Asia’s tech sector braces for prolonged and significant disruptions due to the Middle East situation. Analysts have warned of reduced semiconductor production and a slowdown in AI data centre construction, reports SCMP.
The Strait of Hormuz, through which about a quarter of the world’s maritime crude oil trade and 20% of liquefied natural gas (LNG) shipments pass, has effectively been closed following additional blockades by the US.
The price of crude oil has risen above $100, while the spot price of LNG delivered to Northeast Asia has approached $20 per million British thermal units.
Energy costs in the Asia-Pacific region directly affect production, transport, and financing.
South Korea, Taiwan, and Singapore cover 15-35% of their gas needs through supplies from Qatar. Singapore generates about 90% of its electricity using natural gas.
In March, Iranian missiles struck Qatar’s Ras Laffan complex, which accounts for about a third of global supplies. Its repair will take three to five years.
“After the cessation of hostilities, normalising natural gas production will take longer than oil due to infrastructure damage and contract renegotiation timelines,” states a report by research firm BMI.
Helium — The Foundation of Semiconductors
Chip production heavily relies on helium, a by-product of natural gas processing. The material is needed for cooling wafers during chip etching. There is no viable industrial-scale alternative, stated David Pan, director and AI expert at Moody’s.
The analyst emphasised that South Korea is particularly vulnerable due to helium supply disruptions. Last year, 65% of its raw material purchases came from Qatar.
“Orders for graphics processors and high-bandwidth memory have already accumulated for over a year, so two-month supply disruptions will extend beyond this period. The situation will worsen and evolve into a much longer crisis,” warned Pan.
Policies could influence the situation, stated Josh Yu, a researcher at the Epoch AI research institute. According to him, in a severe crisis, chip manufacturing plants will become top-priority industrial clients in South Korea and Taiwan, while limits will be set for other enterprises.
The US government may also intervene in the event of a severe shortage.
Samsung Electronics and SK Hynix have signed long-term helium supply agreements with Germany’s Linde and America’s Air Products. Taiwan’s Minister of Economy stated that the island has received assurances of resource provision from a “major” LNG-producing country.
Yu stressed that AI chips are crucial for the US’s economic and strategic interests, so the government can ensure Taiwan receives the necessary LNG if needed.
Data Centres
Another area affected by the Middle East conflict is data centres. They consume more energy compared to semiconductor wafer production, and the conflict could cause serious issues.
According to Yu, the current rise in energy prices has not yet affected existing data centres, but it could impact planned projects.
“An increase in overall costs by 10-20% due to the energy crisis could end some projects,” the expert emphasised.
The situation threatens regional imbalances and the relocation of capacities from Europe and Asia to the US.
During the ceasefire, Iran will demand shipping companies pay for passage through the Strait of Hormuz in cryptocurrency.
