The war in Ukraine is likely to aggravate the shortage of computer chips. The industry depends on a rare gas producer located in Odessa, in southern Ukraine. The invasion of Russia prompted the firm to stop production of the substance, essential for the manufacture of electronic components.
The generalization of working from home, the strong demand for PCs, health constraints and the trade war between China and the United States have generated a major shortage of computer chips. Deprived of components, many companies have not been able to produce as many terminals as expected to meet market demand. Companies like Apple didn’t sell as many products as expected at the end of last year. More generally, the smartphone market fell again following supply difficulties.
According to many experts, the situation is likely to continue at least until the end of 2022. Moreover, the war between Russia and Ukraine is likely to aggravate the difficulties encountered by the supply chain. As our colleagues from Wired report, Ukraine is indeed home to a major supplier of neon, a rare gas essential for the manufacture of semiconductors.
A neon gas producer is crippled by the Russian invasion
Located in Odessa, Ukraine, the firm Cryoin specializes in the production of neon. This substance, present in small quantities in the air, is used to power lasers charged with burn computer chips. Cryoin accounts for half of the world’s neon gas production and depends on raw gas from Russia.
“The consumers of our products are companies that produce semiconductors, electronics”, explains Cryoin on its official website. Cryoin supplies companies located all over the world, including Europe, Japan, Korea, Taiwan, India and Thailand. Asked by Wired, the firm says that most of its neon production is intended for the American market.
After the first Russian strikes, the company was forced to cease production of all gases. “We have decided that our employees should stay at home for the next few days until the situation is clearer, in order to ensure that everyone is safe”says Larissa Bondarenko, director of business development at Cryoin.
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A short-term threat to the electronics industry
The company had planned to resume production over the weekend. Unfortunately, the Russian army quickly attacked Odessa, a port city on the Black Sea. Explosions occurred a few days after Russian troops entered the country. A more virulent Kremlin offensive is expected in the coming days, coming from the east or west of the city. In anticipation of the attack, the Ukrainian military blocked all access to Odessa.
According to Wired, many firms dependent on this rare gas have urgently looking for an alternative to continue working if the conflict persists. These companies fear that the invasion of Ukraine will eventually cause the price of neon to rise.
ASML, a Dutch company that designs machines for the semiconductor industry, says it is already looking “other sources in case of supply disruption from Ukraine and Russia”. Same story in the United States. According to Wired, Joe Biden’s government urges businesses to find alternatives to deal with a possible shortage of neon gas. Over 90% of gas imported into the US market comes from Ukraine.
Cryoin has enough raw gas that has come to Russia to maintain production until the end of March. If the conflict extends beyond this deadline, the firm will have to turn to gas producers in Ukraine. “If the authorities of the countries where our customers are located are able to influence the border situation of commercial shipments, it would be a great help and it will not affect the whole industry worldwide”explains Larissa Bondarenko.
Despite the concerns displayed by Cryoin, many industry players want to be reassuring. SK Hynix, a South Korean semiconductor company, claims to have stored large quantities of raw materials to continue production.