Geopolitical tensions have risen to new levels, disrupting the global trade supply chain, and in the midst of it, the AI frenzy sees a major risk, with suppliers getting cut off from economic resources.
Asian Suppliers Are Heavily Dependent On Energy Imports From the Middle East, Creating Huge Long-Term Risks
When we talk about the AI frenzy, several risks need to be addressed to ensure the pace doesn't slow down, and one of the major ones is supply chain disruptions. We have already seen a glimpse of it with tariffs under the current US administration, and how difficult they are to navigate for suppliers like TSMC, Samsung, and others. However, amid the ongoing conflict in the Middle East, projections suggest that Korean and Taiwanese suppliers will find it difficult to meet global demand if tensions persist for several months, potentially slowing the pace of infrastructure buildout.
Asian nations are heavily dependent on energy imports from global suppliers, and right now, the Strait of Hormuz is a major chokepoint that is starting to influence shipping routes and trade flows. And, specifically, for companies like TSMC that account for a huge portion of Taiwan's energy demands, the lack of access to resource suppliers such as Qatar for LNG, or other nations within the GCC for petroleum products, it without a doubt that TSMC will find it difficult to sustain operations, provided that the geopolitical tensions extend to several weeks.
The above infographics clearly show us how three of the world's largest semiconductor nations, South Korea, Taiwan, and Japan, are heavily dependent on energy imports from global markets. And when we talk about fallback mechanisms for Asian countries, there are limited options, which is why their risk is far greater than that of other nations in the AI supply chain.
Yet again, semiconductors aren't the only essential influenced by global tensions; rather, there is also a risk for memory suppliers in South Korea. Based on a Hankyung report, the most "immediate" risk firms like Samsung and SK hynix face is their dependence on helium imports from Qatar, which is used to cool silicon wafers during the high-energy stages of production. Given that DRAM suppliers are currently focused on EUV lithography, helium is also essential for cooling sensitive components.
Suppliers often factor in geopolitical tensions into the inventory accumulation process, which is why the effects wouldn't be as significant in the short term; however, if the conflict lasts several weeks or even months, there could be major problems. The usual countermeasures expected from the likes of TSMC, Samsung, and SK hynix include optimizing production processes, limiting output, or raising prices to account for higher shipping costs. In all these measures, fabless customers would need to change their pricing/supply plans, creating a 'domino' effect within the AI supply chain.
The importance of domestic manufacturing has been strongly emphasized in the past few years, especially for the American chip industry, as it lacks resilience against geopolitical events. For an industry that intends to scale up to "trillions of dollars", it is important to realize that without consistent access to supply lines, there's no guarantee the hyperscaler buildout will continue as expected.
About the author: Muhammad Zuhair is a hardware and technology reporter for Wccftech, specializing in the semiconductor industry and the complex interplay between technology, manufacturing, and geopolitics. His coverage focuses on the corporate strategies and technological roadmaps of industry giants like TSMC, NVIDIA, Samsung, and Intel. Zuhair's expertise lies in deconstructing complex topics such as fabrication nodes (e.g., 2nm process), the economic impact of policies like the CHIPS Act, and the strategic development of AI infrastructure from NVIDIA, AMD and Intel.
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