Russia's war in Ukraine could cause the production of neon, a critical gas in advanced Semiconductor manufacturing, to fall to worryingly low levels at a time when the world is already grappling with a chip shortage.
Neon is required for the lasers that are used in a chip production process known as lithography, where machines carve patterns onto tiny pieces of Silicon made by the likes of TSMC.
According to Peter Hanbury, an analyst at Bain & Co., more than half of the world's neon is produced by a few companies in Ukraine.
Mariupol-based Ingas is one of those companies.
The firms did not reply to a CNBC request for comment, but Ingas and Cryoin ceased operations in recent weeks due to attacks from Russian forces.
Neon production is set to fall off a cliff as the conflict drags on, with world-leading Ukrainian firms having shuttered their operations.
According to estimates from Techcet, worldwide neon consumption for Semiconductor production reached 540 metric tons last year. If the nation's neon producers remain shut, the figure could fall below 270 metric tons in 2022.
Of the materials used in chip-making that could see a hit to their supply from the Ukraine conflict, it is neon that poses the greatest potential challenge, according to Hanbury.
The ongoing global chip shortage has already wreaked havoc on supply chains and led to lengthy delays on products such as new cars and games consoles.
The global neon shortage could make things worse.
Neon comes from large-scale steel production.
The air that has been cooled to very low temperatures is the liquid air that gets produced.
Up to 90% of the neon for the chip industry was produced as a by-product of Russian steel manufacturing and refined by companies based in Ukraine, according to Hanbury.
According to Alan Priestley, an analyst at Gartner, most major chip manufacturers have several months of neon in reserve.
Intel has assessed the possible impact of the Russia-Ukraine conflict on its supply chain.
Intel's strategy of having a diverse, global supply chain reduces its risk from potential local interruptions. We are keeping a close eye on the situation.
TSMC and SAMSUNG did not respond to CNBC's request for comment.
Some smaller fabs with limited supply may be affected earlier. He said that chip manufacturers are trying to minimize the impacts.
The global Semiconductor industry has been preparing for this event for a long time.
It took crucial steps to try to limit future risks associated with neon supplies in the wake of Russia's annexation of Crimea.
Hanbury said that the chip sector acted to cut the need for use of neon in the manufacturing process.
Semiconductor manufacturers put in place new suppliers outside of Russia and Ukraine.
About two-fifths of the neon used in global Semiconductor production today is from Russia and Ukraine, according to Hanbury.
Dutch firm ASML reduced its reliance on neon from Ukraine to 20% of previous levels, Hanbury said.
ASML recognizes the importance of being prepared in order to manage unforeseen events, such as conflicts, that could impact the supply chain.
We continue to closely monitor the status of the conflict and are currently investigating with our suppliers what the impact would be and to what extent our suppliers can use alternative sources if necessary.
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