Middle East Instability Threatens Chip Materials and AI Data Centers

Select Language:

Prolonged instability in the Middle East could lead to disruptions in the supply of essential materials used in chip manufacturing. Rising energy prices may also slow the development of AI data centers and reduce demand for semiconductors, according to industry experts. Increasing concern is growing over how ongoing conflicts might impact the semiconductor industry.

The unrest could interfere with chip manufacturers’ operations, particularly in sourcing helium and bromine. As noted by a memory market analyst, global chip producers may need to rethink their procurement strategies for these critical resources.

Data from the US Geological Survey indicates that Qatar provides over one-third of the world’s helium. This element is vital for cooling during chip production and plays a crucial role in photolithography, a process used to print complex circuits onto chips. Currently, no suitable substitutes are available.

In addition to production challenges, the closure of the Strait of Hormuz—a strategic waterway—could hinder the transportation of helium from the Middle East. If the strait remains shut for a lengthy period, more than 25% of the global helium supply could become inaccessible, according to a helium industry expert.

Bromine, another key material in semiconductor manufacturing, is also impacted by the conflict. Approximately two-thirds of the world’s bromine supply originates from Israel and Jordan. Disruptions in this area could further threaten the industry’s supply chains.

Market watchers are also concerned that escalating energy costs resulting from the conflict could make building AI data centers more difficult. These data centers use three to five times more electricity than regular data centers, as explained by a stock analyst. With heavy dependence on crude oil, rising oil prices could significantly increase operating costs for AI infrastructure. This, in turn, could raise the overall expense of managing large-scale data centers and slow down broader AI deployment.

Electricity represents about half of a data center’s operational costs, with around half of that energy consumed by memory systems, according to a research director at a market analysis firm. If the cost of memory components rises due to supply chain issues and energy costs continue to climb, data center operators might scale back their AI investments and reduce overall semiconductor demand.