Russia-Ukraine war won't impact semiconductor industry in short-term: Deloitte

The semiconductor industry may not see any major impact of the ongoing military actions between Russia and Ukraine, P.N. Sudarshan, Partner and TMT Industry Leader, Deloitte India, told Business Today.

Russia and Ukraine are both suppliers of components used in semiconductor manufacturing.

“The semiconductor supply chain (excluding certain specific categories like Opto) is largely in Asia and the US, so may not see a major impact in the short run except for the negative sentiment any war naturally fosters. But this strife could impact oil prices, which will potentially trigger a cascading effect and impact supply and demand. A long-duration conflict and a widening of the war could, of course, have far more serious consequences,” Sudarshan said.

Russia is the leading producer of palladium. Palladium is essential for memory and sensor chips. It also produces several other key raw materials for computer chips, including the rare–earth metal, scandium. On the other hand, Ukraine is a leading exporter of neon gas. It is a highly purified gas that is used for the most important process - etching circuit designs into silicon wafers to create chips. However, Sudarshan says the semiconductor supply is largely in Asia and the US.

Navkendar Singh, Research Director at IDC India, told Business Today: “Russia and Ukraine are important in the supply chain of components for semiconductor manufacturing. They produce important gases and rare earth metals, which are used in the lithography.”

Contrary to Sudarshan’s belief, some of the industry experts are expecting the Russia-Ukraine war to stress the semiconductor industry resulting in manufacturing constraints leading to supply shortages and semiconductor price hikes.

Semiconductors, that power everything electronic on earth and also in space, has a complex ecosystem of chip manufacturing. And chip manufacturing is a difficult and complex process. The global semiconductor industry is interdependent, and no nation in the world has managed to master the ecosystem as yet.

The semiconductor industry globally was worth about $440 billion in 2020, as per research firm Statista, and was estimated to grow to about $550 billion in 2021, and is expected to cross $600 billion next year.