Russia-Ukraine War Could Worsen US Chip Shortage

The Russian invasion of Ukraine threatens to adversely affect chip production, exacerbating the already existing shortages of semiconductor chips.

Experts believe that the impact of the war on chip manufacturing will only really kick in in 3 to 6 months.

Russia-Ukraine War Could Worsen US Microchip Shortage

The shortage of chips has long been a problem for small businesses and contributes to disruption of the supply chain. For example, a limited chip supply has caused small businesses to experience delays in purchasing new cars, hampering business operations.

In February of this year, US Commerce Secretary Gina Raimondo warned that there was no “quick fix” to solve the semiconductor shortage. The scarcity of chips, Raimondo warned, is contributing to supply chain disruption, taking its toll on many small businesses and having a ripple effect on the economy.

Conflict in Ukraine could further affect chip shortages

Speaking to Fox Business, Dusin Carmack, research fellow for cybersecurity, intelligence and emerging technologies at the Heritage Foundation, spoke about the effect the war in Ukraine is likely to have on US chip supplies: “Three of the world’s major companies [for neon] are based between Mariupol, which was destroyed by the war, and there are two, I believe, in Odessa.

“It may be three to six months before you see a big impact … but if this is a prolonged war, it will cause problems in the supply chain,” Carmack added.

Ukraine reportedly supplies up to 90% of the neon supplies the United States needs to produce the chips. This goes hand in hand with Russia as a bulk supplier of rare earth metals such as palladium.

Deficits in Palladium

Palladium deficiencies threaten the production of other vital products, including catalysts.

In early 2022, automakers began working together to identify strategies to diversify their sources of needed materials.

Uncertainty in the global supply chain can have a detrimental impact on small businesses in a variety of industries. With the conflict in Ukraine, the chip shortage is poised to become a longer-term problem, with some predicting the shortages could last up to two years. Small business owners would therefore be wise to monitor developments and avoid delaying necessary purchases as the shortfall is likely to get worse.

Image: Depositphotos

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