The Hormuz Blockade: A Disruption to Semiconductor Manufacturing
The closure of the Strait of Hormuz due to ongoing conflicts in Iran has dramatically unsettled both the technology and energy sectors. This blockade acts as a seismic shift within the semiconductor supply chain, affecting not just well-known components but also crucial materials necessary for microchip production. These materials include specialized gases, solvents, minerals, and other critical raw resources which are now becoming increasingly difficult and costly to procure.
Crisis in Raw Material Supply
Apart from silicon, which is widely recognized as essential, numerous other materials required for chip manufacturing have become harder to obtain. According to Bloomberg, the complexity of chip production demands a variety of materials like ultrapure gases, acids, solvents, and resins, many of which primarily originate from the Middle East.
The blockade has abruptly severed essential supplies. Although major manufacturers like TSMC and Samsung have stockpiled some inventory, their reserves are depleting rapidly each week. This situation raises the specter of production delays and rising costs.
Helium: An Irreplaceable Resource
Helium stands out as perhaps the most critical material amid this crisis. It is vital for cooling wafers during circuit etching and is indispensable in EUV lithography processes. Unfortunately, there is no substitute for helium, and its supply has been severely impacted. Qatar, which produced about one-third of the world’s helium, has seen its production grind to a halt due to Iranian attacks on vital infrastructure.
As per Bloomberg, the complete restoration of helium supply could take up to five years, risking the viability of Samsung and SK Hynix, both of which heavily depend on helium for memory chip production.
The Impact of Other Critical Chemicals
Besides helium, the blockade has also disrupted the supply of other vital materials. High-purity hydrogen bromide gas, crucial for etching processes, is now in short supply. Similarly, high-purity sulfuric acid plays a critical role in cleaning wafers and removing photoresists but is also facing restrictions. The Gulf region exports about 45% of the world’s sulfur, a primary component for sulfuric acid production.
Moreover, solvents like PGMEA, essential for photoresists, are becoming scarce as they were largely sourced from Iran.
Inventory Challenges
Although major manufacturers have claimed to possess sufficient reserves for the next few months— with the South Korean government confirming that inventory levels for bromine and helium are stable—this only provides short-term relief. Many of these chemicals have a limited shelf life. For instance, liquid helium can evaporate during transportation, especially given that ships now have to reroute around Africa. Furthermore, photoresist solvents become unusable once opened.
The Geographical Concentration of Supply
This crisis has revealed that the technology supply chain has very specific choke points. The Gulf not only produces oil but also specialized materials in facilities that lack easy replicas globally. Manufacturers who previously sourced helium from the Gulf are now scrambling for the limited quantities available from North American sources, adding further strain to the supply chain.
Implications for the Industry
The disparity in purchasing power significantly influences the industry’s future. Major companies like TSMC, Samsung, and SK Hynix have the leverage to secure high-purity materials, which leaves smaller firms at a disadvantage. According to Gartner, this ongoing supply crisis could potentially ripple into the AI industry as well. Consumers can expect to see less favorable conditions as supply priorities are likely to lean towards AI infrastructure over consumer electronics.
Looking Ahead
Experts suggest it may take up to 12 to 18 months for the situation to stabilize. Derek Lemke, a Senior Vice President of Product Intelligence at Exiger, noted that the aftermath of this blockade will not reset overnight. The damage extends beyond mere interruptions of supply and affects the infrastructure that will require rebuilding.
Moreover, as Jonathan Colehower highlighted, rising prices are likely to become a permanent feature of this market, as gases and chemicals seldom return to previous rates after inflation. Given these challenges, the semiconductor industry is bracing itself for a long and challenging road ahead.
Cover image | Harrison Broadbent