A new crisis in the semiconductor industry could make your next phone more expensive if there is a war in Iran.
The conflict in the Middle East doesn't just raise the price of gas for your car; it also threatens a supply chain that is very important but not always visible: the parts needed to make electronic chips. There is a very complicated global network of materials, energy, and logistics behind every processor.
The problem is that many of these resources pass through the Middle East in some way. This supply chain is under more stress now that the conflict with Iran is getting worse. This could once again affect the price and availability of the technology you carry in your pocket.
The Strait of Hormuz, which is one of the most important trade routes in the world, is getting a lot of attention right now. This important waterway carries almost a fifth of the world's oil and some of the gas that major semiconductor makers need. Taiwan, which makes most of the world's most advanced semiconductors, gets about 37% of its gas from this area. South Korea, which makes two-thirds of the world's memory, depends heavily on this energy source.
Semiconductors are the building blocks of fields like AI, cars, and data centers. If this supply chain is disrupted, it could have a lot of effects. Experts agree that if the dispute goes on, it could bring back a familiar market situation: shortages of goods, delays, and rising technology prices.
There is more than just technology behind every phone, car, or AI system. There is a very sensitive global network of materials, energy, and processes. Semiconductor manufacturing relies on a vast array of materials. "Manufacturing an electronic chip today requires a significant portion of the periodic table," explains Luis Fonseca, director of the Barcelona Institute of Microelectronics (IMB-CNM, CSIC). "Previously, a few materials were sufficient; now, much more are required, and not all of them are equally available or distributed."
This development has led to some of these elements being considered "vital materials," either because they are difficult to extract or because their production is concentrated in a few countries.
But not all of these materials serve the same purpose. In the semiconductor industry, there are two main categories: materials that are part of the chip itself and other materials that are essential for its manufacture. Fonseca explains: "Some materials are part of the chip itself, like silicon, while others are essential for manufacturing processes. Neon, for example, is used in lasers, and helium in vacuum or extreme cooling applications."
These latter materials are extremely sensitive to supply chain disruptions. Unlike other resources, they are not always produced directly, but rather as byproducts of other industries. The expert points out that "this is part of the problem: helium is extracted as a byproduct of natural gas, and its production is heavily concentrated in specific regions."
This isn't a theoretical threat; it's a reality. Before the Russian invasion of Ukraine, the country produced roughly 50%, and perhaps as much as 70% according to some estimates, of the world's neon supply—a key gas for lasers used in semiconductor manufacturing. The war disrupted this supply and further strained an industry already reeling from the pandemic.
Now, the focus is shifting to the Middle East. Qatar, a major helium producer—which accounts for about a third of the world's supply—has had its production affected by attacks linked to the conflict with Iran, resulting in nearly 30% of the global supply of this material being taken off the market.
Fonseca adds: "Production is concentrated in high-risk areas, and there is no easy alternative in the near term."
The tension in the Middle East is affecting not only the supply of materials but also the energy needs of major semiconductor manufacturers. Javier Porras, a researcher at the Barcelona Centre for International Affairs (CIDOB), explains: "A third of the world's helium comes from Qatar, and its distribution has completely stopped. Moreover, major producing countries like Taiwan and South Korea are heavily dependent on energy from the region."
Taiwan's case is particularly significant, as the island produces nearly 90% of the world's advanced semiconductors and is heavily reliant on imported natural gas. "Taiwan imports 37% of its gas from the Middle East," Boras adds. "South Korea produces two-thirds of the world's memory chips, a product that has been in short supply for months. These are two markets that are extremely vulnerable to this energy crisis."
Although the impact is not immediate, experts agree that there is a real risk, especially if the situation continues as it is. Fonseca notes that "the risk is real, even if its effects will only become apparent in the medium term."
Manufacturers have learned from past crises, such as the pandemic and the war in Ukraine, by taking measures like diversifying suppliers or building up reserves. "They typically maintain enough stock to last for a few weeks or months, but not much longer," adds the director of the Microelectronics Institute in Barcelona. He warns, "If the crisis continues, chip production will decline, leading to shortages and higher prices."