Ukraine supplies more than 90 per cent of US semiconductor-grade neon, critical for lasers used in chipmaking. The gas, a biproduct of Russian steel manufacturing. Thirty-five per cent of US palladium, used in sensors and memory, among other applications, is sourced from Russia.
Large chip companies so far predict limited supply chain disruption from the Russia-Ukraine crisis, thanks to raw material stockpiling and diversified procurement.
One Japanese chipmaker, speaking off the record, said 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 could do.
"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."
The US press claims that companies are better prepared than in recent years, thanks to other disruptions and conflicts, reducing some of the pain. But the White House had already warned the chip industry to diversify its supply chain in case Russia retaliates against threatened US export curbs by blocking access to key materials.
Ahead of the invasion, the West sanctioned Russia's Nord Stream 2 pipeline and some Russian banks, and imposed curbs on a number of senior Russian officials. More sanctions could come in the form of Cold War-like curbs on technology, followed by Russian retaliation on exports.
The UK imposed sanctions on Russian oligarchs who were not Tory Party doners, but since most of London is owned by Russian oligarchs, Boris Johnson’s team have mostly focused on Russian banks.
The assumption has been that, other than Russian gas, there was nothing that the Russians could fire back with.
ASML, which is a key Dutch supplier to chipmakers including TSMC, Samsung Electronics and Intel, said on Wednesday it is examining alternative sources for neon.
Some companies had started diversifying away from Russian and Ukraine after Moscow annexed Crimea in 2014, which triggered a huge increase in neon prices.
South Korean memory chipmaker SK Hynix CEO Lee Seok-hee told reporters last week that the company had "secured a lot" of chip materials, and that "there's no need to worry".
Intel does not anticipate any impact. GlobalFoundries said it does not anticipate a direct risk and has flexibility to seek sources outside Russia or Ukraine, as did Taiwan chipmaker United Microelectronics. TSMC, the world's largest contract chipmaker declined to comment "at the moment". Taiwanese chip testing and packaging firm ASE Technology (3711.TW) said its material supply remains stable "at this point".
If none of these companies are being effected, it begs the question as to who Ukraine has been flogging Neon to all these years?
