Amid Taiwan’s ongoing energy transition, Taiwan Semiconductor Manufacturing Company ( TSM ) is grappling with escalating electricity costs, impacting its operations significantly.

What Happened: Taiwan’s shift towards renewable energy is creating substantial challenges for industries, including TSMC. The semiconductor leader is now facing higher electricity costs in Taiwan compared to any other region where it operates. This situation arises after a series of electricity price hikes, with TSMC’s CFO Wendell Huang highlighting that prices have doubled in recent years, Financial Times reported on Tuesday.

Since 2022, Taiwan has increased electricity prices four times, primarily affecting large industrial users. In April, prices surged by 11% on average, with TSMC and other major industrial users experiencing a 25% hike. Last month, the government froze prices for households and declining industries but raised them by 14% for thriving industrial sectors.

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Energy supply issues are compounded by Taiwan’s delayed investment in renewable energy and the phasing out of nuclear power, leading to a reliance on imported coal and liquefied natural gas, which now constitute over 80% of the energy supply.

Why It Matters: The energy challenges in Taiwan come at a critical time for TSMC, which is already dealing with disruptions from external factors such as Typhoon Kong-rey. The typhoon, the most severe to hit Taiwan in nearly three decades, caused significant disruptions to infrastructure, affecting financial markets and transportation systems. This natural disaster led to power outages impacting nearly half a million homes.

Moreover, TSMC is under pressure to meet the growing demand for advanced chip packaging, driven by the surge in artificial intelligence applications. The company is set to double its production capacity for advanced packaging by 2025, with major companies like Nvidia Corp. and Amazon.com Inc. relying heavily on TSMC’s capabilities. Balancing these demands with rising energy costs presents a significant challenge for TSMC as it navigates the evolving energy landscape in Taiwan.

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This story was generated using Benzinga Neuro and edited by Pooja Rajkumari