In short supply of neon, the war will exacerbate the chip crisis

The Ukrainian conflict risks hardly exacerbating the chip crisis, penalizing the global industry (electronics and, consequently, automotive) already severely tested by the shortage of semiconductors during the pandemic.

Palladium and neon are two key resources for the production of semiconductors: the Russia supplies over 40% of the world supply of pallets or (followed by South Africa) while Ukraine produces 70% of neon.

These two percentages give an idea of ​​how much the industry will suffer if the conflict continues: this was reported by a recent report by Moody’s calling into question the Crimean war of 2014-2015 when neon prices registered a boom of as much as 600 %.

Neon is key: Semiconductors serve as technological brains in our phones, laptops, smart homes, and even cars.

If the Usa are independent of crude oil they are not for the neon which is an essential gas for the operation of lasers for chip engraving and is used almost exclusively for this purpose. It is present in minimal quantities in the air and must be processed in huge volumes.

The United States is almost exclusively dependent on the Ukraine-Russia pairing for its neon needs. According to the consulting firm TechCet, which specializes in electronic materials, neon, palladium and C4F6 are in fact three crucial materials for microchips, indeed “vital” for the processing of semiconductors.

According to Moody’s Analytics, the heaviest effects of the new shortage will be felt mainly in Europe, the largest buyers of Russian oil and natural gas. But no country will be able to sleep between two pillows.

Global chip shortages were talked about a lot during the pandemic, as remote working and restrictions had accelerated the process of digitization around the world. But now yes risks a real double blow worldwide for industrial sectors already severely tested.

There are also broader considerations to be made: the war in Ukraine could indeed force the European Union to downsize its ambitions to become a leader in chip manufacturing.

And since the semiconductor supply chain was already strained due to increased demand, any disruption to material supply it may negatively affect chip production over the next 6-12 months.

The global semiconductor market now counts more than 500 billion euros – a figure that is expected to double by 2030. Europe accounts for 10% of world production, up from 24% in 2000 and 44% in 1990.

At the moment, however, it seems that traders are not overly concerned. The Semiconductor Industry Association (SIA), which represents the US semiconductor industry, said it may have “a diverse set of suppliers of key materials and gases, so we do not believe there are any immediate risks of supply disruption related to Russia. and Ukraine “.

Long-term, Russia will be facing the chip crisis, despite the embargo on the export of technologies it does not seem to be so drastic. Taiwan Semiconductor Manufacturing Company (TSMC), the world’s leading semiconductor manufacturer, has announced that it will comply with US guidelines and stop its exports to Russia. And Moscow is also heavily reliant on chips to produce its laptops, smartphones, and advanced military equipment.

If Odessa is one of Putin’s military targets, experts say it is no coincidence. In addition to being one of the busiest ports in the country, it is also home to a little-known company called Cryoin, which plays an important role in global semiconductor manufacturing.

Cryoin, according to Wired reports, produces neon gas, a substance used to power lasers that engrave patterns in computer chips. It supplies companies in Europe, Japan, Korea, China and Taiwan, but most of its neon is shipped to the United States. Its production, with the Russian offensive, stopped.

Meanwhile, the governments of the United States and Japan are putting pressure on their chip industries to find alternatives to neon before it’s too late.

For what concern neon, then, the extraction process consists of a real assembly line: steel companies in Russia that can capture the gas, bottle it and sell it as crude oil, and the neon industry in Ukraine was built precisely to exploit these gases by-products of Russian steel production.

with the war, sourcing neon from elsewhere will not be easy and the long-term impact of the conflict remains unclear. On the part of companies, however, the demand for chips specialized in artificial intelligence is expected to grow by more than 50% per year. And if the South Korean government has invested $ 451 billion in semiconductor development and Intel has invested $ 20 billion in two new semiconductor foundries to fight the chip shortage, the U.S. government has warned that the global supply chain of chip also remains weak globally.

By Editor

Leave a Reply