Russia’s invasion of Ukraine could make chip shortage even worse says, Gartner

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Russia’s invasion of Ukraine could make chip shortage even worse says, Gartner

Russia’s invasion of Ukraine has the potential to further aggravate the already strained supply of semiconductors, according to research firm Gartner.

The chip shortage has long been a headache for the global IT industry. 

For example, ASX-listed managed service provider Data#3 said delivery delays caused by the shortage cost it $3 million in pre-tax profits over the 2021 financial year. 

Gartner vice president analyst Gaurav Gupta said the invasion and international response were likely to have a direct impact on the supply chain of raw materials for chip manufacturing.

Moreover, there could be “panic buying or depletion of inventories from final products to n-tier materials, resulting in shortages and price hikes.”

“Ukraine is a major source of inert gasses, such as neon,” Gupta said.

Neon is required for the semiconductor lithography process, and any disruption in the supply of neon and other noble gasses from the country could trigger shortages and associated cost inflation.

“Russia is an important producer of metals like aluminium, nickel, and copper. Aluminium is a conductor that is commonly used to manufacture passive components and in wire bonding.” 

“Any disruption in the supply of any of these metals could cause prices to rise and subsequently impact the prices of semiconductor devices and electronic systems.” 

Gupta said most chip manufacturers don’t actually expect to see an immediate impact beyond already-present shortages because they have contingency plans, such as diversifying suppliers and maintaining high levels of inventory. 

However, “market demand and supply behaviours depend on how the situation unfolds, so the biggest risk is whether a new wave of panic buying sets in.”

Gupta advised companies to “assess direct inventory levels of the aforementioned materials. Diversify supply chain sources outside of the region of conflict, and seek out alternative materials.” 

Prior to the invasion, Gartner had predicted the chip shortage would ease by the second quarter of 2022.

Intel, the largest semiconductor manufacturer by revenue, has lobbied the US Federal Government to support the chip industry to invest more in domestic production as a safeguard against the impact of foreign conflicts and trade disputes. 

Between 1990 and 2021, the US’s share of global chip manufacturing fell from 37 to 12 percent.

Intel boss Pat Gelsinger met virtually with President Joe Biden in April last year and sought to get funding from Biden’s US$2 trillion American Jobs Plan, which includes US$50 billion in semiconductor manufacturing investments.

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