Russia-Ukraine war exacerbates global chip shortage

Ukraine is the world’s largest producer of noble gases including neon, krypton and xenon. All three are critical to semiconductor manufacturing, especially high-end chips. Gas mixtures with neon, krypton and xenon are used to power lasers for photolithography (the process of etching circuits into silicon wafers).

Neon, krypton and xenon are all byproducts of the air separation plants that produce oxygen for large steel mills. Gas suppliers like Linde and Air Liquide buy inert gases, purify and liquefy them to get finished product which can be supplied to global chipmakers.

According to market estimates, Ukraine supplies about 70% of the world’s neon gas and 40% of the world’s krypton gas. Moreover, Ukraine supplies 90% of the highly purified, semiconductor-grade neon for chip production in USA.

According to Reuters, from 45% to 54% of the world’s semiconductor-grade neon comes from two Ukrainian companies, Ingas (Mariupol) and Cryoin (Odessa). Both closed production operations after the start of the war.

The possibility of resuming production will depend on the state of the plants after the end of hostilities. Before the war Ukrainian gas suppliers also use neon from Russian steelmakers. Continuing this cooperation in the future seems to be uncertain.

Interruption in the supply of noble gases has already disrupted the production of high-technology goods, including automobiles. For example, Volkswagen closed two factories in Germany for several days after the Russian invasion.

Read more in the analyst study GMK Center.