In Mariupol and Odessa, two central producers of neon have given up. Their world market share of 50 percent is difficult to replace. Chip manufacturers in particular will feel the consequences
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Most recently, it was the world’s largest supplier of printing machines for computer chips, who clearly warned: According to the Dutch group ASML, the semiconductor industry would expand, but the increasing demand could probably only be covered in two years. Because bottlenecks at the suppliers slowed down the market leader for lithography systems.
The Ukraine war is also leaving its mark here. In the south of the country, two such companies specializing in neon have declared a total failure: the gas is indispensable for engraving chips. But industrial gases for satellite builders could also soon be in short supply.
,Ingas and Cryoin, the two companies from Mariupol and Odessa, have supplied around 50 percent of the world market for neon. The industry was startled by the news of its war-related shutdown. The corona pandemic has already affected the availability of important components – be it for cars, laptops or mobile phones – due to failures in the supply chains. Whole production lines stand still because microprocessors are missing. Now Vladimir Putin’s war is fueling the semiconductor crisis.
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“The two suppliers will not be replaced any time soon,” says Leonid Weinstein, Managing Director of Aerogas in Mülheim an der Ruhr. His company trades in industrial gases, also buys in Ukraine, and supplies customers all over the world. Ingas’ work in Mariupol has been erased, he says.
There is still an operating facility in Odessa that is to be restarted “in a few weeks”. Cryoin could also start processing there again. However, both are dependent on steel mills for their raw materials. And they are in the contested south-east – and in Russia.
A gas mixture of neon and helium is created by air separation during oxygen production in the steelworks. In the facilities of both companies, neon is refined and brought to the highest degree of purity. In semiconductor manufacturing, for example, it is used as a medium for generating the light waves for engraving. However, steel production in Ukraine is largely idle. Two plants in Mariupol were bombed, says Weinstein. This eliminated almost 30 percent of the domestic raw material. A full 70 percent came from Russia. Of course, this connection was also interrupted by the war.
shortage foreseeable?
“It’s getting tight,” says Weinstein, “perhaps less dramatic for Europe than for Asia and the USA.” Chip manufacturers from Infineon to Samsung are threatened with problems, “because neon cannot be replaced with lasers when engraving semiconductors.” large amounts. But the loss of Ukraine, which supplies Taiwan, South Korea and China as well as the USA and Europe, cannot easily be compensated for.
And to win neon at other steel locations, in turn, requires retrofitting with systems such as those from Linde Gas. The French competitor Air Liquide is also active in neon production – according to Weinstein, but also from Russian raw materials, which are now blocked due to the sanctions.
The Munich manufacturer Infineon, one of the few semiconductor producers in Europe, considers the risks to be manageable. “We currently do not expect any effects on our production capacities,” it says on request. Only small amounts of neon gas are needed for some processes and development. This is covered by a “fundamentally pursued multi-sourcing strategy with suppliers in different countries”. In addition, inventories of potentially affected raw materials and noble gases have been increased.
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Other chip manufacturers also refer to well-stocked warehouses and various suppliers – for example in the Semiconductor Industry Association, which also includes Intel, Nvidia and Samsung. The supply chains have already been diversified with other sources of supply under the impression of the Russian annexation of Crimea in 2014, it says there, in order to reduce risks from dependence on individual suppliers.
Price boost for sure
Estimates of semiconductor manufacturers’ neon inventories vary. But an analyst quoted by the Reuters news agency warns that the situation could worsen the longer the Ukraine war lasts. “If stocks are depleted in April and no orders are pending from other regions of the world, further supply chain bottlenecks and end-product failures are likely.”
In the short term, Ingas and Cryoin still have a few months of supply capacity from stocks, they say. According to the analysis company Techcet, 540 tons of neon gas were used worldwide last year. In the meantime, the gas can be sold at a high profit, as dealer Weinstein emphasizes. Six months ago, a cubic meter of the noble gas was still available for $100, by the last week of March it was already $3,000 – well above the peak of around $2,000 in 2015 after the Crimean crisis.
If availability ends up being a price issue, industry giants like Taiwanese contract manufacturer TSMC or Intel with great purchasing power potentially have an advantage. Thus, the war in the Ukraine may not result in a substantial material shortage for chip manufacturers, but it does result in a sharp rise in prices. Which makes retailer Weinstein expect that neon cleaners in the People’s Republic – motivated by the price explosion – will increase their capacities as quickly as possible.
They would have a large volume of steel for it. China is one of the largest steel producers in the world and could also become a war profiteer in this respect. “They will do everything in their power to react to the prices,” says Weinstein – and also refers to two other noble gases whose production chains are destroyed by the Ukraine war: xenon and krypton are not used in the same breadth and quantity as neon . But in the top market of satellite builders like Airbus or Starlink, a shortage could also hit hard.
