The White House has warned the chip industry to try to diversify its supply chain in case Russia retaliates for threatened U.S. export curbs by blocking access to critical materials, according to people familiar with the matter.
Market research firm Techcet released a report on February 1, emphasizing that many semiconductor manufacturers are highly dependent on Russia and Ukraine to purchase important raw materials for neon and palladium. The possibility that Russia might retaliate once morest U.S. sanctions has been rampant in recent days.
Techcet estimates that more than 90% of the neon material used in semiconductors in the United States comes from Ukraine, while 35% of the palladium in the United States comes from Russia.
White House National Security Council member Peter Harrell and staff have been in contact with the chip industry in recent days regarding their exposure to Russian and Ukrainian wafer-making materials and urging them to find alternative sources.
The White House declined to comment on the details of the talks, but a senior official reiterated that the administration is prepared if Russia invades Ukraine.
“One of the measures the government is working on is to work with industry players to ensure they are prepared if Russia takes action to disrupt supply chains,” the people said. “We understand that key ingredients are also available in other regions and stand ready to work with U.S. industry players. , to help them identify and disperse supply.”
Joe Pasetti, vice president of global public policy at chip and electronics manufacturing supplier group SEMI, sent an email to member companies this week asking to assess the level of risk to the supply of vital chip raw materials.
Techcet notes that neon, which is essential for lasers used to make wafers, is a by-product of Russia’s steel manufacturing industry, which is then purified in Ukraine. Palladium is used in sensors and reservoirs, among other applications.
The Biden administration has threatened to impose sweeping export controls on Russia if it invades Ukraine. Russia has assembled more than 100,000 troops on the Ukrainian border, but has consistently denied planning an attack.
Some chip makers have been evaluating supply chains for the potential impact of the conflict in Ukraine. The company has been investigating supplies of neon and other gases, some from Ukraine, one of the people said on condition of anonymity.
“Even if there is a conflict in Ukraine, it won’t cut off supply, but it will push up prices,” he said. “The market will contract and these gases will become very scarce. But it won’t stop semiconductor manufacturing.”
Another executive at a power chip design startup noted that the unrest in Ukraine has led to higher prices for rare gases and might lead to supply problems. Like fluorine, another gas that Ukraine can supply in large quantities, it might be affected.
Intel (INTC-US) company spokesman William Moss said the company did not expect any disruption to its neon gas supply.
But the problem remains worrisome as global chip supply is tight and chip orders are only expected to continue to pick up. Techcet estimates that demand for all materials will increase by more than 37% over the next 4 years as Intel, Samsung and Taiwan’s TSMC (2330-TW) recently opened plants in Ohio, Arizona and Texas.
Before Russia annexed the Crimea peninsula from Ukraine in 2014, neon gas prices jumped 600 percent, according to the U.S. International Trade Commission (FTC), as chip companies were highly reliant on Ukrainian production.
