Ukraine crisis may impact India’s device makers
NEW DELHI: The dependence of leading global semiconductor manufacturers on raw materials--palladium and neon-sourced from Russia and Ukraine, respectively, could prolong the global semiconductor crisis and even indirectly impact India’s device manufacturers in countries like India with a delay in supply of critical parts, say industry experts.
On February 1, a report by an American market research firm Techcet underscored the dependence of America’s semiconductor manufacturers on palladium and neon sourced from Russia and Ukraine, respectively. It pointed out that Ukraine supplies more than 90% of the U.S.’ semiconductor-grade neon while Russia supplies 35% of the U.S.’ palladium supply.
The noble gas Neon is used in the critical laser lithography process in chip production. This process is used to etch patterns on silicon, which is fundamental to producing computer chips. Palladium is used for pins that conduct electricity on a chip.
“Neon is an important material in the semiconductor manufacturing process, so there is definitely going to be some impact. India would face an impact since we make a lot of electronics. In fact, no country will be spared – at least indirectly,” said Rajeev Khushu, chairman of industry body the Indian Electronics and Semiconductor Association (IESA). “India may face a direct impact in the sense that we may not get critical parts in due time, and the rapidly growing device manufacturing ecosystem could be impacted,” he added.
To be sure, India does not yet manufacture and export chipsets to companies around the world – something that Taiwan, South Korea and China do. ‘Fabs’, or semiconductor manufacturing plants based in such nations are expected to be hit first. However, the impact may not be a blanket one, since the global chips supply chain is structured in a complex manner.
“There are so many levels of dependencies in the semiconductor industry. Like Taiwan, both Ukraine and Russia play pivotal roles in the global semiconductor supply chain. Now, if you are sourcing components primarily from Russia, your supply chain is on. But, if you are sourcing a lot from Ukraine, then you will see disruption,” said Sanchit Vir Gogia, chief executive of market research firm Greyhound Research.
Gogia explained that India largely draws its supplies from Taiwan and Russia, as a result of which most industries should not face an impact in the short term. However, companies that import chips from manufacturers that do source raw material from Ukraine could face some short-term impact.
Since March 2020, there has been a global chip shortage that has affected multiple businesses. Numerous factors contributed to this shortage, including a slowdown of manufacturing due to the Covid-19, rising demand for gadgets due to work-from-home mandates, and a drought causing water supply shortage in Taiwan – which holds the largest market share of semiconductor supplies around the world.