US supply chain of rare gas, critical for chipmaking, at risk of Russian retaliation over US threats of export curbs on Russia

According to sources familiar with the matter at hand, the White House has issued warnings to the chip industry to diversify its supply chain in case Moscow decides to retaliate against threatened U.S. export curbs by blocking access to key materials.

Russia’s potential for retaliation has garnered more eyeballs in recent days over a report by market research group Techcet, highlighting the reliance of many semiconductor manufacturers on Russian and Ukrainian-sourced materials including palladium, neon, and others.

According to Techcet’s estimates, more than 90% of U.S. semiconductor-grade neon supplies come from Ukraine, while 35% of U.S. palladium is sourced from Russia.

The White House declined to comment on the specifics of the conversations, although a senior official reiterated that the administration was prepared in case Russia invades Ukraine.

“Part of that is working with companies to make sure that if Russia takes actions that interfere with supply chains, companies are prepared for disruptions,” said the source.

“We understand that other sources of key products are available and stand ready to work with our companies to help them identify and diversify their supplies.”

Joe Pasetti, vice president of global public policy at the chip and electronics manufacturing suppliers group SEMI, sent an email to members this week gauging exposure to the vital chipmaking supplies.

“As discussed on today’s call, please see the attached document … regarding Russian/Ukrainian production of a number of semiconductor materials,” wrote Pasetti referencing a summary by Techcet on C4F6, Palladium, Helium, Neon and Scandium from the troubled region.

“Please let me know if potential supply disruptions to any of them are a concern for your company.”

According to Techcet’s report, Neon, which is critical for lasers used to make chips, is a biproduct of Russian steel manufacturing; it is purified in Ukraine. Palladium is used in sensors and memory, among other applications.

Chipmakers have been reviewing their supply chains to gauge any potential fallout from the conflict , with a source who works at a chipmaking company stating on the condition of anonymity that his company has been looking into its supply of neon and other gases, many of which originate in Ukraine.

“Even if there was a conflict in Ukraine it wouldn’t cut off supply. It would drive prices up,” said the source. “The market would constrict. Those gases would become pretty scarce. But it wouldn’t stop semiconductor manufacturing”.

According to an executive which designs power chips, Russia-Ukraine tensions has caused rare gas prices to increase and could cause supply issues.

Fluorine is another gas that has a large supply from that part of the world and could be affected, said the executive.

According to Intel Corp’s spokesperson William Moss, it does not anticipate any impact to neon supply.

Following Russia’s annexation of the Crimean peninsula in 2014, Neon prices rose by 600%, since chip firms rely on a few Ukrainian companies.

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