Russia’s war in Ukraine could trigger another global chip shortage

- Advertisement -

Thursday morning, explosions shocked at least seven cities in Ukraine, heralding the start of a full-scale Russian invasion. Among Putin’s first targets was Odessa, a seaside city clustered around the Black Sea and one of the country’s busiest ports. But it’s also home to a little-known company called cryoinwhich plays an important role in the global production of semiconductors.

- Advertisement -

Cryoin produces neon gas, a substance used to power lasers that etch patterns into computer chips. The company supplies companies in Europe, Japan, Korea, China and Taiwan, but most of its neon comes from the US, WIRED said. Now, analysts are warning that the ripple effects caused by Cryoin supply disruptions could be felt around the world.

- Advertisement -

Production of neon cryoin and other gases was halted on Thursday when the invasion began, says business development director Larisa Bondarenko. “We decided that [our employees] should stay at home for the next few days until the situation clears up to make sure everyone is safe,” she says, adding that no damage had been done to the facility as of Monday. Despite plans to resume production over the weekend, rockets over Odessa meant it was still too dangerous. Bondarenko, who lives half an hour away by car, says she slept in her basement. Thank God we have one in our house.

Semiconductors act like the technological brains in our phones, laptops, smart homes, and even cars. The industry is already struggling with deficit as it struggles to keep up with the pandemic demand for devices. In 2021, the shortage of chips has limited the production of almost all major automakers, including companies such as General Motors. closing as a result, entire factories. Apple, one of the world’s largest buyers of chips, told manufacturers in October that it would produce 10 million fewer iPhones than planned in 2021 due to a shortage of chips. bloomberg.

- Advertisement -

But Russian aggression in Ukraine is making the industry nervous, as this shortage could widen with a repeat of 2014, when neon gas prices jumped 600% in response to the annexation of Crimea. Last week, the US and Japanese governments have been scrambling to make sure this doesn’t happen again, putting pressure on their chip makers to find alternative sources of this little-known gas before it’s too late.

Ukraine is just one of the bottlenecks in the global semiconductor industry. About half of the world’s neon gas comes from the country, said WIRED TechCet, an electronic materials consulting firm that advises some of the world’s largest chip makers, including Intel and Samsung.

The Ukrainian neon industry was created to use the gases produced as a by-product of steel production in Russia. “What is happening in Russia is that those [steel] companies that have the ability to capture the gas bottle it and sell it raw,” said Lita Shawn-Roy, President and CEO of TechCet. “Then someone has to clean it up and take away the other [gases] and that’s where cryoin comes in.”

When Russia annexed Crimea in 2014, the world’s chip makers were even more dependent on Ukraine, as the country supplied about 70 percent of the neon gas. “There were supply delays due to border crossing issues,” says Sean-Roy, and the raw materials needed to make neon were also in short supply. “Russia has focused its efforts on the war, not steel production.”

Burnt by this experience, the chip industry has struggled to diversify its supply. Cymer, owned by Dutch chip giant ASML and making the lasers used to draw patterns on advanced semiconductor chips, has tried to cut down on neon consumption. “Chip makers are concerned about the recent rise in neon prices and continuity of supply,” said David Knowles, vice president and general manager of Cymer. said at the timewithout specifically mentioning Ukraine.

Bondarenko says the price spike in 2014 was mainly due to a feud between rival neon makers Cryoin and Iceblick, which is no longer in operation. However, if access to Russian oil does become a problem, she says, Cryoin has enough reserves to keep production going until the end of March. If this ends, she argues that there are Ukrainian oil producers that Cryoin can turn to as an alternative.

Instead, she is more concerned about the neon being taken out of the country. “The borders are now very congested, people, civilians, are trying to evacuate,” she says. “If the authorities of the countries where our customers are located can influence the situation at the border for commercial traffic, this will be of great help. [and] it will not affect the entire industry worldwide.”

Chip makers are downplaying how much the crisis in Ukraine will affect them. “There is nothing to worry about,” said Lee Seok-hee, CEO of South Korean chipmaker SK Hynix. said last week, adding that the company has “purchased a lot” of materials. Koichi Hagiuda, Minister of Economy, Trade and Industry of Japan: said Japanese chip makers do not expect “major impact” on their operations as they may source materials from other sources. The country imports 5 percent of gases used in semiconductor manufacturing from Ukraine.

But there are signs that, despite the 2014 warning, Ukrainian neon still plays an important role in the industry. ASML told WIRED that “less than 20 percent” of the neon it uses in its factories comes from Russia or Ukraine. “Together with our supplier, we are exploring alternative sources in case of supply disruptions from Ukraine and Russia,” the spokesman said.

There are fears that the US is even more vulnerable. Last week, the White House urged US chipmakers to look for alternative suppliers, Reuters reported. informed. “We are seeing huge volumes of imports coming into the US from [Russia and Ukraine],” says Sean-Roy of TechCet. “According to my reasonable estimate, what enters the United States from Russia and Ukraine may be from 80 to 90 percent of all [neon] import”. US chip maker Intel did not respond to a request for comment.

But getting neon from other sources will not be easy. Any disruptions in Ukraine will hit chipmakers at a time when the industry is already under heavy pressure from post-pandemic demand. “The drive to increase production is so strong that it is putting pressure on the supply chain everywhere, even without a war,” adds Sean-Roy. “Therefore, as far as I know, there are no surplus reserves of such gas, just not in the Western world.”

More Great WIRED Stories


Credit: /

- Advertisement -

Stay on top - Get the daily news in your inbox

DMCA / Correction Notice

Recent Articles

Related Stories

Stay on top - Get the daily news in your inbox