Ukraine produces about 70% of global neon gas exports, and a purified version of that gas is vital to the semiconductor industry. And escalating tensions threaten to disrupt supplies and make the ongoing microchip shortages even worse.
Essentially, chip makers use lasers to etch ultra-fine circuit patterns onto silicon wafers. Lasers work by excite atoms of noble gases to produce light at specific wavelengths, and neon typically makes up 95% or more of the laser’s gaseous form. Neon must be purified to 99.999% purity for this purpose – a suitable process that very few factories in the world perform.
Among these is Iceblick, a 32-year-old company in Odessa, the largest province in the southwest of Ukraine, which supplies 65% of the world’s neon. Like other neon scrubbers, Iceblick captures gases that are a by-product of the steelmaking and other metallurgical industries. In Soviet times, many of these plants – which continue to be used today – were equipped with air separators, which provided oxygen and nitrogen for the steelmaking process but also obtained neon, a Noble gases make up only 18.2 parts per million of the atmosphere.
Why does Ukraine produce so much neon gas?
The 2018 German Government white paper explains that the Soviet Union invested heavily in the neon gas capture process, “because it was deemed necessary for the purpose of producing laser weapons for missile defense purposes.” and satellites”. As older steel mills and gas separators in other parts of the world closed, Ukraine and Russia took an increasingly large share of the neon gas export market.
After Russia annexed Crimea in 2014, supplies of neon gas dwindled and prices skyrocketed. At its peak, the market price of neon gas was 10 times higher than it was just a few weeks ago. Some companies have even started programs to reduce their neon gas consumption. Many industry experts have even predicted that the complete closure of chip foundries in Japan and elsewhere is imminent.
And a similar shock now will further hamper the semiconductor industry’s efforts to supply all the microchips the world needs for products ranging from toys to cars to computers. planes, phones, watches and practically every other smart device.
In a statement, the Semiconductor Industry Association said the industry had “a diverse group of important gas and material suppliers” and that the crisis in Ukraine would not pose an “immediate risk” of disruption. ie”. According to Peter Lee, an analyst at Citi Research, most memory chip manufacturers have an inventory of neon to use for about eight weeks.
But, if this crisis continues for a long time, it could suffocate those reserves and trigger new worries for a world increasingly starving for semiconductors.