the chip industry has a problem in Ukraine because of its neon gas reserves

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The microchip industry sees a new challenge looming on the horizon. One related to the Ukraine war. After two years marked by the pandemic and the semiconductor crisis, a scenario that according to some large manufacturers won’t clear until well into 2022 and others extend to 2023the sector now adds an extra danger: that the conflict created by Russia complicates the supply of neon, a key gas for the manufacture of chips. According to the data handled by TechCetabout half of the world’s supply comes from Volodymyr Zelensky’s country.

The Russian offensive on Odessaa coastal city that is now the focus of the Kremlin, would have already partially affected the sector. The company is headquartered there. Cryoin Engineering, dedicated to the worldwide production and distribution of neon gases, among others, and with a significant weight in the sector. Days ago, those responsible for the firm, which supplies companies in the US, Asia and Europe, they recognized Wired that had stopped production after the first attacks.

His plans were then to resume activity in the factory that same weekend; but the reality is that, after ten days of war, the situation in Odessa is particularly delicate, with Russian forces centered on the city After taking Jershon. The attacks are not the only headache for the company. Another concern of those responsible for Cryoin is how to get the neon out of the country with the borders “overloaded” by citizens fleeing the war.

A crisis with echoes of 2014

It is not the first time that the sector and chip manufacturers face a similar situation. In 2014, during the annexation of the Crimean peninsulathere was already an episode of neon gas shortage that caused prices skyrocketed 600%. In addition to the increase in costs, there were delays in shipments due to the situation at the border and the lack of raw materials. Manufacturers depended on neon gas from the Ukraine at that time, yes, much higher than what is recorded today: approximately 70%.

At the moment and at least publicly, chipmakers remain calm. The Korean SK Hynix, Intel Corp, GlobalFoundries, United Microelectronics Corp or Malaysia Unisem, for example, have moved messages on that line impacting on available stock or its ability to source outside Ukraine and Russia. In the US, the government has already instructed the industry to also diversify its suppliers in case Moscow retaliates. More than 90% of the neon of the country’s semiconductor grade comes from Ukraine and 35% palladium that it uses – metal that is also used in sensors and memories – has its origin in Russia.

Semiconductor makers can't find the extra skilled staff they need to address chip shortages

Neon gas is essential for lasers used to etch patterns into silicon wafers to shape chips. In the Ukraine, firms such as Cryon or Iceblick are in charge of taking the neon that is produced in Russia as a by-product of the manufacture of steel and treating it to adapt it to the needs of the industry. The implications of the war could in any case go beyond Russian neon or palladium. According to data from the World Bureau of Metal Statisticslast year Russia was the world’s third largest producer of aluminum and a large part of its production is exported to Turkey, Japan, China, the United States and the countries of the European Union itself.

The new threat could aggravate the complex scenario that the pandemic inherits from the sector, a scenario that was generated by the increase in demand and had not yet been cleared up. Large automotive brands, such as Ford, Hyundai or General Motors, recognized at the beginning of February that the scenario did not expect the scenario to subside until late 2022.

Precisely to prevent the problem from repeating itself public bodies and multinationals have begun to make a move. The EU wants to quadruple its production by 2030 and Intel or Bosch they want to reinforce their productive muscle with the help of a checkbook, with a millionaire investment program. In recent months, the sector has already warned of another problem: the shortage of qualified personnel.

Image | TSMC

The microchip industry sees a new challenge looming on the horizon. One related to the Ukraine war. After two years…

The microchip industry sees a new challenge looming on the horizon. One related to the Ukraine war. After two years…

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