Russia- Ukraine war to impact stressed Semiconductor Industry

There is growing tension and bad news for the already-stressed semiconductor chip industry. This comes at a time when chipmakers are struggling to keep up with the demand for chips across the computing and automobile sectors, among others. Experts predict that the Russia Ukraine war has the potential to constrain the supplies of neon and palladium – two critical components in the manufacturing of semiconductor chips. Ukraine is a major supplier of neon gas, which is used in the lithography stages of chip production.

Sources said, Ukraine has a share of 90% semiconductor -grade of neon, a noble gas. The gas, a biproduct of Russian steel manufacturing, is purified in Ukraine, market research firm Techcet says. Russia is the source of 35% of the palladium used in the United States. The metal is used in sensors and memory, among other applications. This could lead to an increase in the cost of production of semiconductor chips.

Both Russia and Ukraine are vital exporters of raw materials used in the manufacturing of Chipsets and semiconductors, with these chips being vital to all modern electrical devices, companies may decide to pass on these costs to buyers, leading to an increase in the prices of consumer technology products.

Europe faced one of its biggest security crises in decades, after Russia invaded Ukraine by land, air and sea. As per analysts, Russia is also a key supplier of neon and palladium – accounting for a third of the global supply of the metal. Palladium is a metal that is used for electronics, catalytic converters among other things. West’s sanctions against Russia could lead to a shortage of this metal and force manufacturers to scramble for alternative sources.

Large chip companies said they expected limited supply chain disruption for now from the Russia-Ukraine conflict, thanks to raw material stockpiling and diversified procurement, but some industry sources said there could be an impact longer term. Sources said, the availability of those materials is already tight, so any further pressure on supplies could push up prices. The White House said that it planned to choke off Russian access to a range of U.S. tech, including semiconductors, as part of the economic sanctions package proposed in response to the invasion of Ukraine.

The sanctions have the potential to severely damage Russia’s ability to get its hands on the most advanced chips made around the world. Despite the growing need for chips around the world, Russia isn’t a primary market for chipmakers. Russia is not a significant direct consumer of semiconductors. Even the country’s overall spending on tech is relatively limited, as per IDC, it estimates the market at roughly $50 billion, compared with a global market that measures about $4.5 trillion.