The cities of Odessa and Mariupol play a significant role in the global semiconductor industry

The cities of Odessa and Mariupol play a significant role in the global semiconductor industry. The plants “Krioin” in Mariupol and “Ingas” in Odessa produce neon, which is used in the lithographic process for semiconductor devices manufacturing. 

Ukraine used to provide more than half of the world’s neon supply to the largest manufacturers of integrated circuits (IC), such as TCMS and Samsung. The main IC consumer is the USA.

Industry representatives say they have a 6-months supply of neon, but it’s an approximate estimate. The IC production had already been hampered due to COVID-19 restrictions. At the same time, IC demand is growing, and the neon shortage has already led to a 9-fold increase in prices in China. China, which controls about half of the total neon production, theoretically could make up for part of the lost production volumes. However this is a very slow process . At the very least, increasing neon’s production will take time. 

Current geopolitical uncertainty makes the situation more complex. The Armed Forces of Ukraine (AFU) continue to supply the southern front with more weapons and troops to prevent the Russian Army from taking over the sea ports and creating a land corridor to Transnistria.

Therefore, there is a vicious circle: the USA, the main consumer of ICs, and its allies intentionally prolong the Ukrainian conflict, by supplying weapons to Ukraine. Due to hostilities, Ukraine has had to interrupt the manufacturing and supply of a component that is required for the production of these very weapons. Consequently, the USA is at risk of  a weapon production crisis, which will affect both Ukraine and the USA itself in the future.