Ukraine Invasion May Hit Chip Supply Chain – Analysts

Analysts have warned that Russia's invasion of Ukraine may cause trouble down the line for chipmakers, which are still now caught up in a component supply crunch that's affecting product shipments.

TrendForce this month warned that Ukraine supplies 70 per cent of the world's neon – a noble gas used primarily in the lithography stages of semiconductor production.

The analyst firm predicted that the conflict we ultimately saw this week could create regional shortages of neon. Thankfully, chip fabs stockpile the gases they require, so "gas production line interruptions in Ukraine will not halt semiconductor production lines in the short term."

However, we're told, any reduction in gas supply will mean the laws of supply and demand come into play – meaning price rises are likely, and those will likely be passed on to buyers.

Another analyst firm, Techcet, stated that Russia is also a key neon supplier and is the source of plenty of palladium – a metal needed for catalytic converters, electronics, and other things. Sanctions against Russia therefore have the potential to see suppliers scrambling for alternative sources.

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While the war in Ukraine may pose new challenges to the silicon supply chain, COVID-19 is still causing some trouble. In recent weeks it halted perhaps 0.5 per cent of global 200mm wafer production, according to TrendForce.

The analyst yesterday shared news that it has detected a ten-day production slowdown at Hejian Technology, China's second-largest chipmaker and a subsidiary of Taiwan's United Microelectronics Corporation (UMC). The production problem was blamed on the COVID-19 pandemic, although TrendForce's report doesn't mention whether Hejian Technology suffered downstream effects of COVID-19 or more directly struggled to staff its plant.

UMC reports that Fab 8N, located in Hejian, can produce 50,000 wafers a month – a sum that TrendForce suggests accounts for between 0.4 per cent and 0.5 per cent of global supply. The analyst firm believes the slowdown could therefore slug UMC's bottom line by 0.3 per cent – or around $225 million of its $7.5 billion annual revenue.

That's not the biggest number UMC's accountants will be juggling today. The chipmaker yesterday announced a $5 billion investment in a fab it will build in Singapore. The facility will offer 22nm and 28nm manufacturing processes, at a rate of up to 30,000 wafers a month.

That is, assuming UMC can get the noble gases it needs to make it work. ®