Dual Pressures Mount on Global Semiconductor Industry: Climate Risks and Geopolitical Shifts
The intricate global semiconductor industry is currently navigating a confluence of challenges, ranging from environmental vulnerabilities to complex geopolitical dynamics. A recent report by PwC highlights a significant and increasing risk to chip production linked to copper supply, a crucial component for these advanced circuits. This threat, primarily driven by climate change-induced droughts, could impact a substantial portion of global semiconductor manufacturing by 2035. Concurrently, major industry players are experiencing the ripple effects of international trade policies, even as the broader market records overall sales growth.
PwC's analysis indicates that approximately 32% of worldwide semiconductor production could face disruptions related to copper supply by 2035. This projected increase, a fourfold rise from today's levels, stems from growing drought risks in key copper-producing regions. Chile, the leading global copper supplier, is already contending with water scarcity that hampers its production. By 2035, the majority of the 17 nations providing copper to the chip sector are expected to be vulnerable to drought conditions. This widespread exposure suggests that no major chipmaking area will be entirely shielded from potential supply chain interruptions. The repercussions of a past global chip shortage, fueled by pandemic-driven demand and factory closures, led to notable economic impacts, including a reduction of a full percentage point in U.S.
Copper is essential for fabricating the billions of minute wires within every chip. While alternative materials are being investigated, none currently rival copper's balance of cost and performance. PwC warns that this risk will intensify over time if material innovation fails to adapt to climate shifts and affected nations do not secure more reliable water sources. The report even suggests that around half of all countries' copper supply could be at risk by 2050, regardless of efforts to reduce carbon emissions.
Despite these emerging supply concerns, the global semiconductor market recorded strong performance in May 2025. According to the Semiconductor Industry Association, worldwide sales reached $59 billion, an increase of nearly 20% compared to May 2024. This also represented an increase of more than 3% over April 2025 sales. This positive trend was particularly strong in the Americas, where sales surged by over 45% year-on-year, and in the Asia Pacific region, which saw growth of over 30%. China also reported sales growth of more than 20%, while Japan and Europe experienced more modest increases of over 4%.
However, the overall market growth does not reflect uniform success across all companies. Samsung Electronics, a significant contributor to the semiconductor landscape, announced a substantial drop in its operating profit for the second quarter of 2025. This projected decrease, amounting to a 56% year-on-year decline to approximately $3.2 billion, highlights the impact of U.S. trade restrictions on advanced AI chips and delays in obtaining crucial certifications for its high-bandwidth memory (HBM) chips from key customers. These factors have led to a write-down of unsold inventory and underutilized advanced foundry capacity for Samsung, allowing competitors to gain ground in segments experiencing strong AI-driven demand in unrestricted markets.
The challenges faced by Samsung underscore systemic vulnerabilities within the chip supply chain, including geopolitical risks given the high concentration of global chip production in South Korea, Taiwan, and China. While demand for HBM, a vital component for AI servers, is rising sharply, companies that are successfully navigating these complex market and geopolitical shifts appear to be best positioned for continued growth.
