The White House is warning chipmakers to diversify its supply chain in case Russia responds to the threat of US export restrictions by blocking access to key materials, people familiar with the matter said. The possibility of retaliation has gained more attention in recent days after market research group Techcet published a report on Feb. 1 highlighting that many semiconductor manufacturers rely on Russian and Ukrainian materials such as neon, palladium and others.
Techcet estimates that more than 90 percent of US semiconductor neon supplies come from Ukraine, and 35 percent of US palladium comes from Russia.
Peter Harrell, a member of the White House National Security Council, and his staff have been contacting the chip industry in recent days, learning of their exposure to Russian and Ukrainian chip materials and urging them to find alternative sources, People said.
The White House declined to comment on the details of the talks, but a senior official confirmed that the administration was ready for a Russian invasion of Ukraine.
“Part of that is working with companies to make sure that if Russia takes action that disrupts supply chains, companies are prepared for disruptions,” the source said.
“We understand that other sources of key products are available and are ready to work with our companies to help them identify and diversify their supply.”
According to a copy obtained by Reuters, Joe Pasetti, vice president of global public policy for SEMI’s chip and electronics supplier group, sent an email to members this week assessing the availability of vital chip manufacturing supplies.
“As discussed on today’s call, please see the attached paper… regarding Russian/Ukrainian production of a number of semiconductor materials,” he wrote, referring to a Techcet summary of C4F6, palladium, helium, neon and scandium from the troubled region. . “Please let me know if potential supply disruptions of any of these are of concern to your company.”
The neon needed for the lasers used to make the chips is a by-product of the Russian steel industry, according to Techcet. Then it is purified in Ukraine. Palladium is used in sensors and memory, among other things.
The Biden administration has threatened to impose massive export controls on Russia if it invades Ukraine. Russia, which has amassed more than 100,000 troops along its border with Ukraine, has denied any plans to attack.
Some chip makers are reviewing their supply chains for the potential impact of the conflict in Ukraine. One person at the chip company, who declined to be named, admitted that he is looking into his supply of neon and other gases, some of which originate in Ukraine.
“Even if there was a conflict in Ukraine, this would not lead to a cessation of supplies. This would lead to higher prices,” the source said. “The market will shrink. These gases will become quite scarce. But this will not stop the production of semiconductors,” he added.
The turmoil in Ukraine has pushed up the price of the rare gas and could cause supply issues, according to one energy chip startup executive. He added that fluorine is another gas that has large reserves in this part of the world and could be affected.
William Moss, an Intel spokesman, said the chip maker does not expect any impact on the neon supply.
But the problem still persists because global chip supply is limited and chip orders are only expected to increase. Techcet estimates demand for all materials will grow by more than 37 percent over the next 4 years, pointing to recent announcements from Intel, Samsung and Taiwan’s TSMC in Ohio, Arizona and Texas.
Neon prices rose 600 percent ahead of Russia’s annexation of the Crimean peninsula from Ukraine in 2014 as chipmakers relied on several Ukrainian companies, according to the US International Trade Commission.
© Thomson Reuters 2021