Impact of Russian Invasion on Chip Shortage

 

Context:

  • According to a report by Moody’s Analytics, Ukraine supplies rare gases used to produce semiconductor fab lasers, and Russia exports rare metals like palladium to make semiconductors.
  • This combination is required to build chipsets that power a range of devices, from automobiles to smartphones.

 

Background:

 

  • Palladium is often used as an alternative to gold in making various devices as the metal is highly malleable and resistant to corrosion.
  • The rare metal is considered to be softer than gold, but is still much harder and durable than the yellow metal.
  • This quality of palladium gives it more protection against an impact and a greater resistance to denting.
  • So, automobile makers, electronics manufacturers and biomedical device producers prefer the silvery-white metal.
  • Russia and South Africa are the two largest producers of palladium. In 2021, Russia supplied 2.35 million ounces (66 million grams) of palladium, according to precious metals refiner Heraeus.
  • The silvery-white market would move into a severe deficit without those supplies, pushing the price up.
  • While platinum and rhodium could be substituted for palladium, Russia is also a leading producer of the other platinum group metals.
  • Palladium is used in nearly all electronic devices, and the metal is a key to make chipsets and circuit boards.
  • It is used to make multi-layer ceramic capacitors (MLCCs), which are important to make smartphone screens, stereo systems, and power circuit breakers.
  • As Russia’s invasion into Ukraine escalates, the country is getting hit by Western sanctions. This could disrupt the country’s exports, leaving the semiconductor firms fewer options to source raw materials to make chip sets.

 

Way Ahead:

  • The global semiconductor market is projected to grow by 8.8% to US$ 601 billion, driven by a double-digit growth of the sensors and logic category, according to data from World Semiconductor Trade Statistics (WSTS).
  • And with the recent trends in electric mobility, automotive safety, and Internet of Things (IoT), the demand for semiconductor is only going to grow.
  • But this growth is coming at a time when products are being built on global supply chains. So, businesses are inversing their offshoring plans.
  • They are considering ‘reshoring’ as an option to be shielded from global supply chain disruptions.

Source: THE HINDU.

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