Korea Warns That Prolonged Middle East Conflict Could Hurt Chip Industry
The widening conflict threatens to choke off shipments of critical materials
- Geopolitical tensions in the Middle East threaten South Korea’s chip industry by disrupting material shipments and raising energy costs.
- Lawmaker Kim Young-bae noted South Korean chip firms source helium from the Middle East and rely on the region for 70% of oil.
- Lawmaker Kim Young-bae is proposing to deploy strategic oil reserves, and authorities are providing refiners access to national oil reserves.
Prolonged geopolitical tensions in the Middle East could disrupt South Korea’s chip industry, a top South Korean politician has warned.
The widening conflict threatens to choke off shipments of critical materials used in semiconductor production, and saddle chip makers with higher energy bills.
“The [South Korean] semiconductor industry expressed concerns that rising oil prices could lead to higher electricity costs domestically, which could ultimately undermine the price competitiveness of semiconductors,” said Kim Young-bae, a lawmaker with the ruling Democratic Party.
South Korea is a chip-making powerhouse, making up a significant portion of global supply and producing almost 75% of the world’s DRAM memory chips, estimates show.
Kim made the comments during a televised briefing after meeting with executives from chipmaking giants Samsung Electronics and SK Hynix, as well as domestic trade associations.
He noted that South Korean semiconductor firms source key materials, such as helium, from the Middle East, and if supply is hindered that could hurt output.
“Logistics and transportation costs are likely to be the biggest issues rising from the situation in the Middle East,” Kim added, noting that South Korea relies on the region for 70% of its oil.
After getting requests from industry insiders, the lawmaker said that he is working on a proposal to deploy the country’s strategic oil reserves as needed in a way tailored for each industry’s needs.
BNP Paribas expects the South Korean government to introduce support measures to mitigate any economic shock from the current situation.