Ukraine conflict can deeply impact the chip scarcity
By MYBRANDBOOK
According to a report by Moody’s Analytics, the Russia-Ukraine conflict is likely to aggravate the global semiconductor shortage as the two countries are major suppliers of raw materials critical to chip production.
Russia supplies the global semiconductor industry with rare metals, and Ukraine supplies specialty gases required by the chip making industry. Moody’s Analytics said that the ongoing war might have massive ramifications in the already acute semiconductor chip shortage scenario.
The supply of chips for vehicles and electronic goods has been under tremendous stress for the past year because of the pandemic. A lingering conflict between Russia and Ukraine can quickly exhaust thin semiconductor inventories, disrupting production worldwide and affecting the fragile global economic recovery.
“Neon and helium are both gases critical to the production of chips, and Russia and Ukraine are both major players in the global supply chain—so much that neon prices went up more than 10 times following the Russian annexation of Crimea in 2014," the report said.
The stress could potentially impact the manufacturing of automobiles and electronic equipment in the Asia-Pacific region. The report further highlighted that palladium, another key component of the chipmaking process, may be affected given that Russia controls a quarter of the world’s palladium stock.
Moody’s Analytics noted that it does not see an immediate impact on chip production because most major chipmakers have stockpiled raw materials due to significant demand growth during the pandemic.
As per the report, “But if the Russia-Ukraine conflict drags on, chipmakers in Taiwan, South Korea, Japan, China and other countries will feel the impact. This will likely result in higher chip prices and longer lead times moving forward."
Analysing the larger impact of the Ukraine-Russia conflict on the Asia-Pacific (APAC) region, the Moody’s Analytics report said that iron ore, semi finished iron and iron bars are among the four largest commodities imported by APAC countries from Ukraine.
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