Budapest Post

Cum Deo pro Patria et Libertate
Budapest, Europe and world news

Chipmakers brace for more trouble as Russia limits exports of rare gases

Chipmakers brace for more trouble as Russia limits exports of rare gases

The semiconductor industry just can't catch a break.

After grappling with pandemic-fueled supply bottlenecks, chipmakers are facing a new headache: Russia, one of the world's biggest suppliers of gases used to make semiconductors, has started to limit exports.

Moscow began restricting exports of inert, or "noble" gases, including neon, argon and helium to "unfriendly" countries at the end of May, according to a report by Russian state news agency TASS.

All three gases are used to produce the tiny electronic chips found in a raft of consumer products, from smartphones to washing machines to cars, and which have been in critically short supply for months.

It is one of the latest salvos by President Vladimir Putin against countries that have imposed a slew of sanctions on Moscow in response to his assault on Ukraine. Prior to the war, Russia and Ukraine together accounted for about 30% of the chip industry's supply of neon gas, according to consultancy Bain & Company.

The export limits come just as the semiconductor industry, and its customers, were beginning to shake off the worst of the supply crisis. Last year, carmakers built 10 million fewer vehicles because of the chip shortage, according to LMC Automotive, but supplies were expected to improve in the second half of this year.

"What we don't need, obviously, is another drama with the chip supply that could affect and perhaps stall a recovery," said Justin Cox, director of global production at the automotive consultancy.

He told CNN Business that neon export limits were "worrying," but had not taken chipmakers by surprise. After Russia annexed Crimea from Ukraine eight years ago, the industry had been preparing for further supply disruptions from the region, he said.

Chipmakers have been preparing


Neon plays a critical role in the production of semiconductors, in a process called lithography. The gas controls the wavelength of light produced by a laser as it etches patterns onto the silicon wafers that make up the chip.

Before the war, Russia collected raw neon as a byproduct in its steelworks, then sent it to Ukraine for purification. The two countries have been leading producers of noble gases since the days of the Soviet Union, when the superpower used them to build its military and space technologies, Jonas Sundqvist, senior technology analyst at Techcet, a market research company, told CNN Business.

The conflict has caused lasting damage to capacity. Intense fighting in some of Ukraine's cities, including Mariupol and Odessa, two strategically important port cities, has destroyed industrial sites and made it extremely difficult to export goods from the region.

"Now we have permanent loss of some purification capability in Mariupol and Odessa," Sundqvist said.

But semiconductor manufacturers have been reducing their dependence on the region ever since Russia invaded Crimea in 2014.

Peter Hanbury, a partner at Bain & Company's manufacturing practice for the Americas, told CNN Business that chip makers have redoubled their efforts in the wake of February's invasion.

The industry's dependence on Ukraine and Russia for neon was "historically very high" at between 80% and 90%, Hanbury said. But since 2014, chipmakers have whittled that down to less than one third.

"The industry recognized the risk associated with [the region] and began basically qualifying new sources, developing new countries and specific suppliers," he added.

Price rises


It is still too early to know how Russia's export restrictions will impact semiconductor makers.

So far, the war in Ukraine has not impaired production of chips, Hanbury said.

"I don't think we're going to see an impact for at least a few months... I do think that the impact that we see will likely be somewhat minimal," he said.

However, even if chipmakers can replace lost supply from the region, they are likely to end up paying much more for the vital gases.

It is difficult to track the price of neon and other gases, because most are traded under private long-term contracts, Sundqvist said. But Techcet estimates that neon contract prices have already increased fivefold since the invasion earlier this year, and will remain at those elevated levels in the near-term.

"[Russia's export limits] will definitely have an impact on any new contracts," Sundqvist said.

South Korea, home to giant chipmaker Samsung (SSNLF), will feel the pain first, he added, because it is reliant on noble gas imports and — unlike the United States, Japan and Europe — lacks big gas companies which could ramp up production.

Samsung overtook Intel (INTC) last year as the biggest semiconductor maker by revenue, according to data compiled by Counterpoint Research.

Micron Technology (MU), another of the world's biggest chip manufacturers, told CNN Business that it has seen noble gas prices increase, but that it had "sufficient supply for the next few months" and does not expect to make any cuts to its production in the short term.

"[We] are taking steps to secure additional supply for a longer period," a company spokesperson said.

China could benefit


Countries are now racing to build up their chipmaking capacity after two years that left them brutally exposed to the volatility of global supply chains.

Intel has offered to help the US government with its plan, and earlier this year announced it would invest $20 billion in two new factories. Last year, Samsung also committed to building a $17 billion facility in Texas.

More chipmaking will likely translate into higher demand for the noble gases.

With Russia threatening to curtail its exports, China could be a big beneficiary. It has the "biggest, newest" production capacity, according to Sundqvist.

Since 2015, the country has poured investment into its own semiconductor industry, including into the equipment needed to separate noble gases from other industrial products. China is now a net exporter of these gases, and claims to be self-reliant, he said.

The world's demand for noble gases will likely concentrate on China, Sundqvist added, and the county will "get a good price for [its] product."

AI Disclaimer: An advanced artificial intelligence (AI) system generated the content of this page on its own. This innovative technology conducts extensive research from a variety of reliable sources, performs rigorous fact-checking and verification, cleans up and balances biased or manipulated content, and presents a minimal factual summary that is just enough yet essential for you to function as an informed and educated citizen. Please keep in mind, however, that this system is an evolving technology, and as a result, the article may contain accidental inaccuracies or errors. We urge you to help us improve our site by reporting any inaccuracies you find using the "Contact Us" link at the bottom of this page. Your helpful feedback helps us improve our system and deliver more precise content. When you find an article of interest here, please look for the full and extensive coverage of this topic in traditional news sources, as they are written by professional journalists that we try to support, not replace. We appreciate your understanding and assistance.
Newsletter

Related Articles

0:00
0:00
Close
Chinese Stock Market Rally Fueled by Domestic Investors
Israeli Airstrike in Yemen Kills Houthi Prime Minister
Ukrainian Nationalist Politician Andriy Parubiy Assassinated in Lviv
Trump Administration Seeks to Repurpose $4.9 Billion in Foreign Aid
Corporate America Cuts Middle Management as Bosses Take On Triple the Workload
Parents Sue OpenAI After Teen’s Death, Alleging ChatGPT Encouraged Suicide
Amazon Faces Lawsuit Over 'Buy' Label on Digital Streaming Content
US Appeals Court Rules Against Most Trump-Era Tariffs
Germany’s Auto Industry Sheds 51,500 Jobs in First Half of 2025 Amid Deepening Crisis
Bruce Willis Relocated Due to Advanced Dementia
French and Korean Nuclear Majors Clash As EU Launches Foreign Subsidy Probe
EU Stands Firm on Digital Rules as Trump Warns of Retaliation
Getting Ready for the 3rd Time in Its History, Germany Approves Voluntary Military Service for Teenagers
Denmark Confronts U.S. Diplomat Over Covert Trump-Linked Influence in Greenland
Trump Demands RICO Charges Against George Soros and Son for Funding Violent Protests
Taylor Swift Announces Engagement to NFL Star Travis Kelce
France May Need IMF Bailout, Warns Finance Minister
After the Shock of Defeat, Iranians Yearn for Change
Ukraine Finally Allows Young Men Aged Eighteen to Twenty-Two to Leave the Country
The Porn Remains, Privacy Disappears: How Britain Broke the Internet in Ten Days
YouTube Altered Content by Artificial Intelligence – Without Permission
Ukrainian Refugee Iryna Zarutska Fled War To US, Stabbed To Death
Elon Musk Sues Apple and OpenAI Over Alleged App Store Monopoly
German Chancellor Friedrich Merz: “The Current Welfare State Can No Longer Be Financed”
HSBC Switzerland Ends Relationships with Over 1,000 Clients from Saudi Arabia, Lebanon, Qatar, and Egypt
Sharia Law Made Legally Binding in Austria Despite Warnings Over 'Incompatible' Values
Dutch Foreign Minister Resigns Amid Deadlock Over Israel Sanctions
Trump and Allies Send Messages of Support to Ukraine on Independence Day Amid Ongoing Conflict
China Reels as Telegram Chat Group Shares Hidden-Camera Footage of Women and Children
MotoGP Cameraman Narrowly Avoids Pedro Acosta Crash at Hungarian Grand Prix
Wizz Air passengers screamed as storm-battered flight diverts to Bologna
European postal services halt U.S. deliveries after Trump imposes new tariffs
Urban explorer finds abandoned luxury restaurant left to decay
Fidesz leader labels Péter Magyar a ‘bluffer’ amid escalating political spat
French rope park operator arrested for denying entry to Israeli children
Újpest thrashes Zalaegerszeg 4-1 to secure first win in five matches
Profit-margin cap costs retailers 13 billion forints a month, warns trade group
Curiosity rover finds coral-like rock on Mars hinting at watery past
U.S. green policy rollback drives investors to Europe’s sustainable finance market
Special funerals rise in Hungary: boat, aerial and forest burials gain popularity
Hungary’s Kiskunság region turning into semi-desert after extreme drought
Kopasz Bálint wins world kayak 1000 m title in Milan, making him triple world champion
Budapest’s Keleti railway station to close for four weeks for track overhaul
Balaton could be unfit for swimming by 2035 and dry by 2050, scientists warn
Leaked guidelines show Meta’s AI allowed flirty and racist interactions with children
Filming of ‘Emily in Paris’ halted after assistant director dies on set
Filipino guest workers sue after Hungary moves to deport them for pregnancy
Ukraine Declares De Facto War on Hungary and Slovakia with Terror Drone Strikes on Their Gas Lifeline
A monster hit and a billion-dollar toy empire
Animated K-pop Musical ‘KPop Demon Hunters’ Becomes Netflix’s Most-Watched Original Animated Film
×