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Ukraine, leading exporter of neon gas. It was before the start of the war. Today, the two large factories, in Odessa and Mariupol, are at a standstill, something to worry the semiconductor industry.
Ukraine, a major player in the semiconductor industry, is one of the revelations of this war. Before the start of the conflict, the country provided half of the world’s neon supply. A gas which is used in particular in the manufacture of lasers used in the printing of electronic chips.
For example, in 2021, the United States imported 90% of its neon from Ukraine and Germany, according to the consulting firm TechCet, which specializes in supplying the semiconductor industry.
Odessa and Mariupol, two closed factories
With the war, the two main Ukrainian factories located in Odessa and Mariupol (Ingas and Cryoin) obviously stopped their production. No one can say when activity will resume and with what capacity.
Developing new production lines elsewhere cannot be a short-term solution, given the technology required and the time required to start a factory. The solution for buyers is therefore to look for other suppliers, and to turn in particular to China, the other major supplier of neon.
But in the Chinese market as in the international market, the price has soared. The increase is of the same order as in 2014, during the annexation of Crimea, where the price had risen by 600% according to figures from the American International Trade Commission.
Since 2014, importers have learned
Following the 2014 conflict, large buyers have already started to diversify their suppliers to reduce their dependence on Ukraine. They also made more stock. The situation is therefore not critical for the main semiconductor manufacturers. Stocks are sufficient according to an expert from AlixPartners, an international consulting firm, who does not rule out supply problems in the medium term.
The price curve should not be reversed, however, because the fear of a shortage is encouraging some importers to buy at all costs, especially the smaller ones who have not had the means to build up stocks.