The ongoing invasion of Ukraine by Russian forces may have implications for the chip shortage causing massive supply issues globally.
Ukraine exports around 90 percent of the industrial-grade neon gas used in the production of US semiconductors, while Russia exports around 33 percent of palladium required for electronic chips.
The chip shortage began during the COVID-19 pandemic, with widespread lockdowns and resulting supply-chain issues. While semiconductors were in short supply before lockdowns began, the closure of semiconductor manufacturing plants, ports, and transport networks resulted in significant delays that have now developed into a large backlog of chips.
Supply chain issues have caused a shortage of semiconductors that have impacted cars, household appliances, and personal electronics – but that shortage is now only expected to get worse.
The Biden administration released a warning to US semiconductor manufacturers last month to diversify their sources of industrial materials, expecting Russia to retaliate to damaging sanctions over the Ukraine invasion.
“This will have an impact,” said Lita Shon-Roy, CEO and President of supply-chain analytics firm Techcet, to CNBC on Thursday.
“It will continue to constrain the chip source going into the automotive industry.”
During the 2014 annexation of Crimea, prices of neon reportedly rose by 600 percent – and with strong financial and distribution sanctions currently being imposed on Russia by the EU and US, history is set to repeat itself.
While many cutting-edge processes no longer rely on neon, most other fabrication steps use neon in helium-neon lasers, particularly for inspection purposes. Neon gas is created in cryonic air-separation plants, which also produces helium, xenon, and nitrogen. Ninety percent of neon production comes from Ukraine, with 65 percent originating from a sole company with plants in Odessa – which is currently under attack – and Moscow.
Reuters have now reported chip companies in the US are expecting supply shortages that will have knock-on impacts on electronic appliances, with Intel reportedly sourcing 50 percent of their neon from Eastern Europe.
Cars, which use semiconductors in infotainment systems and onboard electronics, now have long waiting lists, computer parts are often sold out within minutes of stock becoming available, and even household appliances may soon reflect the shortage.
It is unclear how the invasion will affect consumers, but the White House has stated they will be working with manufacturers to limit the impact of possible material shortages.
“Part of that is working with companies to make sure that if Russia takes actions that interfere with supply chains, companies are prepared for disruptions,” a White House official told Reuters.