The developing Russian invasion of Ukraine is likely to send shockwaves through the global semiconductor industry already reeling from the fallout of an ongoing chip shortage. Several materials key to the production of semiconductor chips are almost exclusively sourced from either Russia or Ukraine.
Chip manufacturers use lasers to etch hyperfine circuit patterns onto the silicon wafers, these lasers use noble gases to excite atoms to generate light in specific wavelengths. The gaseous content used in these lasers is made up of 95% neon. According to TECHCET Critical Materials Council, another key material in the etching process is C4F6 or hexafluorocyclobutene, which is used for advanced node logic device etching and lithography processes.
It’s not just regular old Las Vegas neon either, the neon has to be refined to 99.999% purity in order to be used for chip manufacturing. There are very few plants in the world capable of refining neon to this degree. Ukraine’s neon industry is based on purifying byproduct gases created by Russian steel manufacturing. Many of the old Soviet-era steel plants in Russia still use air separation units that capture neon which is then further refined at specialty shops in Ukraine before being sold globally to chip makers.
Russia is also a key palladium supplier which is used in sensors and emerging memory, it also has uses as a plating material. Aside from chip applications, palladium is also a key material in the construction of catalytic converters. Russia supplies roughly a third of the global supply of palladium, South Africa is the other big global hub supplying the precious metal.
U.S Secretary of Commerce Gina M. Raimondo says legacy chips like those used in automotive production are especially susceptible to production bottlenecks outside of the conflict in Ukraine. Already these chips are facing an acute shortage that has affected vehicle production during multiple points over the past two years of the global pandemic. Companies like General Motors and Ford are still working to clear the backlog of vehicles produced without key functions reliant on semiconductors. Dealership lots continue to sit barren while prices of used vehicles are spiking out of control due to the lack of new vehicles.