The Middle East conflict disrupts the semiconductor supply chain: Beyond helium, these photolithography materials are also affected

Under the conflict between the U.S. and Iran, the procurement and cost pressures of key materials in the semiconductor industry are raising concerns.

According to TheElec, South Korean chip manufacturers are closely monitoring the situation, fearing that supply disruptions could impact the availability of essential raw materials such as helium, diluents, ethanol, and isopropyl alcohol (IPA).

Among these, the risk of helium supply has become apparent. Industry insiders report that the spot price of helium has surged recently, rising over 50%. Semiconductor manufacturers like Samsung Electronics, SK Hynix, and DB HiTek are prioritizing securing sufficient inventory at current market prices, with their procurement departments checking the supply status and price fluctuations of key materials daily to prevent production interruptions. Currently, supply stability has surpassed cost considerations.

Reports indicate that even if peace negotiations are reached, the reconstruction of the Ras Laffan Industrial City may take years, thus supply shortages and price volatility will pose medium- to long-term risks.

Helium plays a crucial role in the semiconductor industry and is a rare inert resource referred to as “the golden gas.” As a byproduct of natural gas (LNG) production, it heavily relies on Qatar, which accounts for about one-third of the global supply. Previously, an attack by Iran on the Ras Laffan Industrial City damaged LNG infrastructure, which could disrupt long-term supply contracts.

As of now, there are no substitutes for helium in the semiconductor manufacturing process. According to MoneyDJ, although TSMC and UMC have achieved a helium recovery rate of 60% to 75%, significantly reducing dependence on imports, about 25% of helium loss per day still needs to be supplemented through imports, and the recovery systems consume a lot of electricity. Additionally, data from the Korea International Trade Association shows that 64.7% of South Korea’s helium imports last year came from Qatar.

▌Not Just Helium Affected

In addition to helium, rising oil prices have also indirectly increased the production costs of semiconductor materials.

Diluents are cleaning materials used in the photolithography process to remove photoresist residues, with the core raw material being propylene oxide (PO). PO is processed into PGME and PGMEA, which are then further processed into diluents for supply. Reports indicate that suppliers including DuPont, Dow, and LG Chem have issued price increase notifications to PGMEA manufacturers, expecting PGMEA prices to rise by 40% to 50%.

As a result of this trend, diluent finished product suppliers including Dongjin Semiconductor, ENF, and Dongyu Fine Chemicals plan to increase the prices of products shipped in April by about 20%.

Moreover, the prices of ethanol and isopropyl alcohol (IPA) are also rising. Reports add that South Korean suppliers have begun issuing price increase notifications this week, with expected increases reaching double-digit percentages. Semiconductor-grade ethanol with a purity greater than 99.99% can be used for wafer cleaning and removing residues after etching; while IPA, with its excellent dissolving ability, can effectively remove contaminants such as metal ions, organic residues, particulates, and photoresist residues from wafer surfaces.

According to OpenSource Securities, the escalation of global geopolitical risks may lead to a repricing of the “supply cutoff” concerns in the external technology dependency sector. The investment logic in semiconductor materials has formed a “dual-driven” model. In the short term, supply chain security anxieties are accelerating downstream manufacturers’ willingness and urgency to adopt domestic solutions, especially regarding “bottleneck” segments. In the long term, capital-level layouts are accelerating comprehensively, and intensive catalysis in the industrial sector will follow. The certainty of expanding domestic advanced processes and advanced memory production will open up growth space for upstream shovel stocks.

(Source: Caixin)