The Iran War Could Trigger a Global Microchip Crunch

The production of microchips may be negatively affected by the ongoing conflict in the Middle East, due to supply chain disruptions, particularly of helium, which is key to semiconductor manufacturing. Some unexpected industries are being hit hard by the Iran war, as several supply chains are being severely disrupted, not just oil and gas. This could lead to severe delays in the production of microchips unless agreements can be reached between key powers to stop conflict and free up key trade routes.

Helium is an essential component of semiconductor manufacturing, used in the chip fabrication process. Helium helps maintain optimal conditions during production. In the lithography process, helium is used to establish a stable vacuum environment and to ensure precise alignment and exposure of photomasks. It also helps to cool semiconductor materials, thereby reducing thermal stress that could negatively affect the functionality of the chips. Unlike other industrial gases, there is no effective substitute for helium for chip production.

As a noble gas, helium is chemically inert, which helps to minimize the risk of contamination during production processes. In addition, its low thermal conductivity supports precise temperature control. Further, helium is lightweight and has a small atomic size, allowing for its use in creating ultra-clean environments. The use of helium means that manufacturers can achieve stricter tolerances and greater accuracy in circuit designs.

In South Korea, a major producer of semiconductors, several companies rely heavily on Middle Eastern states for their helium imports. For example, in 2025, Jukan imported around 64 percent of its helium supply from Qatar. Together, South Korea and Taiwan account for around 36 percent of global semiconductor production.

However, it is not just Japan that relies on Qatar for its helium, as QatarEnergy’s massive Ras Laffan facility provides almost one-third of the global helium supply. The Ras Laffan plant has now been offline for over a week, after Iranian drone strikes halted operations. The facility’s closure led to an immediate 30 percent cut to the world’s helium supply.

Qatar and several other countries in the Middle East rely heavily on the Strait of Hormuz, a key trade corridor connecting the Persian Gulf with the Gulf of Oman and the Arabian Sea, for transporting goods. The strait is considered a chokepoint, as there are few alternative options for energy transportation, beyond some limited pipeline networks in the region. The almost complete closure of the Strait has not only led to the biggest oil supply disruption in history, but has also significantly disrupted various supply chains between Europe and Asia.

The largest global producer of helium is the United States, meaning that the countries that can no longer receive the noble gas from Middle Eastern suppliers may be able to look to the U.S. for replacement supplies. However, the U.S. is unlikely to be able to respond to the spike in demand at such a fast pace. 

Russia is also a major producer of helium, but the widespread sanctions introduced on Moscow following the 2022 invasion of Ukraine have made investors wary of establishing operations in the Russian market or importing goods from Russia.

Now, South Korean companies, such as Samsung, SK hynix, and TSMC, fear that the current disruptions may force them to decrease output until they can find alternative helium suppliers. Meanwhile, the global demand for semiconductors is growing year on year in response to the rapid adoption of advanced technologies, such as artificial intelligence. Some companies worry that they may not be able to fulfil orders on time, and they will be forced to produce less profitable chips to fulfil their orders. However, SK Hynix recently stated that it had diversified its helium procurement and secured adequate inventory for the short-term.

At present, it is not clear how long the Iran war, and broader Middle East conflict, will last, particularly as President Trump has said that the U.S. intends to continue with operations in Iran until it can “achieve ultimate victory”. However, if the war continues for several months, the helium supply will continue to be disrupted, which is likely to drive up the price of semiconductors in the mid-term.

The disruption of Qatar’s helium supply shines a light on the vulnerabilities of the semiconductor supply chain, as the major microchip-producing countries depend heavily on Qatar for their helium supply. The Middle East conflict could, therefore, force producers to look to alternative helium suppliers for both short- and long-term supply chain diversification. It could also drive companies to strengthen regional supply chains to mitigate the risk of future geopolitical disruptions.

By Felicity Bradstock for Oilprice.com