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Russia’s invasion of Ukraine could worsen chip shortage

Russia’s invasion of Ukraine is having a significant impact on the tech world. Ingas and Cryoin are two Ukrainian companies that produce half the world’s supply of neon, a key ingredient for making chips. These manufacturers have halted their operations as Russia escalates its attacks on the country, which could have negative effects on the global chip supply.

The two Ukrainian companies produce 45% to 54% of the world’s semiconductor-grade neon that is critical for the lasers used to make chips. According to a report from Reuters, the halt in neon production could worsen the global chip shortage.

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According to Angelo Zino, an analyst at research company CFRA, if the conflict drags on, global chip production could take a hit as estimates vary widely about the amount of neon stocks chipmakers keep on hand. “If stockpiles are depleted by April and chipmakers don’t have orders locked up in other regions of the world, it likely means further constraints for the broader supply chain and inability to manufacture the end product for many key customers,” he said.

Cryoin is said to be unable to fill orders for 13,000 cubic meters of neon this month unless the violence stops. While the company could weather at least three months with the plant closed, if equipment is damaged, there would be a bigger drag on company finances, which would make it harder to restart operations quickly. The manufacturer is also not sure if it would be able to access additional raw materials for making neon.

Richard Barnett, chief marketing officer of Supplyframe, said other companies around the world could initiate neon production, but it would take nine months to two years to ramp up. So we are looking at a worsening global chip shortage for the near future if the war doesn’t come to an end soon.

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