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Russia-Ukraine war will make the global semiconductor shortage even worse

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The Russian invasion of the Ukraine is going to make the global semiconductor shortage even worse – and at a time when it showed signs of easing after the COVID pandemic.

The war between these neighbouring countries, which supply key raw materials in the semiconductor industry, could set the chip supply shortage back so far, we might not get back to normal levels until 2024.

This has had an obvious impact on a number of industries which rely on semiconductors for their products including electronics companies and car manufacturers.

The Ukraine and Russia play an important role in the semiconductor business and produce materials vital to the supply chain in the advanced chip making process.

Ukraine supplies most of the world’s semiconductor-grade neon gas which is used in chip manufacturing.

After the last Russian incursion into the Ukraine in 2014, the price of neon went up by more than 600 per cent in a matter of days and turned the semiconductor industry on its head.

Since then, manufacturers have tried to source neon from other countries, but the Ukraine remains the main supplier.

Russia is also the major supplier of palladium which is used in many memory and sensor chips.

In fact, Russia accounts for 45 per cent of the global palladium supply.

As a result of this impending conflict, the price of the metal has gone up significantly in recent months.

The result will see the costs of semiconductors skyrocket which will lead to increased production costs and higher prices at retail.

The other issue is the inevitable delay in semiconductors supply with this war disrupting production and delivery.

It has such a wide-reaching effect across so many industries, it could cause a global economic crisis.

Back in December delivery times for chips was six months (25.8 weeks) according to the Susquehanna Financial Group.

With the shortage set to get even worse and trade sanctions and embargoes taking effect in Russia, we’re looking at longer delays than ever before.