Taiwan’s tech manufacturers fear their output is under threat from the island’s worst drought in decades, risking more turmoil for global supply chains already strained by shortages of semiconductors and other key components.
Taiwan’s government further tightened water use at the end of February in several cities that are home to a cluster of important manufacturers. Plants in Taoyuan, Taichung, Hsinchu and Miaoli were asked to cut consumption by up to 11 per cent, on top of a 7 per cent cut requested in January.
Manufacturers in the cities of Chiayi and Tainan — where Taiwan Semiconductor Manufacturing Company, the world’s biggest contract chipmaker, builds iPhone processors — were asked to reduce water use by 7 per cent from February 25.
Taiwan is one of the world’s most important sources of the advanced chips that power everything from cars and phones to servers and game consoles. Chip production requires massive amounts of water but reservoirs in Taiwan are critically low and authorities have already cut supplies to agriculture to support industrial and residential use.
The water concerns come as the chip sector battles worldwide shortages. Taiwan has promised to help countries such as the US, Germany and Japan by speeding up the manufacture of automotive chips to ease a global crunch that has already hit car production.
This article is from Nikkei Asia, a global publication with a uniquely Asian perspective on politics, the economy, business and international affairs. Our own correspondents and outside commentators from around the world share their views on Asia, while our Asia300 section provides in-depth coverage of 300 of the biggest and fastest-growing listed companies from 11 economies outside Japan.
“All the industries are concerned [about] whether the situation will be alleviated soon . . . No one wants to see the worst-case scenario of anyone being forced to dial back production capacity due to water issues,” an executive at Winbond, a leading memory chipmaker, told Nikkei Asia.
Large industrial users will be checked weekly to ensure the targets are met, a top government official told Nikkei Asia.
The water needs of the island’s manufacturers are growing despite efforts to conserve supplies.
TSMC needs 156,000 tons of water a day, according to the company — about one-third of all water used in Taiwan’s key science parks. The company initiated contingency plans to mobilise trucks from the end of February to supply water to production bases across the island.
Water quality “is extremely critical to chip production lines and the processes . . . It could affect product performance, so that needs to be handled very carefully,” a person with knowledge of the plan said. “So far the situation is manageable, but if it does not rain properly and continues like this till the end of May, that would be a real big problem.”
TSMC has long-term contracts with water truck companies, which provide groundwater and well water that the chipmaker uses to supplement water from reservoirs in times of shortages, the person familiar with the plan said.
Nina Kao, a spokesperson for TSMC, said of the plan to truck water: “Deployments are still limited and the main purpose is to get the involved staff prepared for possible future needs.”
TSMC reused 86.7 per cent of its water, or 133.6m tons, and saved an additional 7.93m tons in 2019, according to its most recent social responsibility report.
Taiwan’s second-biggest contract chipmaker United Microelectronics said it would start to ask trucks to supply water to support its production from late February, company chief financial officer and spokesperson Liu Chi-tung told Nikkei.
“As the water-saving rate needs to increase to 11 per cent, we need the support of additional water trucks,” said Liu. “Currently, we only need a small percentage of additional water, but the company will adjust accordingly based on the dynamics.”
Winbond, whose production is mostly in the central city of Taichung, has also planned tests of additional water trucks, the company executive said. The memory-chipmaker has forged a business continuity plan to operate normally if the situation deteriorates and the water-saving rate must reach as much as 25 per cent, the person said.
AU Optronics, an Apple and Tesla display supplier, has prepared a series of measures to save water if the situation worsens, including reducing use in manufacturing, employee restaurants and restrooms, to keep its operations running.
Unimicron, the world’s biggest maker of ajinomoto-build-film board — the key substrate for high-end automotive computing chips and chips used in 5G base stations — said the water shortage was a concern, especially around Hsinchu, the heart of the chip industry.
“We’ve been reserving water and we will use rental water trucks to support our use if necessary,” company CFO Michael Shen said in an earnings call. “If we keep having no rain . . . it will be difficult for us to address the issue.”
Water storage rates at Baoshan and Baoshan Second reservoirs — which supply Hsinchu’s Science Park — stood at just 25.6 per cent and 14.7 per cent on February 24.
For the two reservoirs supplying Taichung Science Park, the storage rates were 16.6 per cent and 13.9 per cent, respectively, while the reservoir for Tainan Science Park was at only 15 per cent.
Taiwanstats, an open data site, cited data from the island’s Water Resources Agency showing that these reservoirs would only be able to supply water for between 30 and 60 days unless there was sufficient rainfall in time to replenish them.
Taiwan’s chip sector, the second-largest after the US, is the crown jewel of the island’s economy. However, Taiwan’s limited supplies of water, electricity and labour pose uncertainties for longer-term economic growth.
Taiwan usually averages at least three typhoons each year, bringing much-needed rain, but none hit the island in 2020. The average water level of the nation’s reservoirs is 1,000mm lower than a year ago, according to the Water Resources Agency.
“The situation is indeed more ‘special’ than we faced in 2015. Given there was no typhoon at all, we sensed the urgency and started responsive measures and discussions to brace for the water shortage as early as July last year — months before the traditional dry season began,” Lai Chien-hsin, director-general of the agency, told Nikkei Asia.
Su Chen-kang, director-general of Southern Taiwan Science Park, told Nikkei Asia that the tech and manufacturing sectors were on high alert, with messaging communication groups “to make sure all the companies have the correct messages about water supply so that they could come up with better strategies and plans to battle the shortage”.
To keep the tech manufacturing sector running, the Tsai Ing-wen administration on February 1 started using a new water pipeline to draw water from Taoyuan to support Hsinchu. The government in late 2020 also approved an emergency plan to build a desalination plant in less than 70 days to supply more water to Hsinchu. The plant came online on February 23.
“Climate change is dynamic and we have to always think ahead for the worst-case scenario. The government has been preparing for this and trying to increase supply since last year but we also need not just the suppliers but everyone in the nation to help conserve water, as the resources are limited and precious,” Lai said.
A version of this article was first published by Nikkei Asia on February 25 2021. ©2021 Nikkei Inc. All rights reserved
Death of the call centre? Workers ring in the changes during WFH era
A new message frequently punctuates the muzak as customers wait to speak to a call centre worker nowadays: a recording warning them to expect “home life noises in the background” once someone answers.
“A friend of mine heard splashing water when she called her bank,” said consultant Ursula Huws, a long-term advocate for staff to be allowed to do their jobs from home and who coined the term teleworking in the early 1980s.
“The agent revealed she was in the bath. For an industry historically so resistant to remote working, that speaks volumes about how far things have come in the past 12 months.”
Before coronavirus arrived in the UK, only 3.8 per cent of the country’s 812,000 call centre workers were based at home, according to research group ContactBabel — below the 5.1 per cent average for the working population.
But as the government introduced sweeping restrictions in March last year, the pendulum swung. By November homeworking was almost twice as common among call centre staff as the general workforce with about three quarters of 139,000 agents surveyed saying they were home-based.
This looks set to remain. A recent poll of 107 call centre managers and directors conducted by industry bodies found just four who anticipate a full return to the office.
HSBC has confirmed its 1,200 call centre staff will remain at home permanently. Outsourcer Capita has said many of its 16,000-strong call centre workforce in the UK can do the same, while rival Teleperformance has indicated many of its 10,000 employees will be allowed to continue working remotely once the pandemic subsides.
The shift will have far-reaching consequences: for the working lives of hundreds of thousands of people employed in the sector, for commercial landlords and for customers relying on their services.
Working the phones
The earliest known example of a call centre in the UK was in the Birmingham Post and Mail building in 1965, but it was not until the establishment of Direct Line in 1985 that they became more widespread. From 63 staff at the insurer’s call centre in Croydon, the industry has since mushroomed into one of the UK’s largest.
For a sector weighed down by a reputation for frenzied offices, distrustful management and high attrition rates, the post-pandemic world in theory offers a chance for a reset.
“Call centres are . . . a fun punching bag for a lot of people,” admitted Gary Slade, Teleperformance’s UK chief executive. But he insisted that a hybrid working model will offer his employees “more choice” rather than simply being an opportunity “to squeeze the staff by cutting costs and removing benefits”.
Yet half a dozen staff who spoke to the Financial Times on condition of anonymity, two of whom are Teleperformance employees, said remote working had made their jobs more difficult — or alleged they were being denied the right to do so.
One 26-year-old, who works for an online travel platform, described the stress from solving more complex customer queries from home as “all-encompassing”, while a 21-year-old Teleperformance agent said virtual training was “difficult to absorb”, adding that he often “had to wing it”.
Two are office-based, one of whom is working for an outsourcer in Liverpool having had repeated requests to do so remotely rejected for “no apparent reason”.
Privacy is another concern. Teleperformance has already butted heads with Unite, Britain’s biggest trade union, and the Communication Workers Union over concerns about a plan to issue remote workers with webcams.
Slade said reports they will be used to monitor staff at will are “absolutely not true”. He said webcams will be used to replicate “the checks and balances” that are normal in the office.
The FT has seen an internal memo sent to Teleperformance staff suggesting video calls could be mandated to “conduct clean desk audits” and “[detect] unauthorised objects in [an] employee’s workspace . . . such as a mobile phone”. Slade said “occasional checks” are essential to “avoid data breaches”, adding that the webcams are “not designed to be remotely activated”.
But Jamie Woodcock, who went undercover in a call centre for his book Working the Phones, fears what he describes as “callous management practices” mean the chance to improve the workplace culture with the adoption of remote working will be “squandered”.
“Managers in call centres rarely ask workers what will improve their work, instead they simply rely on ever stricter targets and monitoring to get results,” said Woodcock.
Aimie Chapple, Capita’s executive officer for customer management, insisted she was “always checking in” with staff such as during virtual coffee mornings but that a balance has to be struck between “what employees want [and] what clients want”.
Others are more optimistic. The migration of consumers online during the pandemic has prompted a hiring spree to meet demand for helplines. “Thanks to the work from home model, they’ve been able to tap into wider talent pools,” said Leigh Hopwood, chief executive of Call Centre Management Association. “A call centre in Bradford can now easily hire an agent in London.”
Landlords put on hold
The prize for call centres allowing staff to work from home is the freedom to shed costly office space.
Capita saved £10m from office closures during the first UK lockdown and has now permanently closed 49 sites worldwide, nearly a fifth of their commercial real estate holdings, with plans to offload more.
In the UK, Santander has scrapped plans for a £75m call centre in Merseyside that would have housed 2,500 workers, while travel group Saga has put a 600-capacity call centre in Kent up for sale.
That could pose a problem for landlords in regions where call centres are a major employer. “Are they lettable? It hangs on the location. Some of these [operators] went to locations which had high unemployment and not a lot of other industry,” said Mat Oakley, head of UK and European commercial property research at Savills.
In the north of England and Scotland more than 6 per cent of the local population are employed in call centres, according to ContactBabel.
They are often thought to be unappealing workplaces. “Secondary office buildings in Dundee, Prestwick, East Anglia . . . on business parks like the one where [TV show] The Office was filmed,” said one analyst.
Many suffered during a wave of offshoring in the early 2000s but customer preferences led to a return, said Oakley, who also argued that concerns about high staff turnover led to improvements in office quality.
That will increase their chances of being re-let to other businesses or to the government as part of its drive to disperse employees around the regions, he added. “Many of these centres are in the north of England, I expect quite a few will get taken up as part of the government’s move of civil servants away from London. That’s the obvious tenant.”
Both Slade and Chapple insist productivity, as measured by metrics like average call handling time and first call resolution, have remained consistent or even improved despite homeworking.
However the shift has presented new dilemmas for satisfying customers and maintaining data security.
“At very least, a dog barking or a baby screaming in the background [of a call] will come across as unprofessional,” said Teresa Cottam, chief analyst at telecoms consultancy Omnisperience. “But if [the agent is] handling sensitive medical or financial data and their flatmate is next to them that opens the door to fraud and crime.”
Call centres are able to remotely monitor technology “to the nth degree”, she said, but adds the “human factors” remain “very risky”.
Huws forecasts that, regardless of the great WFH experiment, employees will eventually be asked to return to the office. “Face-to-face meetings and handshakes are in call centre managers’ muscle memory,” she said. “Juggling a hybrid workforce requires good management and they’re not really allowed to be good managers.”
Sir Peter Wood, who co-founded Direct Line, rues that the heyday of the call centre “has long gone”. “I used to man the phones just for fun and sometimes call customers back . . . when they were rude to my staff,” Wood recalled. “But the romance of call centres is a thing of the past.”
Musk well-positioned to steer cryptocurrency’s future direction of travel
When Elon Musk revealed three months ago that Tesla had bought $1.5bn worth of bitcoin, fans of the digital currency claimed the move would hasten its wider adoption as a tool of corporate finance.
On Wednesday, however, Musk withdrew his personal endorsement, swearing off accepting the cryptocurrency as payment for Tesla’s cars and undermining the company’s justification for using it as a destination to park its spare cash.
As usual, Musk’s comments provided immediate fuel for crypto traders as well as ammunition for the warring crypto tribes on Twitter. But it was harder to tell whether his announcement would have any effect on wider perceptions of the currency, or what role Musk’s views will play in the next phase of crypto adoption.
“He’s always saying things every two days and isn’t consistent,” said John Coffee, a professor at Columbia Law School. Tesla’s pretensions to pushing bitcoin into the mainstream of corporate use always sounded secondary to its interest in pure financial speculation, Coffee added. “I think his first investment was much more of a currency investment than anything else.”
Whatever lies behind Musk’s on-again, off-again love affair with bitcoin, his effect on market prices has been hard to ignore. The currency’s price jumped 15 per cent on the day that Tesla’s investment was revealed, and fell 6 per cent in the 24 hours after this week’s announcement.
The latest drop came just days after Musk jokingly denounced dogecoin — another cryptocurrency that he had heavily promoted — as “a hustle” on US television, sending its value down 15 per cent.
“Without question, he’s become the single most important factor in crypto,” said JP Thieriot, chief executive of crypto exchange Uphold. That influence extends beyond Musk’s ability to move prices and helps shape how people think about digital currencies, Thieriot suggested.
Even Musk, however, can’t force cryptocurrencies into mainstream commercial use. He said this week that Tesla had backed away from accepting payment in the currency because of the environmental effects of the energy-intensive “mining” that goes into validating transactions — a well-known issue he has ignored in the past.
Many crypto experts said that Musk’s change of heart appeared to reflect an acceptance that bitcoin was not suitable for payments. Other companies that had accepted bitcoin as a form of payment in the past, including Dell and Microsoft, also later dropped it.
“I don’t think a lot of people want to spend their bitcoin,” said Wilson Withiam, an analyst at crypto research group Messari. “If there was actual money behind it, would [Tesla] have actually done that?”
Musk’s change of heart extended beyond the issue of payments. He also swore his electric carmaker off becoming an active participant in the bitcoin market, saying that it “will not be selling any bitcoin”.
The commitment came two weeks after Tesla surprised Wall Street with a $101m profit from selling part of its holdings, raising worries that the company’s performance would increasingly be tied to crypto trading.
The pledge not to sell may have reassured some investors, but it also effectively undermined Tesla’s case for using the currency as part of its everyday corporate treasury operations.
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Zach Kirkhorn, Tesla’s chief financial officer, told Wall Street two weeks ago that the liquidity of the bitcoin market justified Tesla holding the cryptocurrency, since it meant the company could buy and sell actively.
That flexibility was particularly important, he said, as Tesla faced greater cash demands to finance plants in Texas and Germany while also dealing with extreme financial stresses in its supply chain caused by the global semiconductor shortage.
“Being able to access our cash very quickly is super important to us right now,” Kirkhorn said. With one tweet that promised to lock in the company’s crypto investment, Musk has torpedoed that rationale.
Some bitcoin backers said that Musk had still helped prepare the way for the wider adoption of bitcoin by corporate treasurers by encouraging other companies to view it as a valid holding — even if there have been almost no examples of others announcing they were buying the currency.
His initial enthusiasm for bitcoin had generated interest — including among treasurers — that was likely to continue well beyond his recent turnround, said Rayne Steinberg, chief executive of digital asset management group Arca. “People were talking about it, it entered the zeitgeist.”
Some corporate treasury experts, however, said that Tesla’s flirtation with cryptocurrency holdings had done nothing to encourage wider adoption.
“It created conversation among treasurers, but I don’t think it changed anyone’s mind,” said Jerry Klein at Treasury Partners in New York. The overriding requirement for treasurers to preserve the value of their companies’ cash had completely ruled out cryptocurrencies, Klein added.
But if Musk’s dabbling in bitcoin failed to change the currency’s standing in the corporate world, his latest intervention has raised another prospect: that he could become a kingmaker for a future cryptocurrency to rival or even supersede bitcoin.
Using his celebrity to draw attention to bitcoin’s large energy consumption — and that many participants in the network are in China, relying on coal-fired power stations — could hasten the search for alternatives, according to supporters. Surveys of millennials and Gen Z, who are big buyers of cryptocurrencies, showed that they were also deeply concerned about climate change, said Thieriot at Uphold. “Eventually, those things have to converge,” he said.
Musk’s comments provoked an immediate scramble for attention among backers of cryptocurrencies that claim to have less adverse effects on the environment. Those included Bitcoin Zero — a carbon neutral version of bitcoin — and Cardano, one of several networks that use a so-called proof of stake mechanism to validate transactions, consuming less energy.
Most newer networks, however, have struggled to win attention and a share of crypto investment. Most of the displaced attention has focused on ether, the digital token used on the ethereum network. With a total value of $440bn, its tokens are worth almost half as much as bitcoin.
Ether is already used by some investors as a form of digital money, and its long-planned move to a proof of stake system could finally be completed within the next year, putting it in a strong position to win wider support, said Withiam, the analyst at Messari.
Musk did not show his hand about which cryptocurrency will win his favour as he turns away from bitcoin, saying only that it would be a token that consumes less than 1 per cent as much energy. His open-ended comment is bound to leave crypto investors guessing — and guarantee that all eyes stay fixed on his tweets for the next clue to his thinking.
Where climate change meets business, markets and politics. Explore the FT’s coverage here
UK’s voter ID plan ‘an expensive distraction’
When the Queen announced in parliament this week that the British government was planning legislation that would require voters to carry photographic identification, her words stirred up worries nine miles to the east, in the London borough of Newham.
Junaid Ali, organiser of the Hope for Humanity Food Bank, which operates from a rundown shopfront in the deprived, multicultural West Ham area of the borough, said families using the service on Tuesday told him they would struggle to find the documents voters are expected to need.
“A lot of the families do not have identification,” Ali said.
Such stories — allied with the near-absence of in-person voter fraud — have raised suspicions that the proposed legislation is an attempt to make it harder for some sections of Britain’s electorate to vote.
A study commissioned by the Cabinet Office and published on March 31 found that 9 per cent of UK adults lacked photographic identification that was still valid and had a recognisable photograph.
Ali said many people reliant on the food bank were citizens of Commonwealth countries such as Pakistan — who have the right to vote in the UK — but that many spent long periods without identity documents while the Home Office processed their visa and immigration applications.
“For asylum-seeker families, the ID is held by the Home Office,” Ali said.
The UK government’s move received backing from former US president Donald Trump on Tuesday who said the UK measures were “exactly” what the US should do. There have been widespread accusations that new voter identification laws across a swath of Republican-controlled states — including Georgia and Florida — are part of an attempt to stop black and other minority groups in America from voting.
Jessica Garland, director of policy and research for Britain’s Electoral Reform Society, the election-rights pressure group, queried why a crackdown on in-person voter impersonation was a priority for the government when it was a rarely recorded offence.
“There’s no evidence that there’s a problem that the policy is trying to solve,” Garland said. “We really think this could be quite an expensive distraction.”
Despite vocal opposition to the proposals, the government has so far refused to back down, perhaps raising the prospect of another embarrassing U-turn further down the line.
“Having photographic identification is ensuring a problem doesn’t arise,” Jacob Rees-Mogg told MPs on Thursday. “This country has an electoral system of which people can be proud and of which people can have confidence. We mustn’t allow that confidence to slip.”
The arguments surrounding voter identification have been familiar to Angela Wilkins, leader of the Labour party group on Bromley council, in south-east London, ever since the council hosted one of the pilots for the voter ID scheme at local elections in 2018.
The Electoral Commission, the UK elections watchdog, said after the pilot that the majority of voters had been able to meet the requirements, although some were turned away. It added there was no evidence the requirement significantly deterred people from voting.
Wilkins, however, said she believed the commission had underestimated how many people were put off.
“A lot of people didn’t even attempt to go and vote because they knew they couldn’t because they hadn’t got the right ID,” Wilkins said.
It is unclear, meanwhile, how far the proposed legislation would address issues raised by the UK’s biggest election fraud scandal of recent years, in the 2014 local elections in Tower Hamlets, a London borough that neighbours Newham.
That case — which led to the removal of Lutfur Rahman as the borough’s mayor — related mainly to false registrations of people with no right to vote and a range of other issues, including the exercise of unlawful religious influence over voters’ decisions by Muslim religious leaders.
The Tower Hamlets case took place while prime minister Boris Johnson was mayor of London. Johnson closely followed the case and after the ruling against Rahman in 2015 said: “I’m very glad that justice has taken its course and the cloud has been lifted from Tower Hamlets.”
But Johnson is also a longtime sceptic of ID cards. Writing in the Telegraph newspaper in 2004 as a Conservative MP, he said: “If I am ever asked, on the streets of London, or in any other venue, public or private, to produce my ID card as evidence that I am who I say . . . I will take that card out of my wallet and physically eat it.”
Garland said the fraud in Tower Hamlets had been caught and there had not been another similar case since.
“To introduce this measure for an entirely different kind of fraud . . . seems like the wrong lesson to be drawn from that,” she said.
It is not clear, either, whether the legislation will follow a key recommendation from the Electoral Commission — that councils should offer a free, official form of photo identification for those lacking other forms. Voters in Northern Ireland — where photographic identification has been needed since 2003, and whose experience the government has cited as evidence the proposals can work — are offered such a card.
The plans are also likely to encounter some political opposition when introduced to parliament. Libertarian-minded Conservative MPs are unhappy with the proposals; one described them as “the very sort of thing we used to tear pieces out of Labour for”. But any rebellion is unlikely to undermine the government’s 80-seat majority.
Ruth Davidson, the former leader of the Scottish Conservative party, described the plans as “total bollocks”, adding they were “a solution to a problem that doesn’t exist”.
She told ITV: “I think that given where we are and the year we’ve had, we’ve got real problems to solve in this country, and the idea that this is some sort of legislative priority I think is for the birds.”
The House of Lords is also likely to seek to amend the legislation. Liberal Democrat and Labour peers are particularly unhappy with the proposals.
Garland said the introduction of a free, official form of ID would be the “absolute minimum” required to make any system fair.
In West Ham, however, Ali said the new plans had simply added to the suspicions of his food bank’s already marginalised users about the government’s intentions towards them.
“They have concerns that it might be another way to check the data of people,” Ali said. “They’re quite scared.”
Additional reporting: John Burn-Murdoch in London and Lauren Fedor in Washington
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