Increasing energy costs are causing difficulties at the UK’s chip fabs and the rises are expected to continue.
“Many of the wafer fabs have seen prices more than double in the last two years,” Derek Boyd, chief executive of the UK National Microelectronics Institute (NMI), told Electronics Weekly. “The wholesale price of electricity has risen from £20-£22/MWh 24 months ago and it is currently £50/MWh. Three years ago it was £16.”
Martin Burns, UK country manager for Freescale Semiconductor, which has a fab in Scotland, agreed with Boyd: “Last year our electricity price increased by 50 per cent and looking into 2006 we could see a similar increase.”
Efficiency gains cannot keep pace. “We have won awards for our energy reduction programme, but we have not been able to claw back enough to compete with an annual electricity price increase of 50 per cent.”
The price hike has pushed the UK from one end of the energy spectrum to the other. “The UK has gone up from one of the cheapest [energy] places in the work to one of the most expensive,” said Boyd at the NMI.
Increasing costs, from around $2m to around $5m in a typical large UK fab - the largest non-personnel cost, said Boyd - has potential knock-on effects for employment, although “I am not aware that it has cost any jobs at the moment”, he admitted.
Price is primarily being driven by the cost of gas, which is used to generate much of UK electricity.
“Graphs of natural gas and electricity prices almost match identically,” said Ted Wiggans, supply chain director of UK chip maker Zetex. “North Sea reserves are running out, the UK is now a gas importer, and the world demand for all fossil fuels has gone up: gas is easily shipped and it is a commodity.”
Zetex saw a 37 per cent rise in electricity prices this year and expects 50 per cent next year.
“The only thing to do about it, is to decouple gas and electricity prices,” said Wiggans. “The French are building nuclear power stations. We [the UK] used to use a lot of coal, but coal is fairly dirty.”