Consequences of Middle East war: Global semiconductor production penalized by shortage

Helium is running out due to the blockade of the Strait of Hormuz and Iranian strikes on the Qatari site of Ras Laffan. This is a problem for the semiconductor industry, which needs this gas to produce its components. At the other end of the chain, consumer electronics and cars are at risk of being impacted.

When we talk about the economic consequences of the war in the Middle East, oil and gas take center stage. However, another raw material is at play, and it is strategic: helium. Your smartphone, computer, or even your car all require semiconductors (microchips) to function, and this sector is currently being impacted by the ongoing conflict. To produce these chips, helium is needed, a gaseous element used to cool silicon disks, an essential step in the manufacturing process.

This helium is a by-product of natural gas and is partly produced in Qatar: the emirate normally supplies a third of the global helium. However, the ongoing conflict has disrupted this production. Iranian strikes on the Qatari site of Ras Laffan, the world’s largest liquefied natural gas (LNG) complex, have caused significant damage. Production has been interrupted. It will take between three and five years of work to restore normal operation, according to the Qatari state company QatarEnergy, which cited a force majeure event to justify non-compliance with signed contracts. The production that could be shipped is also affected by the blockade of the Strait of Hormuz. Through this strait, helium shipments transit to Asia, where the world’s largest semiconductor factories are located.

The French group Air Liquide summarized the situation as follows: “Following QatarEnergy’s force majeure declaration concerning LNG production and related products, the sector is currently experiencing a global helium shortage.”

The semiconductor industry is on high alert, especially the Taiwanese giant TSMC, whose main clients are American behemoths Apple and Nvidia, the specialist in graphics cards and artificial intelligence solutions. For now, TSMC has a reassuring stance and emphasizes the helium stocks it has to cope with this shortage.

As a result of this blockade situation, prices are soaring, with increases of at least 40%. It is still too early to measure the impact down the line – the industry is currently running thanks to existing capacities – but if the crisis persists, it will likely lead to production delays for smartphones, computers, game consoles, cars, therefore resulting in price hikes. The medical imaging sector is also affected as it is also a helium consumer.

This shortage situation once again highlights the importance of diversifying sources of supply. Besides Qatar, there are other helium-producing countries: the United States, the world’s leading helium supplier, are likely to benefit from this crisis. Algeria is also well-positioned. As for Russia, it is also a significant player, but European sanctions limit its ability to be a fallback.

Helium production is therefore controlled by countries that can be unreliable. As early as 2023, the American Semiconductor Industry Association had highlighted the fragility of this strategic resource, concentrated in countries with geopolitical risks.