The conflict in the Middle East is disrupting semiconductor production and data center operations in Asia, impacting energy costs and supply chains.
The ongoing conflict in the Middle East is causing significant upheaval in Asia's technology sector, primarily impacting semiconductor manufacturing and data center developments. Experts are forecasting a decline in semiconductor output and a slowdown in the construction of AI data centers due to these disruptions, as reported by SCMP.
Key maritime routes, particularly the Strait of Hormuz, are facing operational challenges following new U.S. blockades. This strait is crucial, facilitating about 25% of global oil transportation and 20% of liquefied natural gas (LNG) supplies.
As a result, crude oil prices have surged past $100 per barrel, while spot prices for LNG in Northeast Asia have neared $20 per million British thermal units. These rising energy costs are poised to affect production, logistics, and financial aspects across the Asia-Pacific region.
Countries such as South Korea, Taiwan, and Singapore depend significantly on gas imports from Qatar, accounting for 15-35% of their supply, with Singapore relying on natural gas for roughly 90% of its electricity generation.
The situation was exacerbated in March when Iranian missile attacks targeted the Qatari Ras Laffan complex, which is responsible for about a third of global gas supplies. Recovery from this damage is anticipated to take three to five years.
Research firm BMI noted, "Normalizing natural gas production will take longer than oil due to infrastructure damage and contract renegotiations."
Helium Supply Challenges
Helium, a critical component in chip fabrication, is facing supply challenges, significantly impacting chip production. It is essential for cooling during the etching process, and currently, there are no large-scale alternatives. According to David Pan, a director and AI expert at Moody’s, South Korea is particularly at risk, having sourced 65% of its helium from Qatar in the previous year.
Pan warns that due to a backlog of orders for graphics processors and high-bandwidth memory, even a brief disruption could lead to prolonged shortages, stating, "The situation will worsen and evolve into a much longer crisis."
Experts also highlight the potential for government intervention in the event of severe supply shortages, with semiconductor facilities likely prioritized for resources over other industries.
Major firms such as Samsung Electronics and SK Hynix are establishing long-term helium contracts with Linde and Air Products, indicating proactive measures to mitigate risks. Taiwan’s economy minister mentioned that the island has received assurances regarding resource availability from a significant LNG supplier.
Impact on Data Centers
The data center sector, which consumes more energy than semiconductor production, is also facing challenges stemming from the rising energy prices. Currently, existing facilities are managing, but planned developments may be in jeopardy.
Josh Yu, a researcher at the Epoch AI research institute, stated, "An overall cost increase of 10-20% due to the energy crisis could put an end to some projects."
This situation may lead to an imbalance, prompting a potential shift of capacities from Europe and Asia to the U.S. Furthermore, during any ceasefire, it has been noted that Iran might require shipping companies to use cryptocurrency for passage through strategic waterways.
