WASHINGTON: The White House is warning the chip industry to diversify its supply chain if Russia retaliates against US export sanctions by blocking access to key materials, people familiar with the matter said.
The potential for retaliation has attracted more attention in recent days, when a market research group, Tekset, published a report on February 1 on the reliance of many semiconductor manufacturers on Russian and Ukrainian-sourced materials such as neon, palladium and others. highlighted.
According to TekSat estimates, more than 90% of US semiconductor-grade neon supplies come from Ukraine, while 35% of US palladium is sourced from Russia.
Peter Harrell, a member of the White House’s National Security Council, and his staff have been in contact with members of the chip industry in recent days, learning about their exposure to Russian and Ukrainian chipmaking materials and finding alternative sources from them. are urged, people said.
The White House declined to comment on the specifics of the talks, but a senior official reiterated that the administration was prepared if Russia attacked Ukraine.
“Part of this is working with companies to ensure that companies are prepared for disruption if Russia takes action that interferes with the supply chain,” the person 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.”
Joe Passetti, vice president of global public policy at chip and electronics manufacturing suppliers group SEMI, sent an email to members this week about critical chipmaking supplies, according to a copy obtained by Reuters.
“As discussed on today’s call, please refer to the attached document … with regard to the Russian/Ukrainian production of a number of semiconductor materials,” he said in a summary by Techcet on C4F6, Palladium, Helium, Neon and Scandium from the turbulent region Wrote with reference to “Please let me know if a potential supply disruption for any of them is of concern to your company.”
Neon, critical to the lasers used to make chips, is a bi-product of Russian steelmaking, according to Tekset. It is then purified in Ukraine. Palladium is used in sensors and memory, among other applications.
The Biden administration has threatened to impose broad export controls against Russia if it invades Ukraine. Russia, which has amassed more than 100,000 troops along Ukraine’s border, has denied planning an attack.
Some chipmakers are reviewing their supply chains to scan them for possible fallout from the conflict in Ukraine. A person at a chipmaking company admitted on condition of anonymity that it is investigating supplies of neon and other gases, some of which originate in Ukraine.
“Even if there was a conflict in Ukraine, it wouldn’t cut supplies. That would drive up prices,” the person said. “The market will shrink. Those gases will become very scarce. But that won’t stop semiconductor manufacturing,” he said.
According to a power chip design startup executive, the unrest in Ukraine has increased the prices of rare gas and could lead to supply issues. The executive said fluorine is another gas that has large supplies from that part of the world and could be affected.
Intel Corp. spokesman William Moss said the chipmaker was not anticipating any impact on Neon supplies.
But the issue is still worrying, as global chip supply is tight and chip orders are expected to pick up. Tekset forecasts that demand for all materials will grow by more than 37% over the next 4 years, pointing to recent announcements by Intel, Samsung and Taiwan’s TSMC in Ohio, Arizona and Texas.
Neon prices rose 600% following Russia’s 2014 annexation of the Crimean peninsula from Ukraine, according to the US International Trade Commission, as chip firms relied on some Ukrainian companies.
(Writing by Alexandra Alper; Additional reporting by Jane Lee in San Francisco and Pratima Desai in London; Editing by Chris Sanders and Stephen Coates)
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