Ukraine Neon Factory Stops... Semiconductor Supply Crisis for Finished Cars

Global Industrial Crisis from Ukraine
Neon Gas 70%·Krypton 40%
Global Rare Gas Supply Share
Production Halt Deepens 'Supply Bottleneck'
Trade with Russia Virtually Blocked
Chain Impact on Parts Industry Inevitable
Prolonged Crisis May Disrupt Electronics and Phone Production

On the 3rd (local time), black smoke is rising from an oil depot in Chernihiv, northern Ukraine, following a bombing by Russian forces. On the 8th day of the invasion, despite Ukraine's strong resistance, Russian troops are advancing toward the capital Kyiv (Kiev) and are concentrating their attacks on the second-largest city, Kharkiv (Kharkov).

[Asia Economy Reporters Choi Dae-yeol and Lee Hyun-woo] The refining plants in Ukraine, a major supplier of rare gases such as neon and krypton essential for semiconductor production, have completely halted production due to Russia's invasion. The global automotive industry, already struggling with semiconductor supply issues, is now facing an emergency.

In particular, domestic auto parts manufacturers, whose export routes to Russia have been blocked due to the international community's stringent sanctions, are in a state of extreme emergency. It is reported that some companies are facing difficulties in paying salaries and parts payments as all shipments of export parts have been canceled. There are concerns that if the war prolongs, it could affect not only the automotive industry but also electronics and smartphone manufacturers.

Ukraine Refining Plants Halt Operations... Raw Material Supply Shortage Deepens

According to CNN on the 3rd (local time), Tim Uy, an economist at Moody's Analytics, said, "The global semiconductor supply shortage is likely to worsen due to the Russia-Ukraine crisis," adding, "If a ceasefire agreement is not reached within a few months and the war prolongs, it will pose a significant risk to automobile, electronics, and smartphone manufacturers."

This is because the refining plants in Ukraine, a major rare gas producer supplying 70% of the world's neon gas and 40% of krypton, have completely stopped production, raising concerns about supply. In particular, all factories in the southern city of Odesa, where Ukraine's largest rare gas refiner Cryoin's headquarters and main plants are concentrated, have halted production since the 24th of last month due to Russian offensives.

Buildings in Kharkiv, Ukraine, hit by shelling

Amid the already disrupted raw material supply chains due to the war, the supply contraction is expected to worsen further. Over the past two years, vehicle semiconductor production and other key parts have been disrupted due to COVID-19, and complete vehicle production remains unstable. Recently, the supply chain bottleneck that had somewhat improved is likely to deteriorate again. A representative from the complete vehicle industry said, "The semiconductor supply shortage had somewhat eased compared to the second half of last year," adding, "We need to observe a bit more to see how it will be affected going forward."

Japan's Nihon Keizai Shimbun, citing Morgan Stanley's estimates, predicted, "Taiwan's major semiconductor companies have about six months' worth of neon gas inventory, but if the war prolongs, shortages will worsen." It also expressed concern, stating, "Palladium, used as a catalyst in automobile exhaust systems, accounts for 43% of the global market from Russia and Ukraine, and most of it is exported through Odesa, raising supply concerns."

Direct Blow to Auto Parts Suppliers... "Concerns Over Chain Bankruptcies"

Major automakers, facing difficulties procuring parts from Ukraine, are adjusting factory operation schedules, and with trade with Russia virtually blocked due to international sanctions and local logistics issues, a chain reaction of impacts across the automotive and parts industries is inevitable. According to the industry, major automakers worldwide have stopped factory operations or reduced production plans due to this situation. Hyundai Motor Company reportedly reduced its production plan at its Russian plant by about half this month. The company has decided to halt factory operations until the 5th due to parts supply disruptions. Toyota also plans to stop its Russian plant from mid-month.

Professor Kim Pil-su of Daelim University said, "About 40% of exports to Russia are automobiles and parts, so the impact is inevitable," adding, "Especially parts suppliers could face bankruptcy if payment is delayed for 2 to 3 months, so the government should step in to support them."

In fact, small and medium-sized suppliers exporting parts locally are facing difficulties due to canceled parts shipments and halted payment settlements. About 15 parts suppliers, including Hyundai Motor Group affiliates such as Hyundai Mobis and Hyundai Wia, have entered the Russian market. Most of these companies entered the local market alongside Hyundai Motor when it built a plant in Saint Petersburg in 2011, supplying body and electronic parts near the factory.

This content was produced with the assistance of AI translation services.