Israel-Hamas war could endanger advanced chip supply

The on-going war between Israel and Hamas is further threatening the global semiconductor supply chain, according to an industry analyst.

In recent years, the industry has been vulnerable to supply chain disruptions beginning with the COVID-19 pandemic — causing widespread lockdowns and severe delays to global shipping and logistics.

Since then, geopolitical unrest has weakened the industry due to the ongoing ‘chip wars’ between the US and China.

According to Anirudh Munder, assistant manager of industrials at US business consultant The Smart Cube, as Israel is among the few advanced-chip-producing countries outside of East Asia, the war may further complicate the already vulnerable supply chain.

“Israel is home to companies spanning the semiconductor ecosystem and plays a crucial role in the global chip market,” he observed.

“For example, Intel’s design and production facilities are located there with almost 13,000 Israeli employees.”

Munder warned that the war could cause labour shortages at these companies, subsequently disrupting operations.

He added that the war threatens to impact logistics with a sharp decline in the production and export of semiconductor chips.

Coupled with the continuing US-China chip dispute, semiconductor chip prices are expected to rise “rapidly” in the next few months due to a supply shortage, with major chip vendors, such as Intel and Qualcomm, planning to increase prices by the end of the year.

To prevent further disruptions to the industry, countries have started funding their domestic semiconductor markets, according to Munder.  Japan is investing $13.6 billion towards domestic artificial intelligence chip production. Meanwhile, UK-based chipmaker Pragmatic has received sizable funding to expand its manufacturing facilities and boost UK semiconductor production.

The UK finally revealed its semiconductor strategy in May last year, which relies heavily on forging alliances with Japan-based fabs.