What Is a Semiconductor Fab? Cost, Water and Power Explained

In the news: new fabs in Japan

"TSMC's fab in Kumamoto has started volume production." "Rapidus has built a fab in Chitose, Hokkaido." Headlines like these have come one after another in Japan in recent years. The Japanese government has also agreed to subsidize Micron's fab in Hiroshima Prefecture and Kioxia's fabs in Mie and Iwate Prefectures.

Most of the "factories" in these stories are what the industry calls fabs. The word is short for fabrication, which means manufacturing. This article looks at what a fab does, and why it needs so much money, water and power.

What is a fab? A factory that builds circuits on wafers

Chips are made in two broad stages. In the first stage, transistors and wiring are built on the wafer. This is called the front end. In the second stage, the wafer is cut into individual chips, which are packaged and tested. This is called the back end.

A fab usually means a front-end factory. Each wafer holds hundreds of chips. The fab repeats four kinds of work hundreds of times: adding films, printing patterns, etching and cleaning. Daifuku, a maker of transport systems for factories, says the number of process steps reaches 600 to 1,000. Leading-edge fabs have even more. The back end is often handled by a different factory or company. You can compare the two in the table in "Front-End vs Back-End Semiconductor Process."

The heart of a fab is a room where airborne dust is cut to an extreme degree. This is the cleanroom. "What Is a Cleanroom?" explains how clean it is and how it stays that way. In a fab, the spaces above and below this room are packed with air-handling equipment, pumps and piping. Outside the building stand more plants that handle water, power and wastewater.

Why so expensive? Most of the cost is equipment

A factory makes most people think of a big building. But most of the money goes on the machines inside. A 2020 report by the US Congressional Research Service (CRS) cites the Semiconductor Industry Association (SIA) on this point. Most of the initial construction cost is manufacturing equipment, it says. Some tools cost more than $100 million each (about 15 billion yen at 150 yen to the dollar). The same report also notes the view of industry experts that an advanced fab can reach $20 billion.

A typical expensive tool is the one that prints the finest patterns, using EUV lithography. It is made by ASML in the Netherlands. Take ASML's 2025 results and divide EUV system sales by the number of systems. That gives about €240 million per tool on average, or tens of billions of yen. "Semiconductor Manufacturing Equipment" gives the bigger picture, including other tools.

Here are some real amounts. TSMC put the initial investment in its first fab in Kumamoto, Japan, at about $7 billion (2021). Together with the second fab, investment is expected to top $20 billion (announced February 2024). In the US, TSMC has announced plans to invest a total of $165 billion, including six fabs (March 2025). All of these are planned amounts, not money already spent.

Tools this expensive lose money every hour they sit idle. So most fabs run day and night without stopping. "What Is a Semiconductor Foundry?" explains why a fab's capacity is shared among many customers.

Wafers move automatically

A wafer moves from tool to tool for each of hundreds of steps. Carrying wafers by hand is tiring because of the weight, and they could be dropped. People also shed dust. So in today's fabs, wafers travel in a sealed container called a FOUP, and machines carry it.

A vehicle running on rails in the ceiling picks up the container and lowers it onto the entrance of a tool. This vehicle is called an OHT (overhead hoist transport).

The whole setup is called an AMHS, or automated material handling system. It includes the vehicles, the storage shelves and the computers that tell them where to go.

To give a sense of scale, Daifuku says the ceiling rails in a large fab add up to 10 km. Several hundred or more vehicles run on them 24 hours a day, 365 days a year (its 2019 report). Daifuku also cites even longer rails for leading-edge fabs.

Water: "ultrapure water" for washing wafers

Wafers are washed before and after almost every step. Even a trace of metal or dust can cause a defect. The water used for washing has had ions, particles, organic matter and more removed to the extreme. This is called ultrapure water.

Ultrapure water is made in dedicated plants at the fab, starting from pumped groundwater, industrial water or other sources. Part of the used water is treated and reused. The second half of "What Is a Cleanroom?" explains how its purity is checked.

For an idea of the amounts, take an October 2023 document from Kumamoto Prefecture in Japan. JASM (a TSMC subsidiary) plans to pump an average of 8,500 m³ (8,500 tonnes) of groundwater a day for its first fab. That is about 3.1 million m³ a year. This is about 29% less than the April 2022 plan of 12,000 m³ a day.

Power and exhaust: equipment that never stops

Fabs also use a lot of electricity. The fans that keep cleanroom air moving run all year. So do the air conditioning that holds temperature and humidity, the manufacturing tools and the ultrapure water plants.

Look at TSMC's sustainability report. In 2024, the company's fabs and other sites worldwide used 27,456 GWh of energy (27.456 billion kWh). A GWh is a million times the kWh you see on a household electricity bill. About 93% of that energy was electricity bought from power companies and other suppliers. 2024 was a leap year, with 8,784 hours. Dividing the purchased electricity by those hours gives an average of about 2.9 million kWh per hour (this article's own calculation).

What leaves the fab also takes work. Manufacturing uses some gases that are toxic or flammable. These gases cannot simply be released into the air. They are first made harmless, for example by burning them or washing them with water. The equipment that does this is called an abatement system. Used water is also treated before it is discharged.

How many years from construction to volume production?

A fab does not start working the moment the building is finished. First the building and cleanroom are built, and the tools are moved in and installed. Then the conditions for each tool are tuned so it makes exactly the films and shapes intended. Test runs come next, and only then does volume production begin.

The first Kumamoto fab took about three years from the plan announcement to volume production. From the start of construction, it took about two years and eight months. Rapidus started building its Chitose fab in September 2023. It says the cleanroom was completed in 2024, and that more than 200 tools were connected by June 2025. It plans to start volume production in the second half of fiscal 2027.

Volume production is not the end of the story. At first, the share of good chips, called yield, is low. Engineers find and fix the causes one by one to raise it. Also, a single wafer takes about 12 weeks on average just to pass through the front end (Semiconductor Industry Association, 2021).

Who works in a fab?

Fabs are highly automated, but that does not mean there are no people. Engineers set and watch the process conditions. Others maintain the tools, analyze data, and look after the facilities and safety. TSMC expects its two Kumamoto fabs to create more than 3,400 high-tech professional jobs (2024).

Why governments subsidize fabs

In Japan, the Ministry of Economy, Trade and Industry (METI) sees semiconductors as parts that many products cannot be made without. If supply were cut off, society and the economy could be hit hard. In December 2022, semiconductors were designated a "specified critical product" under Japan's Economic Security Promotion Act. That means a product the country needs a stable supply of. During the 2020–2022 shortage, chips really did fail to arrive, and car production stopped ("What Caused the Global Chip Shortage?").

On the other hand, as we have seen, a fab takes huge sums of money and years to build. So the Japanese government pays part of the cost for companies that build fabs in Japan. The main plans approved by METI are below.

In the table, "logic" means chips that compute and control. Flash memory and DRAM are chips that store data. Each subsidy amount is a ceiling, and it is reviewed when the plan changes. In October 2026, it was reported that a change to the plan for the first Kumamoto fab had been approved (EE Times Japan). The latest list, including revised amounts, is on METI's website.

The government has also supported Rapidus by commissioning research and development from it. In addition, the Information-technology Promotion Agency (IPA), a government agency, invested in the company. It put in 100 billion yen in February 2026 and 150 billion yen in June. In November 2024, the government also set a framework for more than 10 trillion yen of public support for AI and semiconductors by fiscal 2030.

Other countries have similar policies. In the US, the CHIPS Act became law in August 2022. Of its $52.7 billion budget, $39 billion goes to subsidies for building fabs and related work. The law also created a tax credit worth 25% of investment in fabs.

Community and environment: groundwater in Kumamoto

Around the Kumamoto fab in Japan, groundwater became a major issue. According to Kumamoto City, about 1 million people in the Kumamoto area, including the city, get almost all their tap water from groundwater. A factory that uses large amounts of water was coming to that area.

So work is under way to put back as much water into the ground as is pumped out. Letting rainwater and other water soak into the ground to add to groundwater is called recharge. In May 2023, five parties signed an agreement to promote recharge, including JASM, Kumamoto Prefecture and the town of Kikuyo. JASM plans to recharge 104.7% of the amount it pumps (Kumamoto Prefecture, October 2023). JASM also takes part in flooding rice paddies in winter so that the water soaks into the ground.

In September 2023, the prefecture revised its guidelines. Companies and others that newly pump groundwater must now recharge the same amount they take. Before, the requirement was 10%. The prefecture also predicted the impact with a simulation, a calculation that reproduces how groundwater flows. Even at the original planned amount (12,000 m³ a day), the groundwater level would drop by about 30 cm at most. The drop would also be limited to a small area (prefectural document, November 2024). New observation wells have been set up in the district where the fab stands, to keep watching the groundwater level.

Water quality is checked too. Kumamoto Prefecture measures rivers, groundwater and other water around the fabs. An expert committee reviews the results, and the prefecture publishes them. The substances measured include some that are not regulated by Japanese law, such as some organic fluorine compounds. In February 2026, the committee found that regulated substances were below the standards, and that no impact had been confirmed so far. For most unregulated substances, too, it said that no clear change had been confirmed.

Common misconceptions

Key numbers

Put the numbers side by side and a picture of a fab emerges. Hundreds of steps run around the clock, with expensive tools and automated transport. That takes large amounts of water and power. In Kumamoto, systems to protect the local water have been built up at the same time. Subsidies and investments change as plans change, so check the latest figures in announcements by the companies and METI.

Learn more

• The workflow inside the fab: "How Are Chips Made?"; the starting material: "What Is a Silicon Wafer?"
• The steps that print patterns: "What Is Photolithography?" and "What Is EUV Lithography?"
• Company types in a table: "IDM vs Fabless vs Foundry"
• Try the numbers: work out how chip size relates to the share of good chips with the "die per wafer and yield calculator."
• Go deeper with terms: the FFU (the filter box in the ceiling), the EFEM that opens FOUPs at the front of a tool, and the specialty gases used in manufacturing.