The geopolitical conflict between Russia and Ukraine risks impacting the semiconductor industry, a mainstay for making tech items, home appliances and vehicles. Prolonging the shortage of this component, which began at the end of 2020, will have consequences on the availability and price of smartphones, necessary for the deployment of 5G.
According to the Techcet consultancy, Ukraine is the main producer of neon gas, supplying 90% of this material, which is vital for lasers for the production of chips. While Russia sends 33% of the world’s palladium. This chemical element is used to create emerging memory chips and sensors.
Raúl Parra, an analyst at the consulting firm Digital Policy Law, explains that although an impact is not in sight in the short term, the evolution of the geopolitical tension between the two nations will determine the future of chip production, where an escalation of the conflict and the imposition of severe sanctions on Russia will cause a cut in the supply of materials. “The implications would be an eventual decrease or delay in smartphone shipments, as we already saw in the last months of 2020 and throughout 2021,” Parra commented.
Analysts projected at the beginning of the year that the chip supply chain would achieve a balance towards the second half of this year, to finally normalize in 2023, but the armed conflict between Russia and Ukraine may change these estimates. A new wave of shortages of technological products can raise their price, as happened last year when smartphones and computers rose almost 10%.
“Geopolitical tensions make it more difficult to establish recovery projections, so we have to be attentive to what happens with this issue of Russia and Ukraine and the participation of all international actors and organizations,” says the Digital Policy Law analyst.
The lack of chips and supply of devices still hits the telecommunications companies. In the fourth quarter of this year, Telcel admitted that the shortage of phones around Christmas time impacted its revenue per handset by falling 13.9%. The conflict between Russia and Ukraine could continue to affect this segment of companies.
In the case of 5G, whose deployment has already begun in Mexico, the expert specified that if the supply chain is affected, the sale and adoption of fifth-generation devices would decrease.
The chip shortage that began in late 2020 sparked a debate about the concentration of semiconductor production in a single region: Asia. For this reason, companies and governments worldwide sought to diversify the manufacture of these microcomponents to avoid a new shortage.
But semiconductor manufacturing is complex. A chip takes 12-16 weeks from order to shipment. Currently the delivery of a microcomponent can take between 30 weeks and in some specific cases up to 40 weeks.
“Companies have begun to glimpse alternatives where to obtain these essential materials for the manufacture of chips and technological devices,” explained Parra.
