Chip demand is growing at a remarkable pace, fueled by the rapid adoption of artificial intelligence. But as advanced AI chips become more complex, each chip can require more water to manufacture. With both chip volumes and water use per chip rising, the industry must address not only the energy required for production, but also the water needed to sustain it.
Industry leaders are pursuing ambitious water-recycling goals, some targeting more than 90% water circularity. Achieving those goals, however, will require more than incremental improvements. It will demand a fundamental rethink of the full AI value chain, including how water is treated, reclaimed and managed across the semiconductor fabrication (fabs) plant.
So, the question remains: Can water circularity help enable continued semiconductor growth and improve business outcomes?
Jeffrey Montanye, Vice President of Strategy & Business Development for Ecolab, explored this challenge during SEMICON Taiwan's Microelectronics Water Forum, where industry leaders gathered to discuss the future of chip manufacturing in an era of accelerating AI demand.
“The semiconductor industry is entering a new era where growth is no longer measured solely by how many chips we can produce, but by how efficiently we can manage the resources required to produce them,” Montanye says. “As AI accelerates demand for advanced semiconductors, water is becoming a strategic input. The manufacturers that succeed will be the ones that view water circularity not simply as a sustainability initiative, but as a pathway to greater resilience, higher productivity and long-term growth.”
AI's Hidden Resource Challenge
The AI boom is reshaping nearly every aspect of semiconductor manufacturing. Advanced chips require increasingly sophisticated production processes, driving demand for more ultrapure water (UPW) throughout the fabrication process.
Historically, most fabs have worked to recycle more than 40% of their water back into critical operations, as highlighted by Montanye. The desire to increase that number has remained strong. The complexity of semiconductor wastewater itself, however, contains a diverse mix of contaminants that require specialized treatment before water can be safely reused.
And modern semiconductor manufacturing depends on water at nearly every stage. Wafers, thin slices of ultrapure silicon that serve as the foundation for making semiconductor chips, are cleaned and rinsed hundreds of times during production—with even microscopic contaminants capable of affecting yield and performance. As node sizes continue to shrink, water purity requirements continue to climb.
According to Montanye, advanced AI chips manufactured at leading-edge nodes can require significantly more ultrapure water than previous generations, making water availability a growing operational consideration for fabs worldwide.
This challenge is compounded by where many semiconductor facilities are located.
As stated by SEMI's 2025 Global Insights report, globally, an estimated 40% of existing semiconductor manufacturing facilities are located in watersheds projected to face severe water stress by 2030.
Why Ultrapure Water Matters
For semiconductor manufacturers, water is not simply a utility, it is a production input.
Before water ever reaches the wafer, it undergoes multiple stages of purification to remove particles, organics, dissolved minerals and trace metals. The result is ultrapure water measured at extraordinary levels of cleanliness.
“Semiconductor manufacturing requires vast amounts of ultrapure water for production with an enormous financial impact of sub-optimal water quality,” says Geoff Townsend, Industry Fellow, RD&E, Ecolab says. “Water quality fluctuations or a lack of reliable water supply can disrupt the complex semiconductor supply chain.”
As manufacturing tolerances tighten, water quality becomes increasingly connected to yield, reliability and profitability. Simply put, producing more advanced chips requires producing more precisely controlled water.
Advancing Toward Water Circularity
In the past, many semiconductor facilities have recycled portions of their wastewater streams. But achieving the industry's long-term goals requires understanding that water and business resilience are linked—including thinking through a more comprehensive lens such as water circularity.
Traditional recycling often focuses on reducing water consumption through isolated treatment and reuse efforts. Water circularity takes a broader approach, treating water as a resource that remains in continuous use across interconnected systems. In fact, it offers a pathway for businesses to recognize and capture the full value of water.
“Achieving increased circularity begins with understanding that not all wastewater streams are created equal,” Montanye says.
Rather than blending wastewater streams together, leading manufacturers are increasingly exploring strategies that separate water streams at the source, treat them according to their specific contaminant profiles and return them to productive use throughout the fab.
This systems-level approach creates an additional opportunity to conserve water. According to Water Europe and the European Institute for Asian Studies, closed-loop systems and advanced purification can reduce freshwater intake by using reclaimed water in ultrapure water production, potentially increasing efficiency by up to 85%. That makes water circularity more than a conservation strategy; it can also strengthen the productivity, reliability and resilience of the fab.
Realizing those benefits, however, requires more than individual technologies. It depends on how water systems are designed and managed across the entire facility.
Montanye goes on to say, “For years, the industry focused on recycling water. The next frontier is full circularity. That means designing fab water systems that continuously recover, refine and reuse water where it creates the most value. When manufacturers connect ultrapure water production, water reclaim and digital intelligence into one coordinated system, water stops being a constraint on growth and becomes a competitive advantage.”
The Business Case for Water Circularity
But the benefits of water circularity extend beyond water stewardship goals. Reliable access to water underpins economic growth, industrial productivity and community resilience around the world. Additionally, 42% of assessed semiconductor manufacturing locations were classified as having high or medium-high water quality risk, with surface water degradation identified as the primary driver, as noted by SEMI's 2025 Global Insights report. Significant semiconductor hubs in Asia, including locations in China, Taiwan and South Korea, were among the regions evaluated.
As semiconductor manufacturing expands into regions facing growing water stress, water resilience is becoming a strategic business issue. Water circularity can help reduce dependence on freshwater supplies, improve operational continuity and support long-term growth plans.
In fact, Montanye argues that the impact is larger than water savings alone. Higher levels of water reuse can contribute to greater operational resilience, stronger resource efficiency and a reduced environmental footprint.
The industry's most ambitious vision is one where water stewardship and business performance become mutually reinforcing rather than competing priorities.
“Intelligent water management is now a lever for growth, profitability, and competitiveness while also enhancing societal well-being and environmental stewardship,” Townsand adds.
One Connected System
Water circularity does not occur through a single technology. It depends on connecting water treatment, reclamation, monitoring and operational intelligence into one integrated system.
“As fabs pursue higher levels of water reuse, the associated increase in risk has to be managed in a very structured and purposeful way as the ultrapure water quality cannot be compromised at all given the extent yield depends on it,” notes Townsend. “Success starts with understanding what's coming into the system, segregating water streams appropriately and identifying which blends can be safely reclaimed. With advanced monitoring and early warning systems in pretreatment, manufacturers can detect changes sooner and take preventative or restorative action before water quality impacts production.”
That ability to understand changing water conditions and respond quickly will depend on connecting systems across the fab. Montanye describes the future fab as an integrated ecosystem where ultrapure water production, water reclamation and digital intelligence work together to improve both performance and efficiency.
The Future of Fabs
The semiconductor industry's next era of growth may ultimately depend on its ability to decouple production from resource consumption. Water circularity offers a path forward, helping manufacturers rethink how water moves through the fab while supporting both water stewardship goals and business outcomes.
For an industry built on precision, innovation and continuous improvement, the future of semiconductor manufacturing may be defined by two interconnected priorities: more chips with less water.
