Chip industry under threat on potential neon shortage

The chip industry is under threat as the geopolitical crisis in Ukraine persists, weighing on the production of neon.

This critical gas is an essential material for the lasers in Lithography’s advanced semiconductor manufacturing process.

The procedure uses the chemical to power machines in carving patterns onto tiny pieces of silicon made by the likes of Samsung, Intel, and TSMC.

However, its output skids to worryingly low levels at a time the world grapples with the chip shortage.

Accordingly, more than half of the world’s neon came from a handful of Ukrainian companies.

However, these businesses have ceased operations amid attacks from Russian forces in recent weeks.

For instance, Mariupol-based Ingas is currently under siege. Then, Cryoin and Iceblick in Odessa now prepare for an assault.

The safety of the workers at these firms is the priority and not the impact on tech manufacturers.

Experts projected that neon production would fall off a cliff as the conflict drags on in line with this.

Worldwide demand for this gas reached 540.00 metric tons last year, and Kyiv produced over half of the quantity.

The figure could fall below 270.00 metric tons this year if the nation’s neon producers remain shut.

Consequently, chip industry analysts mentioned that there is only one to six months worth of neon in reserve.

Intel, a leading semiconductor company, said that it monitors the situation closely. It ensured that its diverse, global supply chain minimizes its risk from potential local interruption.

The persisting chip constraints have already disrupted supply chains. This conflict has led to lengthy delays on products such as new cars and games consoles like the PlayStation 5.

Remarkably, a potential neon shortage flags the most significant challenge for the chip industry. This could trigger higher prices and scarcity of critical technology.

Chip industry’s preparation for Neon shortfall

Meanwhile, the global chip industry has prepared for this situation over the past years. They have taken crucial steps to limit future risks associated with neon supplies.

When Moscow annexed the Crimean peninsula in 2014, this gas price surged by about 600.00%. This fueled questions if the country could be a reliable producer in the long term.

In the stated case, the sector acted to cut the need to use neon in the manufacturing process. There are also new suppliers outside of Ukraine and Russia.

For instance, the American industrial gas company, Linde, spent $250.00 million to build a neon production site in Texas.

Then, Dutch firm ASML minimized reliance on neon sourced from Kyiv to approximately 20.00% of previous levels.