West Asia crisis: A war far from fabs is rattling the chip supply chain

West Asia rarely features in the global semiconductor map, yet the region sits upstream by supplying critical inputs such as helium, bromine, sulphur and other chemicals that underpin chip manufacturing, even though it does not host fabs or packaging plants.

“The global semiconductor narrative has long been anchored around a handful of countries”

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As the US–Israel–Iran conflict enters its third week, these hidden dependencies are surfacing as a risk.

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Helium is the most immediate vulnerability: Qatar supplies over one-third, and a prolonged outage would impact fab operations.

Bromine is used in semiconductor packaging and specialised CVD processes, with supply heavily concentrated in the Dead Sea region (Israel and Jordan) alongside the US.

About 40% of global sulphur exports originate from West Asia, and much moves through the Strait of Hormuz; the concern here is logistics disruptions and price volatility, particularly for ultra-high-purity grades used in advanced manufacturing.

Beyond materials, the conflict's most immediate impact is through energy.

Semiconductor fabs are among the most energy-intensive assets in the world, and rising crude prices drive up operating costs across electricity, industrial gases, freight and insurance premiums.

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'Rising crude oil impacts the semiconductor supply chain by driving up energy and logistics costs,' said Manish Rawat.

He notes that energy-intensive processes such as oxidation, CVD and etching see higher electricity expenses, while transportation costs rise with fuel surcharges.

Crude spikes have already raised energy costs for fabs by 20% to 30% and increased petrochemical input costs by 8% to 10%, according to Jain, and if those elevated prices persist, chip manufacturing costs are likely to rise with a pass-through to customers.

The cost pressures extend to high-temperature metals used in sputtering, conductors and high-reliability packaging, where disruptions to shipping routes, insurance costs and energy prices can push up procurement costs and lead times.

Modelling by Fab Economics and Global Semiconductor Policy Council shows how the impact could escalate if the conflict persists.

“The global semiconductor narrative has long been anchored around a handful of countries”

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A four-week disruption could wipe out as much as $500 billion in market capitalisation across the top 10 players of logic, memory and analogue semiconductor ecosystems;

at six weeks, they could begin missing revenue schedules, and at ten weeks, the industry could see a phased chip shortage that spreads across end markets.

Nvidia’s claimed $1 trillion AI GPU sales could be affected if the conflict lasts beyond eight weeks, Faruqui says, and beyond ten weeks it could trigger a major shortage in sectors such as automotive.

Not all chips will be affected equally: mature, high-volume commodity chips like power-management ICs and DRAM/NAND, and packaging-intensive chips relying on advanced stacking, are especially vulnerable due to cost and logistics disruptions.

For India, the crisis acts as a stress test for a still-developing semiconductor ecosystem.

Rising crude and petrochemical costs are pressuring near-completion fabs and advanced packaging units, inflating capex and operating expenditure while extending lead times for critical materials, according to Rawat.

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India's heavy reliance on imported raw materials amplifies exposure, reinforcing the need to accelerate domestic capability in areas such as high-purity electronic chemicals (including semiconductor-grade sulphuric acid), industrial gas infrastructure and recycling.

The article notes opportunities to expand domestic production of packaging materials like epoxies, polyimides and speciality polymers to strengthen resilience, as India seeks to compete with Southeast Asia and reduce vulnerability in supply chains.