Ukraine’s two leading suppliers of neon, which supplies almost half of the world’s key chip-making materials, have shut down their operations as Moscow has stepped up its attacks on the country, threatening to raise prices and widen the semiconductor deficit.
About 45 percent to 54 percent of the world’s semiconductor grade neon, important for lasers used to make chips, comes from two Ukrainian companies, Ingus and Crayon, according to Reuters, based on figures from the company and market research firm Texet. Global neon costs for chip production reached about 540 metric tons last year, Techcet estimates.
According to representatives of the organization contacted by Reuters, both organizations have stopped their activities because Russian forces have stepped up their attacks on cities across Ukraine, killing civilians and destroying key infrastructure.
After the coronavirus epidemic increased demand for cell phones, laptops and later cars, forcing some companies to cut production, Stopage has clouded the output of chips worldwide.
According to Angelo Gino, an analyst at CFRA, although estimates about the amount of neon stock chipmakers hold have changed dramatically, production could suffer if the conflict escalates further.
“If stockpiles run out by April and chipmakers don’t stop ordering in other parts of the world, that probably means more restrictions for the wider supply chain and the inability to make the final product for many key customers,” he said.
Prior to the attack, Ingus produced 15,000 to 20,000 cubic meters of neon per month for customers in Taiwan, Korea, China, the United States and Germany, about 75 percent of which goes to the chip industry, the company’s chief commercial officer Nicole Avdzi told Reuters in an email.
The company is located in Mariupol, which is under siege by Russian forces. On Wednesday, Russian forces destroyed a maternity hospital there, which Kyiv and Western allies have called a war crime. Moscow says the hospital is no longer working and has been occupied by Ukrainian fighters.
“The civilians are suffering,” Avdzhy said in an email last Friday.
Crayon, which produces about 10,000 to 15,000 cubic meters of neon per month and is located in Odessa, shut down operations on February 24 when attacks began to keep workers safe, according to business development director Larissa Bondarenko.
Bondarenko said the company would not be able to meet the 13,000-cubic-meter neon order in March unless the violence stopped. He said the company could weather at least three months with the plant shut down, but warned that if the equipment was damaged, it would prove a major blow to the company’s finances and make it difficult to quickly resume operations.
He further added that he was not sure if the company would be able to access additional raw materials to make neon.
Ukrainian neon is a byproduct of Russian steel production. Gas, which is also used in laser eye surgery, is also produced in China, but Chinese prices continue to rise.
Bondarenko says prices have already risen by 500 percent since December, under pressure after the epidemic. The price of neon gas (99.9 percent content) in China quadrupled from 400 yuan / cubic meter in October last year to more than 1,600 yuan / cubic meter, according to a Chinese media report quoting biiinfo.com, a Chinese product market data provider. Towards the end of February.
Neon prices have risen 600 percent since Russia annexed the Crimean peninsula from Ukraine in 2014, according to the U.S. International Trade Commission.
Elsewhere, companies could start producing neon, according to Richard Burnett, chief marketing officer at Supplyframe, but it will take nine months to two years to grow, giving companies across the global electronics sector market intelligence.
But CFRA’s Angelo Gino noted that companies may be reluctant to invest in the process if the supply crisis is seen as temporary.
Thomson Reuters 2022