South Korea’s semiconductor sector, led by giants such as Samsung Electronics and SK Hynix, produces about two-thirds of the world’s memory chips. If the supply of chip manufacturing materials in the Middle East is disrupted, semiconductor production could slow unless alternative sources are quickly found.
helium problem
One material at risk is helium, which is essential in chip manufacturing to manage heat, detect leaks and maintain stable temperatures in manufacturing equipment. For many of these uses, there is no real alternative.
About 38 percent of the world’s helium is produced by Qatar, where large extraction facilities are linked to the natural gas industry. This concentration means disruptions to global supply chains can spread rapidly.
National oil company QatarEnergy declared force majeure on March 4, after halting its gas production and downstream operations due to the ongoing attacks. Downstream facilities convert the gas into other products, including urea, polymers, methanol, and aluminum.
South Korea’s Industry Ministry said the country is also dependent on the Middle East for 14 other materials in chip manufacturing, such as bromine and some chip-inspection equipment. Although some of these materials can be obtained domestically or from other markets, it is difficult to relocate suppliers in the semiconductor sector because chip makers need to test and verify new sources to meet strict purity standards.
Companies say that at present the situation is manageable. As reported by Reuters, SK Hynix said it had secured diversified supply chains and maintained adequate helium reserves, adding that there was “almost no possibility” that its operations would be affected in the near term.
Contract chip maker TSMC similarly said it did not anticipate any significant impacts at this time, while GlobalFoundries said it was in direct contact with suppliers and had mitigation plans in place.
stuck in transit
Even if Qatar’s gas production resumes, the semiconductor industry is vulnerable to disruptions in regional shipping routes. Most of the world’s energy and petrochemical exports from the Persian Gulf pass through the Strait of Hormuz, a major maritime choke point.
If shipping through this corridor is disrupted for a long time, it could slow the movement of industrial gases and petrochemicals that chipmakers rely on. Disruption to oil and gas exports from the region has already pushed up global energy prices: European benchmark Brent crude is priced at $80 a barrel at the time of publication.
Energy costs are a major factor in semiconductor production. Fabrication plants run large clean rooms that require constant power and cooling, so chipmakers are sensitive to changes in global energy prices. Industry representatives in South Korea warned that a prolonged conflict could lead to higher energy prices, leading to increased semiconductor production costs and potentially higher chip prices.
These risks come as the semiconductor supply chain is already stretched due to the increasing demand for AI computing. Chip demand from AI data center operators has tightened supply across many electronics sectors, including smartphones, laptops and automobiles.
a long term problem
At the moment, the immediate impact on chip production is unclear. Major chip makers typically maintain a mix of suppliers and stockpile special gases and chemicals to deal with short-term disruptions.
But if instability in the region continues, pressure on supply chains is likely to increase. A drawn-out conflict that impacts energy infrastructure, export facilities, or shipping routes could gradually reduce the global supply of materials needed for chip manufacturing.
This could delay plans of major technology companies to expand artificial intelligence infrastructure in the Middle East. Companies such as Amazon, Microsoft and Nvidia are positioning the UAE as a hub of AI computing capability.
This story was originally published on wired middle east.
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