Update 2/23/2022 05:37 PDT:
News reaches us that a supplier to the chip makers is looking for alternative sources of noble gases. We have updated the original story to reflect this.
Updated Story
As the world is bracing for what could be the largest military conflict in Europe since the World War II, different industries are getting ready for impact on them. Micron, which sources some of its neon supply from Ukraine, says in a recent Bloomberg interview, that for now it can work around the Ukrainian supply. But there could be other problems caused by the conflict. Reuters reports that ASML Holding NV a Dutch multinational corporation specializing in the development and manufacture of photolithography systems has indicated that it is also seeking alternative sources for its factories. ASML Holding NV's key customers are TSMC, Samsung and Intel.
Neither Ukraine nor Russia controls a serious chunk of the semiconductor supply chain, but companies from both countries participate in it, so a war between the two states will affect the chip industry either by disrupting supply of some ingredients to a particular company, which will cause a domino effect down the chain, or by price adjustments by other suppliers. As it turns out, Micron sources a small portion of the noble gases it uses, such as neon, from Ukraine. That portion is not significant, so Micron will be able to offset it by ordering more from other suppliers, though the sign is not good.
"For Micron, we have a small part of our noble gases coming from Ukraine and, of course, we carry large inventory but more importantly have multiple sources of supply […] and we have long terms of supply with those suppliers," said Sanjay Mehrotra, chief executive of Micron, in a Bloomberg interview. "While we continue to monitor the situation carefully and certainly hope the situation will de-escalate, we believe, based on current analysis, that our supply chain of noble gases is in reasonable shape."
Semiconductor companies like Micron use various noble gases in their fabs, including hexafluorobutadiene (C4F6), neon, argon, and helium. For quite a while Japan has been the leading supplier of ultra-high-purity gases for the semiconductor industry, but in recent years new suppliers emerged in China, South Korea, and Taiwan, as the industry obviously does not want to depend on a single source of supply.
But there are other potential problems that can be caused by an armed conflict near the European Union.
First up, logistics. If Ukraine closes its skies for safety reasons (or airlines will avoid Ukraine skies voluntarily), airfreight logistics will get a lot more complex. If Russia follows (to revenge the sanctions against its high-ranking officials as well as oligarchs or for some other reasons), these problems will get worse.
Secondly, Ukraine is fairly big when it comes to software development, so as the country is drafting reservists aged 18 – 60, the country's software industry suffers. While this does not have a direct impact on the semiconductor supply chain, this is a small world where everything is connected.
Thirdly, Russia is a fairly significant supplier of things like palladium. While in general the country is a minor supplier or rare earth metals and is barely a rival to China, if supplies from this state are disrupted, users will have to place additional orders with Chinese companies, which means rebuilding of the supply chain, which is always a tough task, with its own range of problems.
