How Ukraine’s invasion tightening the market dynamics for Semiconductors
- 26-Apr-2022 2:29 PM
- Journalist: Gabreilla Figueroa
labour shortage, the prolonged supply disruptions due to the ongoing hostility of Ukraine have two-folded the impact on global Semiconductor chip capacity and led to a further spike in chipset prices. The situation of Semiconductor chipsets has worsened since the sanction imposed on Russia came into the act. China's hesitation to these sanctions has tightened the relationship between the US, and China poses a substantial geopolitical risk to the chipset demand-supply chain.
Russia's invasion has forced Ukrainian suppliers to shut down their production activity as the Russian siege moved into the country. This movement has further raised concerns for the Ukrainian market participants over the semiconductor industry's capacity to increase semiconductor chipsets production as they retrieved from COVID-19 related production restrictions. Ukraine is a key supplier of argon, neon, xenon, and other significant chemicals used in the manufacturing process of semiconductors. Also, Ukraine holds nearly half of the global neon production. Besides, Russia is the third-largest global supplier of palladium (used in sensor chips and computer memories). Additionally, Russia and Ukraine together fulfil more than 75% of the global demand for Krypton. Their indulgence in war has deeply impacted the demand-supply outlook and has uprooted the global supply chain.
Japan primarily imports many of these gases for the production of semiconductors. Due to supply disruption, Japanese market players were reluctant about the further production of semiconductor chipsets. According to domestic market participants in Japan, the conflict has already restricted the supply chain for neon and palladium, driving up the prices of Semiconductor chipsets. Japanese participants have already piled up inventories in adequate volumes but were reluctant with further drag in the conflict.
As per ChemAnalyst, "The prices of Semiconductor Chipset is expected to further increase owing to the widened demand-supply gap. However, major semiconductor players still have sufficient inventory, but the risk of shortage still arises in a long-drawn conflict. Due to the issues in the domestic market because of the tightened global demand and supply, top exporters are delaying exporting supplies. Thus, the demand-supply balance in the domestic market is expected to remain tight."