White House tells chip industry to prepare for Russian supply disruptions


The White House is warning the chip industry to diversify its supply chain in case Russia retaliates against threats of U.S. export restrictions by blocking access to key materials, people familiar with the matter said. The potential for retaliation has drawn more attention in recent days after Techcet, a market research group, released a report on February 1 highlighting the reliance of many semiconductor manufacturers on materials of Russian and Ukrainian origin such as neon, palladium and others.

According to Techcet estimates, more than 90 percent of the US. semiconductor grade Neon supplies come from Ukraine, while 35 percent of US palladium comes from Russia.

Peter Harrell, a member of the White House 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 chip-making materials and urging them to find alternative sources, people said.

The White House declined to comment on the details of the talks, but a senior official reiterated that the administration was prepared if Russia invaded Ukraine.

“Part of that is working with companies to make sure that if Russia takes steps that interfere with supply chains, companies are prepared for disruptions,” the person said.

“We understand that there are other sources of key products available and we stand ready to work with our companies to help them identify and diversify their supplies.”

Joe Pasetti, vice president of global public policy at chipmaking and electronics supplier group SEMI, sent an email to members this week to gauge exposure to vital chipmaking supplies, according to a copy obtained by Reuters. .

“As discussed on today’s call, please see the attached document…regarding Russian/Ukrainian production of a number of semiconductor materials,” he wrote, referencing a Techcet roundup on C4F6, palladium, helium, neon. and scandium from the troubled region. . “Please let me know if potential supply disruptions for any of them are a concern for your company.”

Neon, critical to the lasers used to make chips, is a byproduct of Russian steelmaking, according to Techcet. It is then purified in the Ukraine. Palladium is used in sensors and memory, among other applications.

The Biden administration has threatened to impose extensive export controls against Russia if it invades Ukraine. Russia, which has massed more than 100,000 troops along the border with Ukraine, denies any plans to attack.

Some chipmakers have been reviewing their supply chains for potential fallout from the conflict in Ukraine. A person at a chip manufacturing company who declined to be named acknowledged that he has been investigating its supply of neon and other gases, some of which originate in Ukraine.

“Even if there was a conflict in Ukraine, it wouldn’t cut off supply. It would raise prices,” the person said. “The market would tighten. Those gases would become quite scarce. But it would not stop semiconductor manufacturing,” she added.

According to an executive at a power chip design startup, unrest in Ukraine has caused rare gas prices to spike and could cause supply problems. Fluorine is another gas that is in great supply from that part of the world and could be affected, the executive added.

William Moss, a spokesman for IntelHe said the chipmaker did not anticipate any impact on neon supply.

But the problem remains a concern because global chip supply is tight and chip orders are expected to rise. Techcet estimates that demand for all materials will grow more than 37 percent over the next 4 years, pointing to recent announcements from Intel, Samsungand Taiwan TSMC in Ohio, Arizona and Texas.

Neon prices rose 600 percent in the run-up to Russia’s annexation of the Crimean peninsula to Ukraine in 2014, as chip companies relied on a few Ukrainian companies, according to Ukraine’s International Trade Commission. USA
© Thomson Reuters 2021


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