The war deepens the crisis of electronic chips

Chip production requires a combination of resources and products in the purest form possible. And because no one in this world can be the best in everything, the West, led by the United States of America, divided this industry in such a way that it is designed (engineered) and software in America, then produced in Taiwan (mostly) using equipment from Holland and through materials Primary from all parts of the world.

With the spread of the Corona pandemic and disruption of supply and production baskets around the world, then the increasing demand for electronic devices due to quarantine and isolation measures around the world, in addition to the great shift towards electric vehicles, and the large number of Internet of Things IoT devices… All of this, made the supply of electronic chips are less than market requirements. Above all, the Russian military operation in Ukraine exacerbated the crisis in the production and supply of electronic chips. The immediate threat is not the military operation, but the pressures on the scarce gas supplies that are essential to the production process of these chips. It was found that Ukraine supplies about 50% of the world’s supply of neon gas. This gas is a by-product of the steel industry in Russia, purified in Ukraine to 99.999% and indispensable in the production of chips (a mixture of gases containing neon is used to power lasers to engrave patterns in semiconductors).
Manufacturers are already struggling with component shortages, delivery delays and rising material costs, with chip-dependent companies such as carmakers facing production delays as a result.
A report in the Financial Times says that when Russia annexed Crimea in 2014, neon prices rose by at least 600%. Companies said they could tap into the reserves they held (Deutsche Bank said in a research note that inventory levels in the industry typically last about three to four weeks). The rush to find suppliers who are not in Eastern Europe is causing shortages and high prices, not only in neon but also in other industrial gases such as xenon and krypton. From Ukraine also comes 40% of the quantities of krypton supplied on the world market.
Shifting away from Ukraine is difficult, because this gas must be improved to a purity that only a few companies around the world can do, including some in the Ukrainian port of Odessa. So, analysts at TrendForce warn that even if alternative sources are secured, “product certification will take several months, or even more than half a year,” causing “scarcity.” They warned that “the auto industry, which requires large amounts of power management chips and semiconductors, will face a new wave of material shortages.”
It should be noted that these gases are used in the manufacture of larger electronic chips, which was confirmed by Akira Minamikawa, from the company “Omdia” market research, telling the Financial Times: “Not all products that use chips will be affected, because the most advanced semiconductors are The only one that does not require neon in its production.” This means that the matter will not affect the manufacture of phones and tablets.