South Korean officials they warned that a U.S.-Israeli war with Iran could hit the global semiconductor supply chain if it disrupts the flow of key industrial materials from the Middle East.
The South Korean semiconductor sector, led by giants such as Samsung Electronics and SK Hynix, produces approx two thirds memory chips in the world. If supplies of chipmaking materials in the Middle East are disrupted, semiconductor production could ponderous unless alternative sources are found quickly.
Helium problem
One of the materials at risk is helium, which is necessary in chip manufacturing to manage heat, detect leaks and maintain stable temperatures in production equipment. For many of these uses, there is no true substitute.
About 38 percent of the world’s helium is produced by Qatar, where vast mining plants are linked to the natural gas industry. This concentration means disruptions can quickly spread throughout the global supply chain.
National oil company QatarEnergy declared force majeure on March 4 after suspending 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 also depends on the Middle East for 14 other chip-making materials, such as bromine and some chip control equipment. While some of these materials can be sourced domestically or from other markets, switching suppliers in the semiconductor sector is challenging because chipmakers must test and approve fresh sources to meet stringent purity standards.
The companies claim that the situation is under control for now. How – Reuters reportedSK Hynix said it has secured diversified supply chains and maintains sufficient helium stocks, adding there is “almost no chance” its business will be impacted in the near future.
Contract chipmaker TSMC similarly said it does not currently anticipate a significant impact, while GlobalFoundries said it is in direct contact with suppliers and has mitigation plans.
I’m stuck in transit
Even if gas production resumes in Qatar, the semiconductor industry will be at risk of disruption to regional shipping lanes. Much of the world’s energy and petrochemical exports from the Persian Gulf pass through the Strait of Hormuz, a key maritime chokepoint.
If transport along this corridor is interrupted for an extended period, it could ponderous the flow of industrial gases and petrochemicals that chipmakers rely on. Disruptions to the region’s oil and gas exports have also already pushed up global energy prices: at press time, Brent crude, the European benchmark, was trading at $80 a barrel.
Energy costs are a major factor in semiconductor production. Manufacturing plants contain vast, neat rooms that require constant power and cooling, so chipmakers are sensitive to changes in global energy prices. Industry officials in South Korea have warned that a prolonged conflict could push up energy prices, possibly leading to higher semiconductor production costs and potentially higher chip prices.
These threats come as semiconductor supply chains are already stretched by rising demand for artificial intelligence. Demand for chips from AI data center operators has boosted supply in several electronics sectors, including smartphones, laptops and cars.
Long-term problem
For now, the direct impact of this decision on chip production is unclear. Major chipmakers typically keep their various suppliers connected and stockpile special gases and chemicals to prevent short-term disruptions.
However, if instability in the region continues, pressure on supply chains is likely to augment. A protracted conflict that hits energy infrastructure, export facilities or shipping routes could slowly reduce the global supply of materials needed for chip production.
This could delay major tech companies’ plans to expand artificial intelligence infrastructure in the Middle East. Companies such as Amazon, Microsoft and Nvidia are positioning the UAE as a hub for AI computing power.
This story originally appeared on WIRED Middle East.