Limited impact for now, as Russia invades Ukraine, chipmakers observe.

• The Russia-Ukraine conflict is expected to cause limited supply chain disruption for large chip companies due to their stockpiling of raw materials and diversified procurement.
• One of Europe's biggest security crises in decades has been caused by Russia's invasion of Ukraine through land, air, and sea.
• The global tech industry is facing a crisis as the supply chain for semiconductor chips remains disrupted, causing concerns about further disruptions among companies that source or sell globally.

Some industry sources predicted that the Russia-Ukraine conflict could have a lasting impact on supply chain disruption for large chip companies, despite their raw material stockpiling and diversified procurement.

In recent years, Europe has been grappling with one of its most significant security challenges in many decades, following Russia's invasion of Ukraine through various means, including land, air, and sea.

The global tech industry is facing a crisis as the supply chain for semiconductor chips remains disrupted, causing concerns about further disruptions among companies that source or sell globally.

Ukraine is the primary supplier of semiconductor-grade neon to the US, which is used in lasers for chip manufacturing. This gas is a byproduct of Russian steel production and is purified in Ukraine. On the other hand, Russia is the source of 35% of the palladium used in the US, which is utilized in various applications such as sensors and memory.

According to a Japanese chip industry source who requested anonymity, the chipmakers are not experiencing any direct impact, but the companies that supply them with materials for semiconductor fabrication purchase gases, including neon and palladium, from Russia and Ukraine. The availability of these materials is already limited, and any additional pressure on supplies could increase prices. This, in turn, could lead to higher chip prices.

Thanks to other disruptions and conflicts, companies are now better prepared than in recent years.

The semiconductor industry is concerned about reports of potential disruption of the supply of minerals and noble gases due to ongoing tensions between Russia and Ukraine, but Micron Technology has diversified its sourcing for its supplies.

The chip industry has been advised by the White House to diversify its suppliers in anticipation of potential retaliation from Russia following U.S. sanctions on its Nord Stream 2 gas pipeline to Europe and certain Russian banks. Additional measures may be taken.

ALTERNATIVE SOURCES

On Wednesday, ASML Holding, a crucial Dutch supplier to major chipmakers such as TSMC, Samsung Electronics, and Intel, announced that it was exploring alternative neon sources.

Before Thursday's escalation, most chipmakers were in wait-and-see mode, despite already diversifying their supply chains due to the U.S.-China trade standoff, the pandemic, and Japan's diplomatic spat with South Korea.

After the annexation of Crimea by Moscow in 2014, some firms started to diversify from Ukraine and Russia due to the increase in neon prices.

Last week, SK Hynix CEO Lee Seok-hee informed reporters that the company had obtained a substantial amount of chip materials and there was no cause for concern.

Intel Corp stated that they did not anticipate any impact and had the flexibility to seek sources outside Russia or Ukraine, as did Taiwan chipmaker United Microelectronics Corp.

At present, TSMC, the world's largest contract chipmaker, has not commented, while ASE Technology, a Taiwanese chip testing and packaging firm, reports that its material supply is stable.

Taiwan's Ministry of Economic Affairs confirmed to Reuters that there was no direct effect on materials or production activities in the semiconductor supply chain.

According to Joanne Chiao, senior analyst at TrendForce, Russia is not currently a significant market for the Taiwanese foundry industry.

Unisem, a Malaysian chipmaker with customers including , stated that it anticipates no impact on chip production as the materials it requires are not sourced from Russia and its machines are primarily from the US, Japan, Korea, Singapore, and locally.

A crucial part of the global chip production, Malaysia accounts for 13% of all chip assembly testing and packaging.

Japan's Ibiden, which produces packaging substrates for chips, stated that they have sufficient materials but sanctions could affect their access to neon and other gas supplies from Russia. A spokesperson expressed concern about the situation.