We pose 3 questions about shortages, stockpiling, and global foundry development in light of the ongoing Russian war in Ukraine and the semiconductor supply chain.
Unfortunately, the Russian invasion of Ukraine continues, and resolution remains uncertain. We’ve written before how global politics can significantly impact supply chains. And, we have written about how recent world events have influenced many countries to enact protectionist policies, which can create a ripple effect far beyond their intended consequences.
With Russia’s invasion of Ukraine, we are again seeing how global politics and the semiconductor supply chain are intertwined. Here are 3 major questions surrounding these events and our latest answers.
1) Where is the war in Ukraine hitting the semiconductor supply chain the hardest?
Recent reports indicate semiconductor shortages might impact the conflict on the ground. Nations looking to supply military assistance to Ukraine are running up against chip shortages.
United States Commerce Secretary Gina Raimondo says that the biggest pain point for defense contractors looking to supply weapons to Ukraine is shortages of chips. A key component of the United States military assistance package, Javelin missile launching systems require more than 250 chips each. This puts increasing pressure on sourcing semiconductors.
2) How are chipmakers’ stockpiles playing out?
Strategic stockpiling of neon and other key materials for semiconductor manufacturing at the start of the war helped stabilize semiconductor manufacturers from initial shocks and prepare for shortages. These stockpiles are reported to provide enough for approximately six months of supply for the semiconductor market before prices go up.
With this cushion in place, any concerns about neon shortages will play out in the longer term. The two Ukrainian companies that produce 45-54% of semiconductor-grade neon, Ingas and Cryoin, remain closed as the Russian war in Ukraine continues.
3) Is there global interest in moving foundries from Asia?
Russia’s aggression toward Ukraine has raised concerns about parallels between China’s stance toward Taiwan. This brings TSMC and other Taiwanese chipmakers that dominate the market into the spotlight.
TSMC holds half of the global market share of revenue generated by the semiconductor industry. While a scenario where China invades Taiwan is highly unlikely at this time, the ramifications of any disruption to the current market would present serious challenges.
Samsung and others fall far behind the output of TSMC, and the gap would take a significant amount of time to bridge, due to the complex technologies involved. Diversification of the semiconductor supply chain beyond Taiwan is increasingly in focus across the globe.
Weathering ongoing uncertainty in the semiconductor supply chain
The global landscape for semiconductor sourcing is volatile. In the background of the war in Ukraine, the semiconductor industry continues to experience ongoing supply chain challenges — including shortages in ABF substrates and the need to expanding packaging capacity in both fabs and OSATs. Quality assurance remains the single most critical factor in seeking new suppliers in a shortage market.
The human toll
While our discussion today focused on of the economic impacts of this war, it is important to acknowledge the tragic humanitarian consequences. The economic impacts are widespread, but it is the humanitarian crisis that is of utmost concern to all watching these events unfold.
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