the semiconductors that make everything

The Strait of Hormuz has been blocked for weeks. Some 1,100 ships, including 250 oil tankers, remain stuck waiting. A barrel of oil already exceeds 100 dollars. And in all that energy chaos there is an unexpected victim: the chips that power almost all the electronic devices we use.

Why is it important. Taiwan manufactures more than 90% of the world’s advanced semiconductors through TSMC. South Korea, with Samsung and SK Hynix, controls 70% of the DRAM memory chip market and 80% of high bandwidth memory (HBM)which AI needs to function.

Both countries import almost all of their energy. And a good part of that energy came from the Persian Gulf.

Between the lines. Taiwan imports around 97% of its energyand before the conflict a third of its gas came from Qatar. Iranian drones have hit the Ras Laffan facilities (the large Qatari LNG export complex) and QatarEnergy has declared force majeure. The last shipments prior to the conflict arrived on the island in mid-March; Since then, supply has been a race against time.

South Korea is not in a better position either: 70% of its crude oil came from the Middle East, and when war broke out The Korean stock market lost 18% in four sessions and $500 billion in capitalization.

The context. The war has not created this problem, but it has exposed it. South Korea has spent decades building the most powerful chip industry in the world on a fragile energy base, with 36.6% of its primary energy tied to oil and 19.7% to natural gas, according to the IEA.

Now the largest chip manufacturing complex on the planet is being built in Yongin, scheduled to partially open in 2027, and that complex will only need 16 gigawatts of energy, the equivalent of 17% of national peak demand.

And all this in an economy that continues to depend on the Gulf.

Taiwan has a very similar vulnerability: its LNG reserves they don’t make it to eleven daysmore than 50% of its electricity is generated by burning gas, and when that gas is scarce the alternative is to burn coal. More expensive and dirtier.

The big question. Demand for memory chips has reached all-time highs due to boom of AI, and the big contracts were already sold out before Hormuz closed. The shortage is not yet physical, but the price of LNG in Asia has more than doubled since the conflict broke out.

Normally this extra cost is absorbed first by the chip manufacturer, then the device manufacturer and, in the end, it reaches the consumer’s bill. It’s a matter of time.

Yes, but. Taiwan assures that there will be no rationing: it has obtained alternative supplies from the US and Australia until April, and Japan, which buys more LNG than it consumes and resells the excess in the region, acts as a cushion.

So the real risk is that the blockade lasts not days, but months.

In Xataka | Chinese memory manufacturers are no longer secondary players: they are the lifeline of the consumer market

Featured image | Xataka