The Russia-Ukraine war has the potential to exacerbate semiconductor supply chain issues and the chip shortage that has impacted the industry for the past two years. The most immediate risk is to the supply of specific raw materials used in semiconductor manufacturing such as neon and palladium.
While the impacts of inflation and indirect supply-chain effects appears to be manageable in the near term, the potential for longer term impacts is yet to be determined and will be predicated on how events continue to unfold.
Make contingency plans now
- Short-term impacts on semiconductor production are expected to be manageable. But the war’s effects on raw material prices, supply-chain constraints, and overall uncertainty will affect chipmakers and consumers.
- However, if the war continues, companies should be prepared for more severe supply-chain impacts.
- Once again, companies are advised to review all their business continuity plans, seek alternative sources of neon and palladium, and use forward pricing to protect against price fluctuations on other critical materials.
- In the medium term, companies must fully understand their supply chains and customer fulfillment networks so they can model the impact of potential disruptions from the war and sanctions. Longer-term, companies might also consider making more substantial investment in neon recycling technologies.
- Unless neon prices increase permanently, producing neon outside Ukraine isn’t likely to become economical. But some governments may see it as a national security option.
Read the brief for additional insights and contingency plan considerations for semiconductor company leaders.
