3 weeks ago
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The war in Iran is threatening a small but crucial part of the complex supply chain that helps produce the world’s chips, as the conflict limits access to a large chunk of the world’s helium.
Qatar produces about a third of the world’s helium, a gas that is central to the semiconductor manufacturing process at a moment when chips have become increasingly crucial as the lifeblood behind AI.
But the war with Iran has disrupted Qatari natural gas production and the helium that is extracted alongside it, while also bringing a key shipping corridor to a halt through the Strait of Hormuz.
“You’ve got two problems — you’ve got the problem that you’re not getting output, and the second problem is that you’re getting an interruption in the logistics and the shipping,” said Simon Croom, a professor of supply chain management at the University of San Diego.
“That compounds because so many other products in the supply chain pass through the Middle East, whether it’s the Strait of Hormuz or the Suez Canal,” he added.
The conflict with Iran, which has now dragged on for more than three weeks, has proven particularly disruptive for energy markets.
Following the initial U.S.-Israeli strikes on Iran in late February, Tehran has responded by hitting targets throughout the Middle East, including gas and oil infrastructure. It has also closed the Strait of Hormuz, the waterway that connects the Persian Gulf to the Indian Ocean and carries about a fifth of the world’s oil.
This has sent oil prices surging to more than $100 a barrel at times. But while much attention has focused on reverberations through the oil and gas markets, the same factors are also disrupting the supply of helium.
Helium is extracted alongside natural gas. Iranian strikes have targeted Qatari natural gas plants, with Reuters reporting that the country’s helium exports are poised to fall 14 percent following a recent series of attacks.
It also faces a bottleneck in the Strait of Hormuz, which has been effectively closed since early March, when Iran vowed to attack any vessels that attempted to travel through the corridor.
Helium is a “critical input” for semiconductor manufacturing, the Semiconductor Industry Association noted in a 2023 response to the U.S. Geological Survey about helium supply risk.
“Helium’s unique properties as an inert gas and a high thermal conductor make it ideal for use in functions that require preventing unwanted chemical reactions and ensuring control and precision of wafer temperatures,” it wrote at the time.
The gas can be used to help cool wafers during processes such as etching and deposition, in addition to cooling lithography light sources, explained Hanna Dohmen, a senior research analyst at Georgetown’s Center for Security and Emerging Technology.
Etching, deposition and photolithography are all various steps in the process of creating the intricate patterns that turn the wafers into chips. Helium can also be used for other purposes, such as detecting leaks.
“All of these are critical components or processes to producing those leading edge chips that everybody’s talking about,” Dohmen told The Hill. “And those companies in South Korea and Taiwan and other leading fabs are critical users of helium or high-purity helium.”
Despite growing concerns, Brad Gastwirth, global head of research and market intelligence for the supply chain services firm Circular Technology, suggested the current situation should be “viewed as a yellow flag rather than a red alert.”
“While the current geopolitical situation has introduced volatility into helium markets, the semiconductor and AI infrastructure ecosystem does not appear to face immediate operational disruption,” Gastwirth wrote in a research note last week.
“The presence of long term contracts, inventory buffers, recycling systems, and alternative production regions means the industry can likely absorb short term disruptions,” he added.
He underscored that the length of any disruption will be key in determining the severity of the impact. In the early stages, spot helium prices are expected to rise, and industrial gas suppliers would likely tighten supply.
But if the disruption continues beyond a few weeks, the facilities producing semiconductors could begin to face “operating constraints or cost increases,” Gastwirth noted.
Dohmen similarly suggested that “it appears that the shortage likely hasn’t yet hit as much as people have feared.”
“I think, at the minimum, those impacted fabrication companies are likely exploring alternative suppliers and thinking about how to mitigate any of the disruptions now and also in the future, especially if the war does last longer than just a couple of weeks or even a couple of months,” she added.
But she noted that finding alternative suppliers is not a “plug-and-play kind of solution,” given that chipmakers need helium at a particular level of purity and suppliers have to go through a qualification process.
“A question moving forward might be whether this sort of first disruption is potentially a wake-up call, maybe also for policymakers, or whether it drives more investment into helium production elsewhere or reducing dependencies from one specific supplier,” Dohmen said.
The potential fallout for chip supply chains is not going unnoticed by the Trump administration, which has made AI and competition with China over the technology key priorities.
Jacob Helberg, under secretary of State for economic affairs, on Monday described the events unfolding in the Strait of Hormuz as “a lesson.”
“Iran is deliberately weaponizing a single choke point in the global economy to hold the world hostage through a narrow corridor of water. And the lesson here is not only about oil, it’s about dependency,” he said at a media briefing ahead of the Hill and Valley Forum.
“It’s about what happens when the physical infrastructure of civilization, the choke points, the corridors, the cables, the ports, become the battlefield themselves,” Helberg continued.
“When a regime calculates that the world needs that infrastructure more than it fears the consequences of their aggression, we will not let that calculus to metastasize into the technology and semiconductor supply chains that underpin our entire economy,” he added.
English (US) ·