The Russia-Ukraine war impact on the global chip shortage

(3 minute read)

Since the onset of the COVID-19 pandemic, large-scale employee sickness, factory delays, and port closures have strained the semiconductor industry, and the effects are being felt throughout the supply chain. Now, the conflict threatens to make matters even worse.

HOW DOES THE WAR AFFECT THE CHIP INDUSTRY?

According to a recent Moody’s Analytics report, Russia controls about 44 percent of the global palladium supply, while Ukraine produces more than half of the world’s neon – these are two key resources needed during the production process of microchips.

The 2014-15 Russia-Ukraine war in Crimea showed us how serious this can be, where staggering increases in neon prices sent chip suppliers scrabbling for raw materials. Since then, leading chip companies claimed to decrease their dependency on the war-torn territory , although global analysts and current production delays scream a different narrative.

HOW BAD IS IT?

The strain from global chip shortages are felt by nearly every industry, causing lengthy delays for cars, smartphones, computers and game consoles such as the PlayStation 5. Companies are increasingly reliant on microchips for their products to work.

So far, Russian commodities and energy trade are not entirely sanctioned, but production in Ukraine and exports have essentially ground to a halt. In addition, Moody Analytics also reported that Russia controls 12 percent of global crude oil production, over 20 percent of natural gas reserves, 5.2 percent of coal, 4.3 percent of copper, 6.1 percent of aluminum and nickel, 15 percent of zinc, 9.5 percent of gold, 5.4 percent of silver and 14 percent of platinum. These materials are used in a wide variety of items, from beverage cans to smartphones to auto parts and you guessed it, microchips.

Some chipmakers have already expressed concern over price escalation and supply continuity. So, things can get real grim from here.

Check out a recent article from the Wall Street Journal: Ford Confirms Layoffs, Says It Is Cutting About 3,000 Jobs.

NOW WHAT?

The most important conclusion we can take away from this is that the global semiconductor chip shortage is unlikely to go away anytime soon – in fact, it’s only going to intensify.

Nevertheless, our commitment remains. Our customers continue to be assured by our Delivery On-Time & Quality Guarantee. We employ best in-class sourcing and planning strategies to plan for the future, mitigate risks and fulfill our customer’s needs.

When the world stands divided, Innovative Micro is here to help you piece it back together: one chip at a time.