Chip Shortage

How The Russian War In Ukraine Could Cause Another Chip Shortage

By now, most of the world has begun to understand the global economic impact of Russia’s decision to invade Ukraine. As the world’s largest exporter of wheat, Ukraine holds a vital role in that supply chain. But what many people are not aware of is that Ukraine is also a significant contributor to the production of microchips. Ukraine is the origin of about 70% of the world’s ultra-pure neon gas production, which is vital in the process of laser etching circuit patterns onto the wafers of silicon.

The Strategic Implications In Odesa

One of Putin’s first targets was the seaside city of Odesa, where the majority of the 99.999% pure neon gas is refined. The company responsible for the production is Cryoin, and their production halted on Thursday as explosions began destroying the city. While Cryoin’s products are delivered to various countries, including Japan, Korea, China, and Taiwan, they shipped the majority of their production to the United States according to information they released to WIRED, a major U.S. publication. Originally plans were to restart production over the weekend. However, with missiles still in the Odesa area, the business remains closed to protect the safety of its workforce.

Challenges Will Remain When Production Restarts

To complicate matters further, the management of Cryoin warns that even when the company can begin producing neon again, logistical issues will hamper its export. Currently, there is massive congestion at the border as people are trying to evacuate the region. This flood of humanity essentially blocks the passage of products like neon shipping to other parts of the world.

Some Words Of Reassurance?

Many chip manufacturers are reassuring consumers by stating that they have large stockpiles of neon that will allow them to continue chip production. They claim the reserves were warranted due to past political issues and disruptions in 2014. However, no one can be sure of abundant neon at any manufacturing facility. Furthermore, those in a position to know the neon moving into the United States have commented that they are unaware of any U.S. chipmaker with a substantial neon supply. When a request was made to the management of Intel on this matter, they declined to comment either way.

An Ulterior Motive

It is worth mentioning that there is a good possibility that Russia will continue to attack Odesa to limit or eliminate its ability to produce neon. With that reliable supply halted, there could be a reason for chip manufacturers to resort to purchasing neon from Russia as it is a byproduct of their steel manufacturing. Most companies would refuse to buy from Russia to protest the invasion at any other time. However, coming off of the chip shortage created by the global pandemic, many businesses could choose to focus on production and profits more than making a moral statement with their purchasing.

The expectation is that the chips that are made will be sold at a significantly higher price that will be passed on to the end consumers of items like cellphones, vehicles, and computers.

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