Russia-Ukraine crisis puts strain on microchip supply chain — RT Business News

Global chipmakers rely heavily on materials sourced from both countries like neon and palladium

The already strained semiconductor industry is set to suffer more disruptions from the ongoing conflict in Eastern Europe, as Ukraine and Russia provide the bulk of the world’s supplies of neon and palladium, vital for production of microchips.

Neon, essential for the lasers used to make chips, is a byproduct of Russian steelmaking. It is then purified in Ukraine. Palladium is used in sensors and memory, among other applications.

The current global chip shortage will worsen if the stalemate persists, as more than 40% of the world’s palladium supply comes from Russia, while Ukraine produces 70% of the world’s neon supply, according to Moody’s Analytics. .

“During the 2014-2015 war in Ukraine, neon prices jumped several times, indicating how serious this can be for the semiconductor industry: Semiconductor exposure companies account for 70% of the total demand for neon, as it is an integral part of the lithographic chip manufacturing process,” Moody’s Analytics’ Tim Uy wrote in a recent report, seen by the Business Standard.

The continued shortage of chips severely hit global producers during the Covid-19 pandemic in 2020-21 after remote working and mobility restrictions triggered an acceleration in digitalization across the world.

Moody’s expects the chip crisis to worsen if a deal is not negotiated in the coming months, with industries heavily reliant on semiconductors being affected as a result.

“This means significant risks lie ahead for many automakers, electronics manufacturers, phone makers and many other industries that are increasingly dependent on chips for their products to work,” warn the experts.

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