KUALA LUMPUR (March 18): Panic buying and rising costs of transportation and logistics as a result of the Russian invasion of Ukraine could lead to higher prices across the board for the global semiconductor market.
Technology and consulting firm Gartner Inc vice president analyst Gaurav Gupta said earlier this week there are three main scenarios that could play out:
- Raw material shortages or disruption in the supply of raw materials from Ukraine and Russia that are critical to everything from micro and sensor chips to memory and packaging
- Panic buying or depletion of inventories from final products to n-tier materials, resulting in shortages and price hikes
- Sanctions or disrupted demand that result in imbalances to supply chains that spill over into planning and capacity management, as well as capacity investments right when semiconductor investments are in high gear.
Gupta said while many chip manufacturers have claimed diversity in their raw-materials and gas supply chains with sufficient inventory, they are wary of long-term ramifications if the situation persists or escalates.
He explained that the impact on raw material supply, market demand and supply behaviours depend on how the situation unfolds, so the biggest risk is whether a new wave of panic buying sets in.
Gupta highlighted that it was one of the major reasons for the onset of the ongoing semiconductor shortage, as it overstretched and deteriorated the supply chain further, without bringing any advantages to buyers.
“The semiconductor supply chain is already strained for a variety of reasons.
“While greater investment and capacity expansion is planned, the ability to ramp up supply takes time,” he said.
Russian and Ukrainian relevance
Gupta said the region supplies various raw materials that are critical to chip manufacturing.
“As one example, Ukraine is a major source of inert gases, such as neon required for the semiconductor lithography process, and any disruption in the supply of neon and other noble gases from the country could trigger shortages and associated cost inflation,” he said.
He said Russia is an important producer of metals like aluminium, nickel and copper, adding that aluminium is a conductor that is commonly used to manufacture passive components and in wire bonding.
“Any disruption in the supply of any of these metals could cause prices to rise and subsequently impact the prices of semiconductor devices and electronic systems,” said Gupta.