELAN assesses climate-related risks, it considers the supply chain’s situation, which makes the assessment more comprehensive.
Physical risks include typhoons and floods, rising average temperatures, and water and electricity restrictions. These risks range from loss of property and equipment to disruption of operations.
Comparing the disclosures of the seven companies, as shown in Table 2, we can find that in the physical risk section, all companies consider immediate physical risks such as floods, droughts, and power outages. Also, except for immediate physical risks, Faraday, Global Unichip, Realtek, and ELAN all believe that the long-term average temperature increase will also affect the service life of the equipment, which will further lead to increased costs.
Regarding transition risks, the risks identified by different companies are relatively inconsistent, and most companies identify the risks related to carbon and renewable energy regulations. In addition, three companies identified technical aspects (Faraday, Global Unichip, Realtek) and customer market requirements (Faraday, Realtek, ELAN). This shows that the risks mentioned above should belong to the transition risks that the semiconductor upstream industry is more likely to face.
In addition to these risks, Faraday also attaches great importance to the impact of reputation, while Elite Sem Memory believes that rising energy prices are a risk they will face.
Table 2: Comparison of climate-related risks among seven companies
Analyzing the climate-related risks and opportunities disclosed by the seven upstream semiconductor manufacturers, it can be found that there is room for improvement in the disclosure content of the seven companies. Besides, the disclosed items are incomplete, and the risks are not ranked. The method of identifying risks or opportunities is also not clearly stated.
In the disclosure section, all companies mentioned that they would face physical risks such as floods and water and electricity restrictions. Carbon, renewable energy-related, technical risks, and customers’ low-carbon needs are common transition risks. As the upstream of the supply chain, it is necessary to include the concept of the supply chain in the identification of transition risks and to make a more comprehensive identification, but most enterprises have not considered it.
With the stricter requirements of the competent authorities for implementing ESG, the investing public will also have higher standards for the content of ESG reports provided by enterprises. That can urge enterprises to disclose and implement ESG policies—continuous progress.
TEJ develops TESG sustainable development solutions. In addition to completing the first edition of the TESG Rating, we will gradually add more measurement variables along with the integrity of the company’s sustainability report disclosure and provide ESG information sets. Assist the financial industry in completing the internal ESG assessment model and implement responsible investment and credit!