The Impact of the Strait of Hormuz Blockade on the Global Semiconductor Supply Chain

The blockade of the Strait of Hormuz is impacting the global semiconductor supply chain across multiple dimensions, from energy and raw materials to chemicals. Asian chip giants such as Taiwan Semiconductor Manufacturing, Samsung Electronics Co., Ltd., and SK Hynix are facing increasing cost pressures and supply risks.

The Strait of Hormuz handles approximately one-fifth of global liquefied natural gas (LNG) shipments. Major chip manufacturing hubs like Taiwan and South Korea are heavily dependent on energy imports from the Middle East. According to Bloomberg ship-tracking data, nearly 40% of Taiwan's LNG in 2025 is sourced from the Middle East, while around 70% of South Korea's crude oil and one-fifth of its LNG imports also transit through the strait. As the blockade persists, the supply of helium, bromine, sulfuric acid, and various chemical solvents essential for chip manufacturing is being disrupted, leading to sustained price pressures.

Currently, major chip manufacturers indicate that the short-term impact is limited, as they have established inventory buffers. However, concerns are escalating. Taiwan Semiconductor Manufacturing's Chief Financial Officer, Wendell Huang, stated in early April that prices for some chemicals and gases may rise due to the Middle East situation, though the full impact is difficult to quantify. Meanwhile, downstream industries such as gaming consoles, low-end smartphones, home appliances, and automobiles are already feeling the pressure, with ripple effects from rising chip prices beginning to spread.

Chip manufacturing hubs are highly dependent on Middle Eastern energy imports. Chip fabrication is an energy-intensive industry; even a one percent increase in electricity prices can raise production costs for chipmakers and their suppliers.

Taiwan Semiconductor Manufacturing is the primary foundry for the world's most advanced chips, providing manufacturing services for companies like Nvidia, AMD, and Apple. Taiwan relies on imports for over 90% of its energy, with LNG being a key source for power generation. Taiwan Semiconductor Manufacturing's CEO, C.C. Wei, expressed concerns about Taiwan's power supply as early as January, stating, "My first worry is Taiwan's electricity. I need sufficient power to expand capacity without constraints." The ASML extreme ultraviolet lithography machines used by Taiwan Semiconductor Manufacturing are particularly power-hungry when producing advanced chips.

South Korea is similarly highly dependent on imported energy, with both Samsung Electronics Co., Ltd. and SK Hynix facing comparable risks. Significant volumes of Middle Eastern crude oil and LNG are shipped to South Korea via the Strait of Hormuz, making the blockade a direct threat to the power and industrial raw material supplies of both nations.

The impact of the energy blockade extends far beyond electricity. According to Roger Sheng, Vice President of Research at tech consultancy Gartner, disruptions in oil and gas transportation can cause "fractures in the extremely long supply chains that include downstream petroleum derivatives."

Helium is one of the most critical shortages. QatarEnergy suspended operations at its Ras Laffan and Mesaieed LNG facilities in early March, disrupting approximately one-third of global helium supply. A full recovery could take up to five years. Helium is indispensable in chip manufacturing, used in circuit printing, etching, and wafer stabilization, with demand being particularly high for memory chips. Samsung Electronics Co., Ltd. and SK Hynix face elevated risks, as South Korea sources about 65% of its helium from Qatar and roughly 30% from the United States.

Furthermore, the supply of high-purity sulfuric acid, used for cleaning wafers and removing photoresist, and high-purity hydrogen bromide gas, used in etching processes, is tightening due to the blockade. Various chemical diluents for lithography processes—including propylene glycol monomethyl ether acetate, propylene glycol monomethyl ether, and ethyl lactate—are also facing supply uncertainties. Their limited shelf life after opening adds to management challenges.

Japanese photoresist manufacturers are significantly affected. Photoresist production heavily relies on naphtha, a petroleum byproduct from the Middle East. Chemical giant Shin-Etsu Chemical has declined to issue an earnings forecast due to supply disruptions. Japanese Prime Minister Sanae Takaichi stated that domestic naphtha supplies could last until next year.

In response to the supply shock, major chip manufacturers and policymakers are generally maintaining a cautious stance. Executives from Taiwan Semiconductor Manufacturing, Samsung Electronics Co., Ltd., SK Hynix, and Micron Technology have indicated that the near-term impact is limited. Inventory buffers established in recent years have bought time for diversifying procurement.

In April, South Korean Presidential Chief of Staff Kang Hoon-sik stated that South Korean chipmakers have stockpiled several months' worth of helium inventories, and maintaining supplies does not pose a major problem. The Bank of Korea also noted that bromine and helium inventories are sufficient to cover several months of demand.

Regarding Taiwan Semiconductor Manufacturing, Wendell Huang noted that the company had already sourced raw materials like helium and hydrogen from multiple regions before the conflict erupted. He expects no near-term impact on material supply from the conflict, though prices for some chemicals and gases may rise, with the extent still difficult to quantify. Chipmakers in South Korea and Japan are procuring helium from the United States and Canada, paying premiums to secure priority supply of high-purity gases. Samsung Electronics Co., Ltd. and SK Hynix have also begun recycling materials like helium.

Supply chain pressures are already spreading downstream. Manufacturers of gaming consoles, low-end smartphones, home appliances, and automobiles are highly sensitive to chip prices. In the event of shortages, these companies may struggle to secure priority in procurement. Nintendo has announced a price increase for its newly launched Switch 2 console, despite the risk of dampening demand.

The impact of the naphtha shortage extends beyond the chip industry. Japanese bathroom manufacturer Toto temporarily halted production of modular bathrooms due to supply issues, and Isuzu Motors' bus division was forced to adjust output.

If the blockade persists, the effects could spread to the AI industry. Gartner's Roger Sheng warned, "This could ultimately dampen AI investment demand, particularly from Middle Eastern financial backers, and cast a shadow over their data center plans."