Ukraine war flashes neon warning lights for chips

MILAN, Feb 24 (Reuters Breakingviews) - Russia’s invasion of Ukraine read more by land, air and sea risks reverberating across the global chip industry and exacerbating current supply-chain constraints. Ukraine is a major producer of neon gas critical for lasers used in chipmaking and supplies more than 90% of U.S. semiconductor-grade neon, according to estimates from research firm Techcet. About 35% of palladium, a rare metal also used for semiconductors, is sourced from Russia. A full-scale conflict disrupting exports of these elements might hit players like Intel , which gets about 50% of its neon from Eastern Europe according to JPMorgan.

The pain won’t fall evenly. ASML (ASML.AS), which supplies machines to semiconductor makers, sources less than 20% of the gases it uses from the crisis-hit countries. Companies may turn to China, the United States and Canada to boost supplies, says JPMorgan. But this may be a slow path. Although the chipmaking industry was able to manage an increase in neon prices stemming from the 2014 Crimean crisis, the scale of today’s conflict looks much larger. (By Lisa Jucca)

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(The author is a Reuters Breakingviews columnist. The opinions expressed are their own.)

(This story refiles to fix typo in last paragraph.)

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