Chip vendors are forced to buy neon for their production at six to seven times more expensive than a year ago. This is due to the shortage of Russian gas, which the whole world is trying to replace, but so far in vain. Russia intends to occupy 25% of the world market for the production of high-purity neon during 2023.
The Taiwanese company TSMC, the world leader in the microelectronics market, admitted that it was forced to overpay for high-purity neon six to seven times due to the lack of supplies of this gas from Russia and Ukraine, writes Reuters. This gas is an indispensable material used in laser installations for the production of various microcircuits, including central processing units.
TSMC is the largest chip vendor in the world, accounting for over 50% of the global semiconductor manufacturing market in 2022. According to the CEO of the company C.C. Wei, TSMC is forced to incur additional costs for the purchase of neon due to the shutdown of both enterprises in Ukraine for its production, which provided up to half of the world's output of this gas.
We are talking about the factories "Cryoin" in Mariupol and "Ingaz" in Odessa. The head of TSMC associates their temporary inactivity with the events that began on February 24, 2022.
Xi-Xi Wei did not specify which countries became the source of high-purity neon for TSMC and replaced Ukraine in this regard. It may well be China, despite the strained relations between Taiwan and China. Both Ukrainian plants have not been operating since the spring of 2022, and their Chinese competitors immediately tried to seize the vacant niche, not forgetting to raise prices along the way. As a result, during the whole of 2022, world prices for high-purity neon were 20 times higher compared to the prices for January 2022.
TSMC assures that expensive neon should not greatly affect the company's prices, that is, the production of chips at its factories, if it rises in price, then not much. Exactly how the company is going to keep the prices is still unclear, but Xi-Xi Wei hinted that TSMC will try to take the quantity. According to him, while in some areas (computer and smartphone) there is a drop in sales and, as a result, a drop in orders for the production of corresponding CPUs, in the automotive sector, on the contrary, an increase in orders for chips for on-board equipment is recorded.
The shutdown of Cryoin and Ingaz has hurt the semiconductor manufacturing industry, and many companies are currently trying to fill the shortage of neon. So, in January 2023, CNews wrote about a sharp increase in the rate of synthesis of this gas at the plants of the South Korean company THAMES – it not only increased the production of high-purity neon, but also reduced the selling prices for it.
The THAMES initiative was a ray of hope for TSMC and other contract vendors of chips, but after four months they are still forced to overpay for this gas. It is possible that TEMS works primarily in the interests of companies in its country – Samsung, for example, also has factories for the production of microchips, and it is one of the main competitors of TSMC. SK Hynix is also a customer of TEMS, since it owns production facilities for the production of memory chips.
TSMC, in general, does not really want to depend on other countries in terms of supplies of the raw materials it needs. In order not to overpay foreign partners, it is looking for ways to switch to neon synthesized by Taiwanese companies – the process was launched in November 2022, and the company has allocated five years to implement its plans.
Russia also has views on the world market of high-purity neon. Back in the summer of 2022, the Russian authorities talked about plans to ensure the release of 25% of the global volume of this gas during 2023.
This was stated by the head of the Ministry of Industry and Trade Denis Manturov during a meeting of Russian President Vladimir Putin with members of the Russian Government. At the time of publication of the material, the size of the Russian share in the neon market was not known.
