Chip makers stare at fresh wave of uncertainty

New Delhi, March 7 (IANS) The Ukraine crisis brings fresh wave of uncertainty to the global semiconductor industry as small and medium chip producers may place multiple orders to offset the risk, resulting in the raw material supply to deteriorate, according to a new report.

With geopolitical tensions now extending from Asia to Europe and from semiconductor manufacturing to raw material supply, capacity expansion and investment decisions will have to be reevaluated, says Counterpoint Research.

"Larger enterprises have more purchasing power. Small and medium chipmakers and allied businesses may face increased supply pressure owing to exhausted inventories and the difficulty in connecting with new sources if the conflict continues," said Brady Wang from Counterpoint.

"Rapidly rising metal (nickel and palladium) prices will represent a new impediment to the revival of the automotive market if the conflict continues," he said in a blog post.

Some raw materials exported from Russia and Ukraine, such as rare gas neon, chemical C4F6 and metals palladium, nickel, platinum, rhodium and titanium, are critical for semiconductor manufacturing.

Palladium is used in component production, like for the substrate in PCB.

However, precious metals such as palladium, platinum and rhodium are mainly used in the catalytic converters for vehicles.

Titanium nitride (TiN) is a widely used material for semiconductor manufacturing as a diffusion barrier.

"The world's second-largest exporter of titanium is Russia (the US is No.1). The production of lithium batteries may also face some turbulence because nickel, of which Russia is a major producer, is an important metal for these batteries," said Wang.

In the medium term, the lack of the aforementioned raw materials will have little influence on semiconductor producers. The situation will be managed through existing inventory and other suppliers. However, it is inevitable that prices will rise significantly.

"If the conflict persists, supply chain uncertainty will keep raw material inventories at higher levels for a longer length of time. Supply chain management will become more complicated as well," he noted.