Ukraine Stopped half of the world’s Neon production Very important for making computer chips in the context of Russian aggression

Ukraine’s two top neon suppliers, which produce about half of the world’s main supply of chip materials, have halted operations as Moscow ramps up its attacks on the country, threatening to raise prices and aggravate the shortage of semiconductors.

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 shut down their operations, according to company representatives contacted by Reuters, as the Russian military escalates attacks on cities across the country. Ukrainekilling civilians and destroying critical infrastructure.

The shutdown created a cloud of worldwide chip production, already in short supply following the coronavirus pandemic, driving up demand for later cell phones, laptops and cars, forcing some The company has to reduce production scale.

According to Angelo Zino, an analyst at CFRA, although estimates vary widely on how much neon chip makers have on hand, production could suffer 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% being the chip industry, said Nikolay Avdzhy, director commercial, 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 had been occupied by Ukrainian warplanes.

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

According to business development manager Larissa Bondarenko, Cryoin, which produces about 10,000 to 15,000 cubic meters of neon a month and is located in Odessa, halted operations on February 24 when the attacks began to keep security. for all employees.

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 to make neon lights.

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 biiinfo.com, a provider of commodity market information China, the price of neon gas (99.9% content) in China has quadrupled from 400 yuan per cubic meter in October last year to more than 1,600 yuan per cubic meter at the end of February.

Neon price up 600 percent in the near future Russia’s In 2014 annexed Crimea from Ukraine, according to the US International Trade Commission.

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