Russia’s attack on Ukraine halves the world’s Neon production for chips

According to Reuters calculations based on data from these companies and market research firm Techcet, between 45% and 54% of the world’s semiconductor neon lights, which are vital to the lasers used to manufacture chips. According to Techcet estimates, the global neon consumption for chip production reached about 540 tons last year.

Both companies have closed their operations, according to company representatives contacted by Reuters, as Russian the army has escalated their attacks on transparent cities Ukrainekilling civilians and destroying critical infrastructure.

The shutdown casts a cloud on worldwide chip production, already in short supply after the coronavirus pandemic spurred demand for newer cell phones, laptops and cars, forcing Some companies have to scale down production.

Although estimates vary widely in the number of neon light Angelo Zino, an analyst at CFRA, is likely to be hit by output that could be affected if the conflict drags on.

“If stockpiles dry up in April and chipmakers don’t have orders in other parts of the world, that means there will be additional constraints on the broader supply chain,” he said. larger and unable to produce the final product for many key customers.

Before the invasion, Ingas was producing 15,000 to 20,000 cubic meters of neon per month for customers in Taiwan, South Korea, China, the United States and Germany, with about 75% going to be the chip industry, said Nikolay Avdzhy, director the company’s chief commercial officer, said in an email to Reuters.

The company is headquartered in Mariupol, which has been surrounded by Russian troops. On Wednesday, Russian forces destroyed a maternity hospital there, which Kyiv and its Western allies call a war crime. Moscow said the hospital was no longer operational and was occupied by Ukrainian warplanes.

“Civilians are suffering,” Avdzhy said by email last Friday, noting that the company’s marketing staff could not respond because he did not have internet or a phone.

According to business development manager Larissa Bondarenko, Cryoin, the company produces about 10,000 to 15,000 cubic meters of neon per month and is located in Odessa.

Bondarenko said the company will not be able to fulfill orders for 13,000 cubic meters of neon lights in March unless the violence stops. She said the company could withstand at least three months when the plant was closed, but warned that if equipment was damaged, that would prove a greater drag on the company’s finances and hard to restart the activity quickly.

She also said she wasn’t sure the company could access additional raw materials for neon cleaning.

Taiwan’s Ministry of Economy, home to the world’s largest contract chip manufacturer TSMCTaiwanese companies are prepared and have a “safe supply” of neon lights, said Taiwanese companies, so they do not see any supply chain problems in the near term. The statement to Reuters echoed similar remarks from Taiwan’s central bank earlier on Friday.

But smaller chipmakers could be hit harder, according to Lita Shon-Roy, president of Techcet.

“The biggest chipmakers, like Intel, Samsungand TSMC, which have greater purchasing power and access to inventory that can cover them for longer periods of time, two months or more,” she said. However, many other fab chips don’t have this type of padding,” she added, noting that rumors of companies trying to hoard inventory have already started circulating. “This will complicate things further. supply problems.”

Neon Ukraine is a by-product of Russian steel production. The gas, which is also used in laser eye surgery, is also produced in China, but Chinese prices are steadily increasing.

Bondarenko said prices, which have been under pressure after the pandemic, have increased by as much as 500% since December. According to Chinese media reports citing, a provider of commodity market information China, the price of neon gas (content 99.9%) in China has quadrupled from 400 CNY (approximately Rs 4,800) per cubic meter in October last year to more than CNY 1,600 (about Rs 19,400) per metre. block at the end of February.

According to the US International Trade Commission, neon prices rose 600% before Russia annexed Crimea from Ukraine in 2014.

According to Richard Barnett, chief marketing officer of Supplyframe, which provides market intelligence to companies in the global electronics sector, companies elsewhere can start producing neon lights but it will take a long time. 9 months to 2 years.

But CFRA’s Angelo Zino noted that companies may not be willing to invest in that process if the supply decline is deemed temporary.

© Thomson Reuters 2022

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