Chip makers stockpile key materials prior to Russia’s invasion of Ukraine

The production of raw materials essential for chip manufacturing is concentrated in Russia and Ukraine, which are used with the neon gas needed to supply lasers that print microcircuits on silicon and in later manufacturing stages. It is the main source of both metallic palladium.

Analysts and industry consultants say that about one-quarter to one-half of the world’s semiconductor-grade neon comes from Russia and Ukraine, and about one-third of the world’s palladium comes from Russia. I’m estimating. The potential shortage of these materials raises concerns among some analysts. Industries that are already struggling to meet hot demand can hurt production.

These concerns may not be realized, at least in the short term. This is because the industry has reset operations after being caught up in demand and repeated shocks during the pandemic era. This includes fires at chip factories and freezes in Texas. Drought in Taiwan, other setbacks, global supply chain disruption.

Companies have moved to strengthen their supply chains in the midst of turmoil, and in some cases have added alternative suppliers to gain options. They stock up on neon and other important chip making materials and now usually have a reserve of 6 weeks to 3 months. Mark Thirsk, Managing Partner of Linx Consulting Inc., a Massachusetts-based electronic materials consultant.

Taiwan TSMC Ltd

Russia, the world’s largest contract chip maker, has gathered troops along the Ukrainian border and secured an alternative supply of neon after threatening the conflict, according to people familiar with TSMC’s strategy. Currently, supply problems are unpredictable, he said. ..

Infineon Technologies AG

A major German chip maker supplying the automotive industry, which was particularly hit by the chip shortage, said it had supply options and did not anticipate any impact on production. Materials and noble gases containing neon, “said a spokesman.

Jimmy Goodrich, Vice President of Global Policy for the Semiconductor Industry, said: Association, an industry group based in Washington, DC.

For chip companies, the 2014 merger of Crimea, which is part of Ukraine, provided early lessons for dealing with political uncertainties in the region. Neon prices have risen and chip makers have moved to find gas sources elsewhere.

Employees at the factory of Russian palladium supplier Krastsvetmet molded a palladium ingot in 2019.



During the coronavirus pandemic, companies moved to fortify important supplies in the global logistics turmoil. Then, in early February, when Russian President Vladimir Putin united his troops along the Ukrainian border, the White House warned chipmakers that export restrictions and other actions would follow the invasion, familiar with the matter. According to the two, the Biden administration was based on a close relationship established with chip companies during the semiconductor supply crisis.

US sanctions against Russia landed shortly after the invasion and restricted the sale of chips and other technologies to Russia’s strategic industries. This regulation does not require chip makers to stop all sales to Russia, but many have stopped, including market leader Intel. Ltd

Nvidia Ltd

And Advanced Micro Devices Ltd

Russia is not a major market for chip makers, analysts say.

Company officials say they’re ready, but that doesn’t mean that the already expanding industry isn’t at risk.

According to analysts, chipmakers’ facilities and gas supply chains have enough neon to last for about six months in the industry, after which prices are likely to skyrocket. Russia annexed Crimea in 2014 and sent goods that were trading on the spot market for 25 cents to $ 5 per liter. Consumers of low-margin gas (for example, lasers used in eye surgery) can be frozen. Before the potential shortage spreads to the more profitable semiconductor industry.

IPG Photonics Ltd

U.S.-based companies supplying optics to industries such as semiconductor manufacturing said last week that U.S. sanctions would increase lead times and shipping costs for products related to operations in Russia, which employs around 2,000 people. Stated.

Even if prices rise tenfold, neon is a small part of the industry’s cost structure, Bernstein analyst Stacy Lasgon said in a note. The semiconductor-grade neon industry is estimated to be worth about $ 100 million annually compared to global revenues. For chips over $ 500 billion.

Write to Asa Fitch (asa.fitch@wsj.com)

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