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Could the war between Ukraine and Russia make the chip shortage worse?

The armed conflict between Russia and Ukraine could also play its part in the chip shortage. It is that both countries have an important interference in the provision of vital materials for the manufacture of semiconductors; and although there is no homogeneous view on the subject, the war in Eastern Europe could become a new factor that deepens the persistent crisis in the technology sector.

Reuters explains that Ukraine is the main producer of the neon gas that is crucial for lasers for chip manufacturing. And also provides more than 90% of the neon used in the US semiconductor industry. But not only that: Intel imports approximately 50% of this gas from Eastern Europe; In any case, for now the American firm does not anticipate major inconveniences.

But the concern about how the Ukraine war could impact chip shortages goes beyond the supply of neon. Russia, for example, provides about 35% of the palladium used in the United States; and although its use is not exclusive to the semiconductor industry, it is implemented in the production of sensors and memories.

For these hours, the main companies that are dedicated to the manufacture of components remain expectant but try to bring peace of mind . Several of them already experienced a similar situation —but on a different scale— during the Crimean conflict in 2014, which also affected the price of neon.

The impact that the war in Ukraine might have about chip shortage

The potential impact of the Ukraine war on chip shortages is viewed differently by country or region. In Asia they consider that it will not be important , or that it will not exist at all. Taiwan's Ministry of Economic Affairs told Reuters there is no direct impact on materials or semiconductor production activities at this time.

SK Hynix (South Korea) indicated that it has raw material in quantity and that there is no cause for concern. ASE Technology (Taiwan) and Unisem (Malaysia) also envisioned an uneventful outlook despite the armed conflict.

In Europe, meanwhile, the look is somewhat different, although it is sought not to generate alarm. From the Netherlands, ASML Holding, which works with TSMC and Samsung, indicated that it will look for new suppliers to supply the potential drop in supplies from Ukraine. In any case, diversification is not easy when talking about an industry like semiconductors, which has been under sustained stress for a long time.

Everything seems to indicate that the key to this story will be how long the armed conflict between Russians and Ukrainians lasts. The longer it is spread over time, the more possibilities there may be for export disruption. And if a deeper impact on the chip shortage finally begins to be seen, the eye should not only be on the availability of components, but also on their price.

“Chipmakers don't feel any direct impact, but the companies that supply them with materials for semiconductor manufacturing buy gases, including neon, and palladium from Russia and Ukraine. The availability of those materials is already scarce, so any additional pressure on supplies could drive up prices,” a Japanese industry representative told Reuters.

A recent report from the US Department of Commerce was pessimistic about the semiconductor crisis. The North American authorities spoke that the industries were in a very fragile situation; and that it could worsen if for any reason production was interrupted at the international level.

For now, the world is looking at what is happening with Russia and Ukraine and how this has repercussions on a humanitarian level. However, the possible consequences at the economic and industrial levels are not lost sight of either.