Global chip supply chain under threat as US-Iran conflict enters third week — Strait of Hormuz blockade is days away from crippling Taiwan's semiconductor industry

The United States, Israel, and Iran are entering their third week of conflict, one that has created a deadly new chokepoint at the Strait of Hormuz. Ships that usually carry large amounts of oil and LNG through this trade route are now blocked. As a result, Taiwan — the global hub for the world's most important and high-end chips — is on the verge of facing an energy and materials crisis, according to Bloomberg.

Taiwan is heavily reliant on foreign resources for its energy needs; the country imports about 97% of all of its power. The Middle East supplies 37% of the fuel that powers Taiwan's electric grid, which runs on liquefied natural gas (LNG). This electricity is then used by the island's chipmakers, like TSMC, whose fabrication plants have enormous power appetites and require a continuous, stable supply to operate.

On the other hand, helium is vital to chip fabrication, as it plays a key role in both cooling and lithography. Qatar, Iran's maritime neighbor, accounts for about one-third of the world's helium supply. Taiwan does not produce any of its own helium and imports it from the United States and Qatar, which are abundant in natural gas fields. Therefore, any tension in the Gulf region can affect semiconductor manufacturing.

Since helium can be procured from multiple sources, and local companies have said both the U.S. and Australia can help, it's less threatened by the ongoing conflict. Moreover, authorities have claimed that LNG and oil supplies are already secured for March, April, and half of May, with talks ongoing with America for June's inventory. However, in case of an emergency, Taiwan has only 11 days of LNG reserves.

That leaves it vulnerable to any sudden disruptions. Morgan Stanley estimated that a few weeks' worth of LNG is headed for the country on top of the existing stockpile, but Taiwan likely paid a significant premium for that. Even though the island has enough oil and helium for now, if the war were to escalate and (replacement) shipments were delayed or blocked for a long period, we might pay the price.

"Helium shortages could force chipmakers to prioritize production of higher-margin AI chips over less profitable components," said Bloomberg Economics analyst Michael Deng. TSMC manufactures all of Nvidia's GPUs, which include AI accelerators that populate most of the world's data centers. Those chips make the Green Team a lot more profit than consumer offerings like the RTX 50 series — so if push comes to shove, you know who's getting shoved.

That will, of course, worsen the already tight situation that was caused by the AI boom's insatiable appetite for silicon. Memory makers are already almost exclusively catering to AI clients, causing DDR5 prices to skyrocket, and even GPUs are more expensive now. The global supply chain is severely affected, and the ongoing conflict will only exacerbate that.

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