Solving Semiconductors’ Energy Paradox: Four Areas Fabs Can Target

The semiconductor industry has two competing priorities.

On the one hand, demand is soaring—last year’s sales were up 25.6%. 2026’s sales should cross the $1 trillion USD mark. Meeting this demand means increasing production—and production is a resource-intensive process. Direct emissions increased between 2023 and 2024.

Projections indicate that by the critical climate year of 2030, manufacturing chips will come with emissions totals larger than those of some countries.

It seems simply impossible to both reduce emissions while increasing the volume of chip production.

But efficiency-minded manufacturers are proving it’s possible to do both.

To solve this energy paradox, the industry needs a holistic four-step process: measure, replace, reduce, and engage.

1. Measure

While any manufacturer around the world can go through this process, every fab is different. There’s simply no one-size-fits-all solution to reducing emissions at every facility around the world.

Adequate measuring provides meaningful, context-sensitive data to guide decision-making. While it’s an older acronym, WAGES (Water, Air, Gas, Electricity, Steam) is a good foundation for what needs to be measured. Life Cycle Assessments (LCAs) for specific products like a die or wafer are also useful to have.

Complete, high-quality data is the key to several key steps for effectively reducing emissions. First, it enables comparing product lines and facilities, which in turn helps create realistic KPIs for emissions reductions.

Second, any efforts to optimize energy usage via AI will fail without sufficient data. Third, the right kind of data enables third-party confirmation and subsequent credibility, such as obtaining validation from the Science Based Targets initiative (SBTi).

2. Replace

As imec has reported, manufacturing chips at scale requires an enormous amount of electricity. Given that only about a third of global electricity comes from renewables, this means electricity consumption is also a major contributor to facility emissions.

Yet it’s possible to improve the energy supply mix. In one specific example, Nvidia earlier this year confirmed 100% renewable energy usage at its controlled facilities. But even companies that aren’t operating at Nvidia’s scale (or almost every company on Earth) can make choices that produce meaningful impact.

Negotiating a Power Purchase Agreement (PPA) during the design phase can be a critical step to ensuring long-term renewable power supply—while also insulating your facility from future price shocks. If possible, band together with other smaller companies to increase your negotiating power.

However, replacing equipment (or choosing more energy-efficient equipment to start) is another way to quickly cut energy consumption. For example, a traditional chilled water cooling system can be a major power consumer. But McKinsey identifies several potential alternatives or upgrades: adding in idle-time controllers, using ambient air and cooling towers, and meters to identify potential areas for improvements.

These two tactics address the issue both before power even reaches the fab and during manufacturing—and can save both capital and emissions.

3. Reduce

Adding meters and controllers also simply reduces the amount of energy used in the first place. By taking the time to collect, measure and organize data, fabs can precisely determine the best targets for reduced usage and lower emissions.

In conjunction with hardware like meters and well-organized data, AI can be a helpful tool. With the right data, it can analyze power usage patterns, including unusual spikes, and generate recommendations. It can also enable predictive maintenance, which can reduce costs and emissions in the long run by identifying problems that can be fixed before they get too resource-intensive and extending equipment lifecycles.

Precise targeting also enables precise measuring for long-term success. Key net-zero target years like 2030 (Paris Agreement) and 2040 (the Climate Pledge year) are still relatively far away at the speed of technological innovation. Without baseline data or an action plan, it’s difficult to ensure that goals are actually being met—and a lack of concrete evidence could compromise credibility with investors, customers and employees.

4. Engage

Reducing emissions is more effective when it’s done in collaboration. Working closely with partners, suppliers, different site managers and other stakeholders can surface new ideas and solutions.

For example, one potentially overlooked area to target is the supply chain. Chip components often take multiple trips on a plane for different operations.

Employees can also be an excellent source of information. With on-the-ground experience, they may have additional insights into how operations play out and what can be done to improve them.

Engagement isn’t a one-and-done process, either. Plan to regularly communicate results to employees, partners and customers. This can not only lead to stronger relationships but also improved employee retention and even public recognition.

When it comes to reducing the semiconductor industry’s emissions, there is no single solution. The current level and projected increases are simply too large to focus only on one area, like energy sourcing, equipment or logistics.

Instead, reducing fab emissions must be a multi-step, multi-faceted journey. But with the right measurements in hand, fabs can precisely maximize the impact of every replacement, reduction and engagement.

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