The Strait That Doesn’t Make Chips — But Can Stop Them
A Semiconductor Supply Chain Insight
The Strait of Hormuz is rarely discussed in the context of semiconductors, yet it represents one of the most consequential chokepoints in the industry’s global supply chain. While leading-edge fabrication is concentrated in regions such as Taiwan, South Korea, the United States, and Europe, and supported by equipment ecosystems spanning the Netherlands, Japan, and California, the upstream dependencies that sustain semiconductor manufacturing are far more geographically diffuse.
At the core of this dependency lies a simple but often overlooked reality: semiconductor manufacturing is fundamentally a chemical industry layered atop precision engineering. Nearly every gas, solvent, and process chemical used in fabrication is derived, directly or indirectly, from hydrocarbons, a significant portion of which flows through the Strait of Hormuz.
Approximately 20–25 percent of globally traded oil and liquefied natural gas transits this narrow waterway. While fabs do not consume crude oil directly, they depend on a multi-stage value chain in which hydrocarbons are refined into petrochemicals, transformed into specialty chemicals, and ultimately processed into ultra-high-purity gases required for chip fabrication. This structure creates a form of systemic dependency rather than direct reliance. Disruption at the level of oil and gas supply propagates through petrochemical production, constrains specialty gas manufacturing, and ultimately impacts semiconductor output. This indirect exposure is particularly challenging to mitigate because it is embedded across multiple tiers of the supply chain.
Among the most critical materials affected is helium, a gas that plays an essential but often underappreciated role in semiconductor manufacturing. The Middle East, led by Qatar, accounts for approximately 25–30 percent of global helium supply. Helium is indispensable for cooling extreme ultraviolet (EUV) lithography systems, enabling leak detection in ultra-high vacuum environments, and serving as a carrier gas in precision deposition and etching processes. Its unique physical properties make substitution extremely difficult, and its supply chain is inherently constrained. As a result, any disruption in Middle Eastern exports quickly translates into operational risk for advanced fabs.
Hydrogen and nitrogen, while more commoditized, form the backbone of semiconductor processing environments. Their production is energy-intensive and closely tied to natural gas markets, of which the Middle East represents a significant share, estimated at roughly 15–25 percent of global influence. Hydrogen is widely used in annealing and reduction processes, while nitrogen provides inert atmospheres critical for wafer handling and contamination control. Although these gases are typically produced closer to end-use locations, their cost structures and availability remain sensitive to global energy price fluctuations, which would be immediately affected by a closure of the Strait.
Fluorinated gases such as nitrogen trifluoride (NF₃), carbon tetrafluoride (CF₄), and hexafluoroethane (C₂F₆) represent another critical category with meaningful exposure to Middle Eastern feedstocks. These gases, which are essential for plasma etching and chamber cleaning, rely on fluorine chemistry and hydrocarbon-derived intermediates. Approximately 20–30 percent of their upstream inputs are linked to petrochemical supply chains influenced by Gulf exports. Given that these gases are integral to pattern transfer and tool maintenance, disruptions would directly impact fab throughput and yield.
Noble gases such as neon, argon, and krypton present a different type of risk. While the Middle East contributes minimally to their primary production, the region plays an important role in global logistics and energy markets that underpin their extraction and distribution. Neon, in particular, is critical for excimer lasers used in lithography. Supply chains for these gases have already demonstrated fragility in recent years, and a disruption in shipping routes through the Strait would exacerbate existing vulnerabilities, even if production remains geographically diversified.
Perhaps the most underestimated exposure lies in petrochemical-based wet chemicals, including solvents, photoresist precursors, and cleaning agents such as isopropyl alcohol. These materials are consumed in large volumes throughout wafer fabrication, supporting cleaning, lithography, and planarization processes. An estimated 30–40 percent of their feedstocks are derived from oil refining streams linked to the Middle East. While less visible than specialty gases, these chemicals are equally critical; without them, wafers cannot progress through the fabrication cycle.
The impact of a Strait closure would likely unfold in distinct phases. In the immediate term, shipping disruptions would drive up freight costs and insurance premiums, while energy prices would spike sharply. Semiconductor manufacturers would initially rely on existing inventories, but these buffers are typically limited due to the continuous-flow nature of gas supply systems. Within weeks, constraints would begin to emerge in helium and specialty gas availability, accompanied by price volatility across chemical inputs. Fabs would respond by prioritizing high-margin and strategically important products, such as advanced logic and AI chips, while deprioritizing lower-margin segments. Over a longer horizon, sustained disruption would lead to broader production slowdowns, particularly affecting automotive and consumer electronics supply chains, which are more sensitive to volume shortages.
This pattern is consistent with prior supply chain shocks in the semiconductor industry, where seemingly peripheral materials have triggered outsized disruptions. The neon shortages linked to geopolitical tensions in Eastern Europe, export controls on photoresists between Japan and South Korea, and recurring helium supply constraints have all demonstrated that advanced semiconductor manufacturing remains highly sensitive to upstream material dependencies. The Strait of Hormuz represents a convergence of these risks at a global scale, combining energy, feedstock, and logistics vulnerabilities into a single point of failure.
In response, the industry has begun to implement mitigation strategies aimed at reducing exposure. These include the deployment of on-site gas generation systems at major fabs, increased localization of supply through partnerships with industrial gas companies, and the development of recycling capabilities for critical materials such as helium and fluorinated gases. Companies such as Linde and Air Liquide have invested heavily in building infrastructure adjacent to fabrication facilities, enabling more resilient and responsive supply chains. Additionally, strategic stockpiling and supplier diversification have become more prominent, particularly among leading-edge manufacturers.
However, these measures address symptoms rather than root causes. The fundamental dependency on hydrocarbons as the basis of semiconductor chemistry remains unchanged. As a result, the industry continues to rely on a global energy system that is inherently exposed to geopolitical risk. The Strait of Hormuz, in this context, serves as a reminder that even the most advanced technological ecosystems are ultimately grounded in physical supply chains shaped by geography.
The broader implication is that semiconductor resilience cannot be fully understood through the lens of fabs and equipment alone. It must also account for the upstream chemical and energy systems that enable production. In this respect, the Strait of Hormuz is not merely an energy chokepoint; it is a strategic node in the semiconductor value chain. Its disruption would not halt innovation, but it could significantly constrain the industry’s ability to manufacture at scale, underscoring the critical importance of materials security in the next phase of semiconductor globalization.
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