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Home » Ukraine-Russia Crisis: Limited Impact on Chips Yet as Future Uncertain
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Ukraine-Russia Crisis: Limited Impact on Chips Yet as Future Uncertain

Abdulmujeeb OwolabiBy Abdulmujeeb OwolabiUpdated:February 24, 2022No Comments4 Mins Read
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Ukraine provides more than 90% of the semiconductor-grade neon used in chipmaking in the United States.

HIGHLIGHTS

  • Companies are more prepared than they have been in prior years.
  • The majority of chipmakers are taking a wait-and-see approach.
  • Some businesses had begun to branch out from Russia and Ukraine.
Ukraine-Russia Crisis: Limited Impact on Chips Yet as Future Uncertain

Because of raw material hoarding and diversified procurement, large chip makers expect modest supply chain interruption as a result of the Russia-Ukraine crisis, although some industry sources are concerned about the long-term impact.

One of Europe’s biggest security crises in decades is brewing, with Russian President Vladimir Putin authorizing a military campaign in eastern Ukraine on Thursday, seemingly signaling the start of a war.

Fears of more delays as a result of a yearlong shortfall of semiconductor chips have weighed heavily on the stocks of tech businesses that source or sell abroad.

Ukraine provides more than 90% of the semiconductor-grade neon used in chipmaking in the United States. According to industry research firm TechNet, the gas is filtered in Ukraine as a byproduct of Russian steel manufacturing. Russia supplies 35% of US palladium, which is used in sensors and memory, among other applications.

“The chipmakers aren’t directly affected, but the companies that supply them with ingredients for semiconductor production buy gases from Russia and Ukraine, including neon and palladium,” said a Japanese chip industry source who requested anonymity. “Because supply of certain minerals are already scarce, any additional demand could drive up prices. Higher chip prices could result as a result of this.”

However, due to past interruptions and wars in recent years, businesses are better prepared than in previous years, lessening some of the pain.

According to Reuters last month, the White House has advised the chip sector to diversify its supply chain in case Russia retaliates against proposed US export limitations by limiting access to vital ingredients.

The West sanctioned Russia’s Nord Stream 2 pipeline and some Russian banks before of the invasion, as well as placing restrictions on some key Russian officials. More penalties could be imposed in the form of technical restrictions like to those used during the Cold War, followed by Russian reprisal on exports.

On Wednesday, ASML Holding, a key Dutch supplier to chipmakers such as TSMC, Samsung Electronics, and Intel, announced it is looking at other neon sources.

Diversified

Most chipmakers are in a wait-and-see posture, and correspondence prior to Thursday’s escalation suggested that they were confident in their supply chains, which they had diversified in the aftermath of the US-China trade war, the pandemic, and Japan’s diplomatic conflict with Seoul.

After Moscow took Crimea in 2014, which generated a massive surge in neon prices, some companies began diversifying away from Russia and Ukraine.

Ukraine-Russia Crisis: Limited Impact on Chips Yet as Future Uncertain

Last week, CEO Lee Seok-hee of South Korean memory chipmaker SK Hynix told reporters that the business has “secured a lot” of chip materials and that “there’s no reason to fear.”

Intel stated that it did not expect any negative consequences. GlobalFoundries, like Taiwan chipmaker United Microelectronics Corp., said it does not see a direct danger and that it has the ability to seek sources outside of Russia or Ukraine.

“At this time,” TSMC, the world’s largest contract chipmaker, declined to comment. Read also; Apple AirTags are being misused to stalk people

ASE Technology, a Taiwanese semiconductor testing and packaging company, claimed its material supply is “at this stage” stable.

In a statement to Reuters, Taiwan’s Ministry of Economic Affairs said it had reviewed the semiconductor supply chain and found no direct impact on materials or production activities.

“At the present, Russia is not one of the primary markets for the Taiwanese foundry industry,” said Joanne Chiao, senior analyst at market research firm TrendForce.

Because the resources it requires are not imported from Russia, and its machines are primarily sourced from the United States, Japan, Korea, Singapore, and locally, Malaysian chipmaker Unisem, whose customers include Apple, predicts little impact on chip manufacturing from a raw materials standpoint.

Malaysia has established itself as a key link in the chip manufacturing process, accounting for 13% of worldwide chip assembly testing and packaging.

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Abdulmujeeb Owolabi
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Abdulmujeeb Owolabi writes SEO articles for businesses that want to see their Google search rankings surge. With his 5 years of SEO expertise in writing tech, crypto, and finance blogs, you can reach him on Owolabi@techloaded247.com His articles focused on balancing information with SEO needs–but never at the expense of providing an entertaining read.

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