Apple’s climate promise depends on Taiwanese partners TSMC, Foxconn going green

Seventy-one of Apple’s hundreds of suppliers have committed to using only renewable energy
Taiwanese companies make up an outsize proportion of Apple’s suppliers because of their dominance in sectors such as made-to-order chips and electronics contract manufacturing

Apple

Bloomberg

Published: 7:56am, 12 Aug, 2020

Why you can trust SCMP

Apple has gone carbon neutral. But to say the same for its flagship iPhone, it is going to need help from Taiwan.

More than three-quarters of the emissions that come from making Apple’s ubiquitous products come from outside suppliers, according to the company’s Environmental Progress Report. That includes electronics giants like Taiwan Semiconductor Manufacturing Co (TSMC) and Foxconn Technology Group, which still get about 90 per cent of their power from non-renewable sources, according to company reports.

That is changing though. The Taiwanese firms are installing solar panels and buying power from offshore wind farms in line with Apple’s target of having all of its products be carbon-neutral by 2030. It underscores how climate pressure is increasingly coming not only from activists, but from within the company’s own supply chains.

“What Apple and other companies are trying to do is contribute to meeting Paris climate targets by decarbonising their own footprints and making it a precondition for their partners and suppliers to use renewable energy,” said Prakash Sharma, director for the energy transition practice at consultancy Wood Mackenzie. “It’s gaining momentum because more and more companies are moving in that direction.”

Apple suppliers soar in Hong Kong, China after US tech giant smashes revenue expectations

So far, 71 of Apple’s hundreds of suppliers have committed to using only renewable energy, about 8 gigawatts worth, or more than the peak power demand for the entire nation of Singapore. Once completed, these commitments will avoid over 14.3 million metric tonnes of greenhouse gases annually – the equivalent of taking more than 3 million cars off the road each year.

Taiwanese companies make up an outsize proportion of Apple’s suppliers worldwide because of their dominance in sectors such as electronics contract manufacturing and made-to-order semiconductors.

Linchpins of Apple’s manufacturing machine include TSMC, which exclusively makes cutting-edge chips for Apple’s iPhones and iPads in Taiwan, and Foxconn, formally known as Hon Hai Precision Industry, which assembles more than 100 million iPhones annually. Both firms recently agreed to join the renewable energy drive.

Wind and solar power can be as cheap as fossil fuels, but they do not produce at all hours of the day, so it is not feasible for major factories to run directly on renewables alone. Improvements in battery technology might soon change that, but at the moment Apple is not pushing its suppliers in that direction.

The logo of Foxconn Technology Group, the world’s largest electronics contract manufacturer, is seen at its production complex in Longhua District, Shenzhen. Photo: Nora Tam

Instead, Apple wants them to invest in enough renewable energy in their home region to cover their power use. That way even if a factory requires coal-fired electricity in the middle of the night, it will have invested in enough wind or solar to keep an equivalent amount of coal from being burned at other times.

For Foxconn, that means installing solar panels on the roofs and of its campuses in places like Henan province in China, where coal is still the dominant source for power. The company had installed 224 megawatts of clean energy by the end of 2019, up from 33 in 2017. But it still has a long way to go, as solar power and renewable energy credits amounted to only about 10 per cent of its power use last year, the company said in its sustainability report.

TSMC, which used renewable energy and credits for 6.7 per cent of its power in 2019, has committed to producing renewable energy for its entire operations by 2050. It signed a deal last month with Orsted to buy all of the power from a 920-megawatt wind farm the Danish energy company is developing off the coast of Taiwan, in what is the world’s largest private renewable power deal. The deal means TSMC now actually has agreements to buy more clean energy than Apple, according to BloombergNEF.

Flags of Taiwan and chip maker Taiwan Semiconductor Manufacturing Co are displayed next to its headquarters in Hsinchu, Taiwan. Photo: Reuters

TSMC’s efforts have been aided by a massive Taiwanese government plan to transform the country’s energy mix away from coal and nuclear and toward renewables and natural gas. The Orsted deal, for example, came after Denmark’s largest power producer had established a major presence in the company, thanks to several government-backed deals for offshore wind farms.

“Growing sustainability initiatives by major companies are definitely making a dent in their supply chains,” said Jonathan Luan, a Beijing-based analyst with BloombergNEF. “Some companies have been able to change market rules to achieve their goals, like in Taiwan.”

Post