Chip Makers Ease Disruption Concerns After Russian Invasion

Large chip companies have sought to ease worries of disruption to semiconductor supplies, after Russia invaded Ukraine on Thursday morning.

Large chip companies said they expected limited supply chain disruption for now from the conflict, thanks to raw material stockpiling and diversified procurement, Reuters reported.

This is despite concern from some industry sources that there could be an impact in the longer term, due to Russia’s large scale invasion of a sovereign nation.

Chip shortages

Russia’s invasion has triggered a collapse in cryptocurrencies, wiping hundreds of billions of dollars from the value of leading cryptocurrencies, as worried traders retreat from riskier investments.

The world remains skittish, considering the huge supply chain disruption caused by the Coronavirus pandemic, which led to widescale chip shortages which has damaged multiple industries.

But the question remains why Ukraine (or indeed Russia) matters in chip production?

Both Russia and Ukraine are well known exporters of wheat for example, but what is not commonly known is that Ukraine supplies more than 90 percent of US semiconductor-grade neon, Reuters reported.

Neon is critical for the lasers used in chipmaking.

The gas, a biproduct of steel manufacturing in Russia, is reportedly purified in Ukraine before being exported.

Meanwhile thirty-five percent of US palladium, used in sensors and memory, among other applications, is sourced from Russia. The metal is used in sensors and memory, among other applications.

Little disruption

This has caused worry for the firms that source or sell chips globally, amid fears of further supply chain disruption.

But most of them have sought to ease any concerns of widespread disruptions to semiconductor supplies.

“The chipmakers are not feeling any direct impact, but the companies that supply them with materials for semiconductor fabrication buy gases, including neon and palladium, from Russia and Ukraine,” a Japanese chip industry source told Reuters.

“The availability of those materials is already tight, so any further pressure on supplies could push up prices. That in turn could knock on to higher chip prices.”

But the good news is that companies are better prepared than in recent years, thanks to other disruptions and conflicts.

“We understand that reports of potential disruption of supply of minerals and noble gases, due to ongoing tensions between Russia and Ukraine, are concerning for the semiconductor industry,” memory chip maker Micron Technology reportedly said, but added that it had “diversified sourcing” for its supplies.

The White House told the chip industry to diversify its suppliers in case Russia retaliated against US sanctions.

Meanwhile the Dutch supplier to chipmakers, ASML Holding, reportedly said on Wednesday it was examining alternative sources for neon.

Reuters reported that South Korean memory chipmaker SK Hynix CEO Lee Seok-hee said last week that the company had “secured a lot” of chip materials, and that “there’s no need to worry.”

Intel also said it did not anticipate any impact, Reuters reported.

GlobalFoundries said it did not expect a direct risk and had flexibility to seek sources outside Russia or Ukraine, as did Taiwan chipmaker United Microelectronics Corp.

Meanwhile the world’s largest contract chipmaker, TSMC declined to comment “at the moment”, Reuters reported.

Taiwanese chip testing and packaging firm ASE Technology said its material supply remained stable “at this point.”