Report: Russian Invasion of Ukraine May Further Strain Chip Supply for Tech, Auto Industries

The Russian invasion of Ukraine may cause further strain on the supply of semiconductor chips already cut short by the worldwide chip shortage according to reports. Potential shorts of neon gas and palladium, mined in Ukraine, could cause significant production delays for tech firms and automakers, amongst other industries.

CNBC reports that the recent invasion of Ukraine by Russia could cause further strain on supplies of semiconductor chips during a worldwide shortage that has already caused production issues for tech companies and automakers for over a year. The Russian invasion may have a direct effect as both countries are critical sources of neon gas and palladium, both of which are used to produce semiconductor chips.

An engineer of United Microelectronics Corp (UMC) holds a wafer pod at the company’s wafer factory in Tainan Science Park, southern Taiwan. (SAM YEH/AFP/Getty Images)

TOPSHOT – A photograph taken on February 19, 2022, shows smoke rising from an explosion after a shelling in Novohnativka village, Donetsk region, not far from position of Ukrainian Military Forces on the front line with Russia-backed separatists. – OSCE monitors recorded more than 1,500 violations of the truce supposedly in effect on the front line in eastern Ukraine in 24 hours, they announced in a statement, a record this year.

The U.S. supply of neon comes almost entirely from Ukraine and Russia, according to market research firm Techcet which specializes in critical supply chain materials and components. Russia produces neon which is then sourced and purified by a Ukrainian company, Techcet explains.

When Russia invaded Ukraine in 2014, the price of neon shot up 600 percent. Techcet president and CEO Lita Shon-Roy told CNBC: “This will have an impact. It will continue to constrain the chip source going into the automotive industry.”

Russia is also a key palladium supplier and supplies 33 percent of the global demand, according to Techcet. Palladium prices jumped over 7 percent on Thursday as part of a surge in precious metals. Shon-Roy told CNBC: “It’s just one more thing that is going to force prices up… The automotive market is going to feel that to be sure.”

Earlier this month, the White House warned chip suppliers to diversify their supply chains in the event that Russia retaliates against threatened U.S. export curbs bt blocking access to key materials. “Part of that is working with companies to make sure that if Russia takes actions that interfere with supply chains, companies are prepared for disruptions,” a senior White House official said.