Despite major chip factories being located far from the conflict zones, the current military hostilities in the Middle East are significantly impacting the global semiconductor industry. European buyers of Asian chips are facing rising costs and extended lead times as military actions involving Iran disrupt key air cargo routes that transit through the region.
Since the outbreak of the conflict on February 28, attacks on shipping and airports have complicated freight planning. According to DSV, global air cargo capacity has decreased by approximately 9% compared to pre-conflict levels. European buyers are currently relying on existing inventory to maintain production, with some companies already reducing their chip purchases from Asia due to reduced available cargo space.
Prior to this, cargo planes on the Asia-Europe routes typically flew over Middle Eastern airspace or refueled at regional hubs. However, recent Iranian attacks on infrastructure, including airports, have placed immense pressure on this route. The reduction in cargo space has not only driven up the transportation costs for chips but has also led to delivery delays across Europe.
Razat Gaurav, CEO of supply chain software firm Kinaxis, noted that some European chip foundries, automotive manufacturers, and contract manufacturers have already experienced semiconductor delivery delays. He added that the inventory held by buyers of these components could last anywhere from a week to several months, depending on the specific company.
Compared to the chip shortages during the COVID-19 pandemic, the situation for companies is currently improved. That shock prompted many supply chains to be strengthened, and more companies built up more substantial inventories.
South Korea's Ministry of Trade, Industry and Energy stated that the country is highly dependent on the Middle East for 14 chip manufacturing-related items, including bromine and testing equipment. Furthermore, approximately 70% of South Korea's oil imports also originate from the region. If oil prices continue to rise, domestic electricity costs could also increase. Another potential vulnerability is naphtha, with 54% of South Korea's naphtha imports passing through the Strait of Hormuz. If the conflict persists, shipping routes could tighten further, potentially driving up logistics costs again.
SK Hynix stated that it has diversified its supply chain and has sufficient helium inventory to mitigate the impact of the conflict in Iran. TSMC and GlobalFoundries both indicated they are closely monitoring the situation. GlobalFoundries also revealed it is in direct communication with partners in the region and has risk mitigation measures in place.
Meanwhile, Asian tech stocks broadly declined on Thursday, influenced by Iran's latest attacks on Qatar's Ras Laffan Industrial City and a surge in oil prices. SK Hynix shares fell 2.23%, Samsung Electronics dropped 1.8%, and Seoul Semiconductor was down 2.53%. In Japan, Advantest shares fell over 4%, and Tokyo Electron was down 1.99%. In Taiwan, TSMC declined 2.1%. In mainland China, MinMax fell 10%, and Zhipu AI (Knowledge Atlas Technology) dropped 8% after an early rally on optimistic expectations.