About 50% of the world’s microchip processors depend on Ukraine to continue producing neon.
Ukraine: Ukraine boasts a significant reserve of neon gas which is an important step in microchip production. Since February, attacks by Russia have halted the normal production capacity of Ukrainian business. Of this, reduced Neon production has proven disastrous for the Tech industry.
Odesa and Mariupol are hubs for neon extraction, both of which came under siege by Russian troops. As of the 22nd of May, Mariupol is under Russian control, and troops are fast approaching the already-bombed Odesa. It is unlikely for neon gas production to get back to normalcy in the near future with the war still raging in the region.
Two of the largest producers of neon halted production early into the conflict with Russia. Ingas and Cryoin manufacturing plants came to a halt as early as February 24th, deepening the chip crisis. More specifically, the lithography step uses lasers to carve into the silicon base. These microchips are vital to smartphone, PC, and gaming console production.
Both Ingas and Cryoin reportedly had enough supply to last 3-4 months at maximum when they shut down operations. That deadline is now fast approaching and the remaining supply stores are unclear.
Warning Signs in Chip Production:
Even before the conflict, global markets already reported difficulties in maintaining supply for tech components. COVID-19 lockdowns put a strain on chip production in multiple ways: Growing demand for personal work devices, inability to cope with demand during lockdown and disruption of the global supply chain.
Apart from that, Taiwan, which is a major chip manufacturer faces a severe drought and failed to meet supply goals.
Silicone Republic reported “Reliance on manufacturing in Taiwan means that the country’s current drought may have serious ramifications for an already stretched chip industry.
Chronic water shortages have often been a problem in Taiwan, with droughts steadily getting worse over the past 50 years, according to the government’s National Science and Technology Center for Disaster Reduction.” in early 2021.
Companies like Apple, Intel and Porche have expressed concern since 2021 over the growing chip supply concern. Apple CEO Tim Cook said “We expect to be supply-gated, not demand-gated,” last year when asked about the crisis.
Industry experts predict that price of tech products will climb unless manufacturers find a more stable source of neon.
