As the demand for renewable energy and low-carbon technologies accelerates, semiconductors are emerging as both a vital enabler and a strategic bottleneck.
Introduction: Powering the CleanTech Economy
Semiconductors—often referred to as microchips—are foundational components in the digital technologies that underpin clean energy solutions. From solar panels, electric vehicles (EVs), to our everyday smartphones, they all rely on semiconductors. These chips have become the hidden enablers of clean technology, powering everything from EV batteries to solar inverters. An electric car can contain up to 3,000 chips—double that of a petrol vehicle—It’s a striking illustration of how microchips have become central to the push for greener tech.
However, their growing importance in sustainability comes with a paradox: while chips power the green transition, their manufacturing processes are energy-intensive, resource-heavy, and geographically concentrated. Understanding the evolving role of semiconductors is critical to advancing CleanTech innovation, policy, and investment.
This post explores why semiconductors are more important than ever in CleanTech, and what that means for innovators, investors, and companies driving toward climate goals. We’ll cover their growing role in clean technologies, the risks within their supply chain, and how forward-looking organisations can act.
Semiconductors: The Hidden Engine of Clean Tech
Semiconductors – or “chips” – are the silent operators behind nearly every clean technology system. While solar panels and batteries tend to grab the headlines, it’s the microchips inside them that make these devices smart, efficient, and responsive.
For example, a solar power system isn’t just a panel array; it needs inverters filled with power electronics to convert DC electricity into grid-ready AC. These inverters are packed with semiconductors – transistors and diodes – that ensure energy conversion with minimal loss. Wind turbines rely on chips to adjust blade speed and optimise power flow. Even the humble home smart thermostat or EV charger depends on semiconductors to enable sensing and communication.
Take electric vehicles: semiconductors control the energy flow between battery and motors, monitor temperature and charge, and enable functions like regenerative braking and driver assistance. Some EVs now contain up to 3,000 chips. The same holds for grid-scale batteries and smart grid systems – they all rely on chips to monitor, manage, and maximise performance.
It’s not just a matter of using any chip – sometimes clean tech needs specialised, robust, and power-efficient semiconductors. Automotive and renewable energy applications, for instance, require chips that can handle high voltages, thermal extremes, and long operational lifespans. Many clean tech devices use larger, rugged chips built for power and endurance – though increasingly, they also demand more advanced processing capabilities as systems become more intelligent.
The takeaway: Semiconductors may be invisible to most users, but they’re the nervous system of clean tech. Recognising this hidden engine is essential for anyone investing in, building, or deploying climate technologies.
A Complex and Fragile Supply Chain
If chips are the engines of clean tech, then the supply chain that produces them is the fuel line – and it’s under strain.
The semiconductor supply chain is highly specialised and globally dispersed. It consists of four core stages:
- Chip Design – Led by fabless firms such as NVIDIA
- Fabrication – Conducted by foundries like TSMC, primarily in Taiwan
- Packaging & Testing
- Integration into End Products
Two dominant production models define this landscape. The first is the vertically integrated model, led by companies such as Intel and Samsung, which manage every stage of production in-house. These companies are known as integrated device manufacturer (IDM). The second is a more modular approach, where companies specialise in individual tasks such as design houses(e.g. ARM, NVIDIA), foundries (e.g. TSMC), or testing and packaging.
This disaggregated model has enabled greater innovation and flexibility, but it also introduces fragility. Advanced chip manufacturing is heavily concentrated in East Asia, with Taiwan leading fabrication, Japan dominating material processing, and the US supplying design software and manufacturing tools. Europe, though less dominant, plays an important role in materials and equipment. This concentration of capability and expertise has created systemic vulnerabilities, as demonstrated by the global chip shortages during the COVID-19 pandemic.
The global semiconductor supply chain is intricate, highly specialised, and concentrated in a handful of regions. No single country controls the full chip-making process. The US dominates design and software tools, Taiwan leads manufacturing, Japan provides materials and components, and the Netherlands (via ASML) supplies essential lithography equipment. This has created efficiency – but also fragility.
A clear warning came during the COVID-19 pandemic. Lockdowns and a surge in demand triggered a global chip shortage. Many EV and car makers were forced to idle production, with an estimated 7.7 million fewer vehicles produced in 2021. Losses in the auto sector alone topped $210 billion.
The UK, which imports around £3 billion in semiconductor goods annually, saw how exposed its green tech ambitions were to global chip disruptions. The UK’s National Semiconductor Strategy has since flagged semiconductors as a critical enabler – and bottleneck – for net-zero goals.
Geopolitics further raises the stakes. Any disruption there could stall key clean technologies. The US, EU, and UK are investing billions into domestic semiconductor capacity, with the UK focusing on niche areas like compound semiconductors. But building new fabs takes years and billions in capital.
In the meantime, cleantech players must adapt. Some companies are already qualifying multiple chip suppliers, redesigning systems to use more available chip types, and stockpiling critical components.
Competition is another hidden risk. In a crunch, defence, telecoms, and consumer electronics may get chip priority. Climate tech players must advocate for their technologies as mission-critical – because climate security is national security.
Bottom line: The chip supply chain is both a marvel and a minefield. Managing its risks is now a strategic priority for clean tech success.
Innovation at the Intersection of Chips and Climate
Amidst the supply challenges, there’s also breakthrough innovation. Semiconductor advances are turbocharging clean tech – and reshaping how chips are made.
- Compound semiconductors (SiC and GaN)
Silicon carbide (SiC) and gallium nitride (GaN) are next-generation chip materials that operate at higher voltages and temperatures, making them ideal for EV powertrains and solar inverters.
The compound semiconductor sector (which includes SiC and GaN) is projected to grow from $67 billion today to $350 billion by 2030.
- Greener semiconductor manufacturing
While chips enable clean tech, chipmaking is carbon- and resource-intensive. Fabricating cutting-edge chips can consume over 7.7 billion kWh per year. TSMC alone used 6% of Taiwan’s electricity in recent years and produced 15 million tonnes of CO₂ in 2020. Chip fabs also consume up to 70 billion litres of ultrapure water annually.
In response, industry leaders are investing in:
- Renewable-powered fabs
- Closed-loop water recycling
- Reclaiming rare gases and metals
- E-waste chip material recovery
These steps are critical to ensuring the chip revolution aligns with climate goals.
3. Chips that save energy elsewhere
Semiconductors are also being used to reduce energy consumption in high-demand sectors. Data centres, for example, are major energy consumers – but the rise of low-power AI chips is helping to dramatically cut their electricity use. One promising cleantech startup, Oriole Networks – a portfolio company of our sister organisation, the Clean Growth Fund – is developing systems specifically designed to lower the energy intensity of AI workloads.
This creates a powerful synergy: semiconductors that not only enable clean technologies, but also decarbonise the digital infrastructure that supports them.
- Local innovation opportunities
UK is one of the largest R&D hub for compound semiconductors, and is nurturing clusters like the one in South Wales to produce the next generation of power electronics. These home-grown capabilities can improve economic resilience and support domestic clean tech supply chains. Although capital investment required is massive and it will take years before it starts impact.
Strategic Implications: What Companies and Investors Can Do
To stay ahead in the clean tech race, stakeholders should start thinking of semiconductor strategies during decision making process.
- Integrate chip risks into planning: Identify supply chain dependencies and build resilience through multiple sourcing, early procurement, or design flexibility.
- Engage upstream: Build relationships with suppliers and monitor policy shifts. Support efforts to boost local or regional semiconductor capabilities, particularly in areas like compound semiconductors.
- Track innovation: Stay informed on emerging chip technologies that can improve your products’ performance or sustainability. Collaborate with chipmakers or startups where possible.
- Procure responsibly: Choose suppliers with transparent carbon footprints and energy-efficient manufacturing practices. Design for sustainability wherever possible.
- Educate internally: Build basic semiconductor literacy within your teams—from engineering to strategy—so your organisation can make informed decisions as this landscape evolves.
Conclusion
Semiconductors are the silent force driving clean technology. From solar farms to smart meters to electric vehicles, these chips make modern climate solutions work. But they also bring strategic and sustainability challenges that must be managed proactively.
The companies and investors that understand the role of semiconductors—and act accordingly—will be best positioned to lead in CleanTech. Because while the future may be powered by sun, wind, and innovation, it’s wired together by silicon.
Question to consider:
Is your organisation prepared for the semiconductor era of CleanTech? How you manage this critical component could shape your success in the net-zero transition.
References – Published Sources
- Earth.org (2023)
The Role of Semiconductors in the Green Transition. Earth.Org. - Rho Motion (2023)
Semiconductors in EVs: What You Need to Know. Rho Motion. - Nexperia – Efficiency Wins (2023)
Harnessing the Sun: Semiconductors in Solar Inverters. Nexperia. - Reuters (2021)
Supply Chain Snarls Could Cost Automakers $210 Billion This Year, Forecast Finds. Reuters. - UK Government (2023)
National Semiconductor Strategy. Department for Science, Innovation and Technology, GOV.UK. - The Guardian (2025)
Hern, A. Inside the Mind-Bending, Tin-Blasting and Hyper-Political World of Microchips. The Guardian. - Forbes Business Council (2023)
Brown, S. The Future of Renewable Energy Is Built on Semiconductors. Forbes. - Interface EU (2023)
Chip Production’s Ecological Footprint. Interface EU.
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