- Conflict in the Middle East could pose a threat to the semiconductor industry.
- Helium, a key resource in chipmaking, is sourced from those areas, and without a steady supply, another shortage could occur.
- While SK Hynix has an adequate supply for now, the same cannot be said for Samsung and other companies.
The geopolitical instability is raising alarms in the worldwide semiconductor sector, particularly in the memory market, which has already been hit by AI and is heavily affected by shortages and strong demand.
Now, Reuters reports a new risk to the chipmaking supply chain: South Korea, known for supplying two-thirds of the global memory market, is concerned that the conflict in the Middle East poses a significant threat to crucial chipmaking resources.
Why it matters: A shortage of resources used in the semiconductor industry would have a big impact on consoles, PCs, and laptops, all of which are currently overcrowded and facing more price increases.
Mainly Helium and Bromine are sourced from the Middle East, which are used for cooling and maintaining stable conditions, and for etching circuits on wafers, respectively.
Since most of the supply for these resources comes from the Persian Gulf, a shortage could be problematic for the memory and semiconductor sectors in general.
Samsung and SK Hynix, along with Micron, control a significant share of worldwide memory manufacture, so any increase in energy costs, logistical interruptions, or issues in obtaining industrial gases might eventually destabilize market equilibrium.
Any long-term issues with industrial materials, energy, or logistics could swiftly translate into higher prices and reduced memory production.
SK Hynix has already secured a steady supply, as per the report, but the same cannot be said for other companies.
With these ongoing conditions, a price hike is expected in the industry starting next month, and businesses and customers will be unable to endure, with hikes ranging from 90% to 100%, depending on the type and modules involved.
It is also notable to mention that this ongoing escalation leaves South Korea extremely sensitive to the possibility of armed conflict. In that case, the global memory supply chain would be disrupted beyond repair.
The Middle East was establishing itself as a new hub for massive data centers. Countries such as the United Arab Emirates and Saudi Arabia have long promoted initiatives to attract AI infrastructure and services.
Since these initiatives require massive quantities of server RAM, any extended escalation of these tensions may slow down some of these investments, if not the entire supply. Some contracts may be terminated owing to force majeure, reducing demand and causing a modest rise in supply.
Companies are attempting to maintain enough inventories and diversify supply chains, but time is running out. If the crisis in the Middle East continues, the memory sector for PCs, laptops, consoles, and AI, as well as IoT, may suffer.
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Sajjad Hussain is the Founder and Editor-in-Chief of Tech4Gamers.com. Apart from the Tech and Gaming scene, Sajjad is a Seasonal banker who has delivered multi-million dollar projects as an IT Project Manager and works as a freelancer to provide professional services to corporate giants and emerging startups in the IT space.
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