Water Shortage Raises Costs Slightly for Chip Makers
Jun. 08, 1988
PALO ALTO, Calif. (AP) _ Computer chip makers, as thirsty as cattlemen and farmers in the deepening drought, say they'll swallow the rising costs of using millions of gallons of water without raising prices.
That could change, however, if the water shortage becomes so acute that it not only pushes up the costs of obtaining and treating water but also limits production.
Extremely pure water, and lots of it, is essential to semiconductor manufacturing to wash away microscopic debris on the tiny circuits.
So far, the water shortage is more an annoyance than a crisis as companies try to conserve water while making plans for a possible switch from San Francisco's system to local groundwater.
The groundwater, hardened by such minerals as iron manganese and calcium, requires a different purification process, and that change could cost each company hundreds of thousands of dollars.
''It sounds like a lot but that's really a minor increase in our manufacturing costs,'' John Grenagle of Advanced Micro Devices Inc. in Sunnyvale said this week. ''The higher water costs also would be minimal and wouldn't affect the price of chips.''
An extra cost, he said, may come from conservation as Advanced Micro Devices joins other companies in trying to cut back water use by 25 percent.
''One of the ways of making sure you get good chips is to flood them with a lot of chemicals, which means you're using a lot of water,'' he said. ''We may decrease the amount (of flooding) we do, which may increase some of the rejects, which represents a cost.''
All those costs combined will come out of Advanced Micro Devices' bottom line and not the customer's wallet, Grenagle said, ''mainly because the price of chips is competition-driven rather than cost-driven.''
Smaller chip companies, such as Siliconix Inc. of Santa Clara, also are loathe to raise prices and will absorb the extra costs.
''The drought really hasn't hit us yet, but if we have to spend $200,000 to $300,000 to handle well water that's a lot to us, a few cents a share off the profits,'' said Tom Boag, director of plant and computer services at Siliconix.
The lawns and flowers around Siliconix may suffer, but the company says it can't cut back much on the 1.3 million gallons it uses a month making silicon wafers, transistors and linear integrated circuits.
Siliconix is more fortunate than some rivals, though. It bought equipment last year that cleans its wafers more efficiently, with the side benefit of using 15 to 20 percent less water.
''We feel we're in pretty good shape to meet the city's request to cut back 25 percent,'' Boag said. ''We can always squeeze out another 5 percent just by being very careful and turning off sinks and equipment.''
The chip companies have not been given mandatory reduction rules yet, although several cities are considering them.
''No one has asked industry to shut down because of the drought, but they've certainly been asked to conserve as much as they can,'' said Dan Kriege, manager of operations at the Santa Clara Valley Water District.
The valley normally uses about 400,000 acre feet of water a year. Officials want to reduce that to 350,000 acre feet this year.
If the chip makers are forced to switch to groundwater, Kriege said, that could threaten the stability of the land.
''If we pump out too much water from the groundwater base, then we're going to have some sites where the ground starts sinking,'' he said.
''It has occurred several times in the last 80 years and caused plenty of damage,'' he added. ''Some places the ground sank 13 feet. We're trying to prevent it from happening again.''