How is the War in Ukraine Affecting the Global Chip Shortage?

How is the War in Ukraine Affecting the Global Chip Shortage?

The world’s supply chains are highly-interconnected and fragile beasts. They are prone to disruptions from crises and conflicts no matter where they strike in the world. The best example of this problem? When the initial lockdowns in China began at the start of the pandemic. What followed was the 2020-2022 global semiconductor shortage. 

Fires, storms, to ships running aground in Egypt exacerbated the original shortage from China’s lockdowns and strengthened the longevity. Market demands, to rising needs for smart appliances for work from home business models, all contributed to the supply chain disruptions over the last couple of years. If these standalone events contributed to massive setbacks in supply chain stabilization, what would a war do?

For many of us, the impacts are already visible. Gas prices, which were rising before the war, jumped due to Russia’s position as a top exporter of oil. Higher gas prices mean a lot more than just bigger numbers at gas stations too. Gas and oil play a big part in the production of electrical power. Rising electricity prices also cut into manufacturer profits. That price difference is then placed on the buyers to make up the difference.

The supply chain is still fragile enough that production halts in Ukraine and sanctions toward Russia can lead to a repeat of 2020 to 2021’s worst months. Semiconductor manufacturers have bounced back faster than expected in the face of other disruptions, so it’s not too late to hope for the same in this case. A SourceToday article reports that the latest rounds of sanctions, as of  March 2nd, might impact Russia more in contrast to the world as a whole.

Russia, according to the Semiconductor Industry Association (SIA) is not a lead producer or buyer of consumer electronics or chips. Accounting for less than 0.1% of total global semiconductor purchasing, the SIA believes the risks of a continued and harmful shortage are minimal. The only unknown variable is China, considering China is on friendlier terms with Russia and has not imposed sanctions.

Robert Marie, president of Semiconductor Advisors, doubts Russia could get any significant aid from Chinese chip manufacturers. Too busy feeding the demand at home and filling backlogs it is unlikely they will change course and plug sanction-driven supply gaps.

For now, industry experts are cautiously hopeful that the electronics sector, still struggling to meet pandemic-caused demands, won’t suffer. With how fragile the global supply chain is currently, it is best to keep a close eye on it. If the previous years taught us anything, it’s to always prepare for the unexpected. 

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