When Russia annexed Crimea in 2014, the world’s chipmakers became even more dependent on Ukraine as the country supplied about 70 percent of the neon gas. “There were shipping delays due to border crossing issues,” Shon-Roy says, and the raw materials needed to make neon were also scarce. “Russia focused much of its efforts on war and not on making steel.”
Burned by that experience, the chip industry made an effort to diversify its offerings. A company called Cymer, which is owned by Dutch chip giant ASML and makes the lasers used to draw patterns on advanced semiconductor chips, sought to reduce neon consumption. “Chipmakers are concerned about the recent escalation in neon prices and continuity of supply,” said David Knowles, vice president and general manager of Cymer, at the time, without specifically mentioning Ukraine.
Bondarenko says the 2014 price spike was mainly caused by a feud between rival neon producers Cryoin and Iceblick, which is no longer active. However, if access to Russian crude becomes a problem, she says, Cryoin will have enough inventories to keep production going until the end of March. When that runs out, she claims there are Ukrainian crude oil producers that Cryoin can turn to as an alternative.
Instead, she’s more concerned about getting neon out of the country. “Borders are currently very congested as people, civilians, are trying to evacuate,” she says. “If the authorities of the countries where our customers are located can influence the border situation for the commercial shipments, that would be of great help [and] it will not affect the entire industry worldwide.”
Chipmakers have downplayed how much they will be affected by the crisis in Ukraine. “Don’t worry,” Lee Seok-hee, CEO of South Korean chipmaker SK Hynix, said last week, adding that the company had secured “a lot” of materials. Koichi Hagiuda, Japan’s economy, trade and industry minister, said Japanese chipmakers do not expect a “major impact” on their operations because they can source materials elsewhere. The country imports 5 percent of the gases used for semiconductor production from Ukraine.
But there are signs that despite the 2014 warning, Ukrainian neon still plays a big role in the industry. ASML told WIRED it sources “less than 20 percent” of the neon it uses in its factories from Russia or Ukraine. “Together with our supplier, we are investigating alternative sources in the event of a supply disruption from Ukraine and Russia,” said a spokesperson.
There are concerns that the US is even more vulnerable. Last week, the White House urged US chipmakers to seek alternative suppliers, Reuters reported. “We are seeing huge amounts of imports entering the US from [Russia and Ukraine]Shon-Roy of TechCet said. “It is my considered assessment that what comes to the US from Russia and Ukraine accounts for 80 to 90 percent of all [neon] imports.” US chipmaker Intel has not responded to a request for comment.
But buying neon from elsewhere will not be easy. Any disruption in Ukraine will hit chipmakers at a time when the industry is already under intense pressure from post-pandemic demand. “The driving force behind increased production is so strong that it creates tension throughout the supply chain, even without war,” Shon-Roy added. “So there is no oversupply of this kind of gas as far as I know, not in the western world.”
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