ukraine:  Conflict To Worsen Chip Shortage, Up Auto Costs | Chennai News - Times of India

ukraine: Conflict To Worsen Chip Shortage, Up Auto Costs | India Business News – Times of India


CHENNAI: The ongoing crisis in Ukraine could further increase the semiconductor shortage that the auto industry is currently battling. According to auto consultants and experts, both Russia and Ukraine supply raw materials used in semiconductor chip manufacturing and, with the current geopolitical situation there, that sourcing link would be seriously jeopardised. The result: Longer waits for vehicles and price hikes as original equipment manufacturers (OEMs) look for alternative sourcing arrangements.
ICRA VP & sector head Rohan Kanwar Gupta said, “The impact (of the war) would emanate from the issues around semiconductor chip production, as Russia and Ukraine are both suppliers of components used in their manufacturing. Ukraine is an important source and supplier of raw materials, such as semiconductor-grade neon used in its manufacturing, and Russia is a key source of palladium used in memory and sensor chips. Thus, A long drawn out war could impact chip supply and constrain production levels across segments,” he added.
Just how important as sourcing hubs are Russia and Ukraine? Crisil Research director Hemal Thakkar said, “Russia is probably the largest producer of palladium (over 40% of global mine production), which is essential for memory and sensor chips along with several other rare-earth metals. Ukraine is a leading producer and exporter of neon gas that is used for several processes in the manufacturing of semiconductors like etching circuit designs into silicon wafers to create chips.” The immediate hit will be for the US because of the supply dependence.
“Ukraine supplies a large part of the US’s semiconductor-grade neon gas, which is integral in the chip-making process, while Russia supplies about a third of the US’s palladium supply, a rare metal that can be used to create semiconductors,” said Thakkar. China is the next largest supplier for neon gas. Nor would the pinch be in petrol and diesel vehicles alone. JATO Dynamics president Ravi Bhatia said, “The automotive sector in some parts of the world is hugely reliant on Ukraine-provided rare gases like neon, krypton and xenon .”


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