Ukraine halts world’s 50% supply of neon output needed for making chips amid Russian invasion

Ukraine’s two leading suppliers of neon, which produce about half the world’s supply of the key ingredient for making chips, have halted their operations as Moscow has sharpened its attack on the country, threatening to raise prices and aggravate the semiconductor shortage.

Some 45%-54% of the world’s semiconductor grade neon, critical for the lasers used to make chips, comes from two Ukrainian companies, Ingas and Cryoin, Reuters said based on figures from Techcet. Global neon consumption for chip production reached about 540 metric tons last year.

Both firms have shuttered their operations as Russian troops have escalated their attacks on cities throughout Ukraine, killing civilians and destroying key infrastructure.

The stoppage casts a cloud over the worldwide output of chips, already in short supply after the coronavirus pandemic drove up demand for cell phones, laptops and later cars, forcing some firms to scale back production.

Before the invasion, Ingas produced 15,000 to 20,000 cubic meters of neon per month for customers in Taiwan, Korea, China, the United States and Germany, with about 75% going to the chip industry, Nikolay Avdzhy, the company’s chief commercial officer said.

The company is based in Mariupol, which has been under siege by Russian forces. On Wednesday, Russian forces destroyed a maternity hospital there, in what Kyiv and Western allies called a war crime. Moscow said the hospital was no longer functioning and had been occupied by Ukrainian fighters.

Cryoin, which produced roughly 10,000 to 15,000 cubic meters of neon per month, and is located in Odessa, halted operations on Feb. 24 when the attacks began to keep employees safe, according to business development director Larissa Bondarenko.

Bondarenko said the company would be unable to fill orders for 13,000 cubic meter of neon in March unless the violence stopped. She said the company could weather at least three months with the plant closed, but warned that if equipment were damaged, that would prove a bigger drag on company finances and make it harder to restart operations quickly.

Taiwan’s Economy Ministry said Taiwanese firms had already made advanced preparations and had “safety stocks” of neon, so it did not see any problems in the supply chain in the near term.