TSMC to Build Neon Supply Chain After Russia Decimated Global Supply

(Image credit: TSMC)

Taiwan Semiconductor Manufacturing Co. is looking to secure its supply chain and build up capacities that produce high-purity neon gas locally. The company faced massive turmoil on the market of noble gases after Ukrainian companies ceased to supply them after Russia's war in the country destroyed noble gas production capacities. 

TSMC is negotiating with numerous gas suppliers to investigate possibilities of producing high-purity neon gas in Taiwan in three to five years, said J.K. Lin, senior vice president of information technology, materials management and risk management, in an interview with Nikkei

As the world's largest contract maker of chips, TSMC requires steady and high-volume supply of materials (e.g., chemicals, wafer subtrates, etc.) to meet customer. The company faced major challenges dealing with the global chip shortage in 2020 – 2022, which increased its costs and required it to hike prices for its customers. 

But in a bid to make its supply chain more resilient, TSMC is now looking forward to localizing a part of its supply chain, notably production of high-purity gases like neon. This is not particularly easy as neon is a byproduct of steel manufacturing. 

"We have a concrete plan to work with suppliers to localize some neon gas supplies and are currently in the process of buying equipment," Lin told Nikkei. "The idea is to have more sources to increase the level of supply chain safety. However, our plan is not to build all the supplies locally. That is not realistic and very costly." 

Earlier this year TSMC faced major turmoil after Russia destroyed Cryoin and Ingas, two major producers of high-purity neon, in Odessa and Mariupol in the first days of war. These two companies shipped 360,000 m^3 of high-purity Grade 5.0 neon last year and 75% of their output went to chipmakers. They controlled around 50% of semiconductor-grade neon in 2021, it was revealed earlier this year. 

The semiconductor business is a major global industry, and it is impossible to localize the whole supply chain in one country. The company sources production equipment from the Netherlands and the U.S.; buys raw materials from Europe and Japan and then uses local companies to build fabs. 

ArF immersion lasers used to make sophisticated chips that require deep ultraviolet (DUV) lithography use a mixture of neon, fluorine, and argon gases. Neon accounts for over 95% of the blend; meanwhile, modern production tools feature neon recycle systems that reduce actual consumption by over 90%. But while each ArF/DUV scanner does not consume a lot of gases, there are tens of thousands of such scanners in use worldwide and all of them need neon, fluorine, and argon gases, so demand for these noble gases is strong. 

While demand for chips is slowing right now, TSMC's revenue continue to increase. The company posted October revenue of NT$210.3 billion ($6.673 billion), which is up a whopping 56.3% from NT$134.5 billion ($4.267 billion) in October '21, reports Bloomberg. TSMC will likely be among the last chip companies to report revenue drop due to demand slump, but will be the first chipmaker to benefit from demand rebound in 2023 ~ 2024. So it makes a great sense for the foundry to invest in its supply chain now.

Anton Shilov
Freelance News Writer

Anton Shilov is a Freelance News Writer at Tom’s Hardware US. Over the past couple of decades, he has covered everything from CPUs and GPUs to supercomputers and from modern process technologies and latest fab tools to high-tech industry trends.

  • BX4096
    Doesn't look like they have any other choice. After both Ukrainian suppliers were bombed out of business, the resulting shortage drove up neon prices by eye-watering 5000%. And considering that Ingas was based in Mariupol, a city that was utterly demolished by Russian shelling, I doubt they'll be able to resume production any time soon–even long after the city is liberated.

    EDIT: no politics, I know. Everything I said is factual, relevant, and objective.
  • Quenepas
    "after Russia destroyed Cryoin and Ingas "

    Source of this?

    Thing is while Odessa and Mariupol have sustained attacks, Russia would not want to target non-military industrial factories. First due to international law and second because those factories would be the war prize if you get to control the region as a way to make money to rebuild. Sure the destruction will make those factories inoperable but to due to destruction of facilities but due to infrastructure (powering them for production) and lack of workers (because of evacuations).
  • polnoch
    Quenepas said:
    Russia would not want to target non-military industrial factories.
    Source of this?
  • bit_user
    Quenepas said:
    Russia would not want to target non-military industrial factories.
    Speaking hypothetically, of course, you would destroy what you cannot realistically take and hold. That deprives your adversary of industrial capacity and economic revenue, plus there's the impact on your adversary's morale.

    Quenepas said:
    First due to international law
    International law doesn't mean anything, if you can't enforce it.