US-Iran War Disrupts Helium Supply, But Chip Industry Remains Resilient

The war in the Middle East has cut off about one-third of the world’s helium supply, an invisible gas that is a critical support for modern technology. However, the semiconductor industry, which is crucial for artificial intelligence (AI) systems, has not been significantly shaken. Chipmakers had already prepared a diverse network of suppliers. This strategy has allowed their factories in various countries to continue operating, supported by long-term contracts, underground helium storage facilities, and on-site inventories. Helium, a byproduct of natural gas production, is essential in advanced semiconductor manufacturing and also plays a role in rocket propulsion and MRI machine cooling. Qatar, which accounts for about 30% of global helium supply, was forced to halt liquefied natural gas (LNG) production early in the conflict following an attack on Ras Laffan, a major industrial zone north of Doha. The disruption to LNG production directly cut helium supplies, and shipments from Qatar were further hampered by the closure of the Strait of Hormuz, a vital energy trade route. As helium supply tightened, industry observers noted that spot prices more than doubled at the start of the war, driven by fears that a shortage would disrupt the semiconductor industry. However, the anticipated pressure did not materialise. Chip manufacturers hold long-term contracts with suppliers of essential gases like helium, nitrogen, and argon, which help maintain production continuity during supply disruptions. For instance, French industrial gas supplier Air Liquide is set to provide high-purity gas to SK Hynix in South Korea, while Samsung Electronics appointed Air Products in April to supply its semiconductor facilities there. Taiwan Semiconductor Manufacturing Co. (TSMC), the world’s largest contract chipmaker supplying companies like Nvidia and Apple, stated it does not expect a significant impact from the supply disruption. In Europe, Germany’s Infineon Technologies reported its production was unaffected as it can source helium from various regions, and STMicroelectronics, a key supplier to Apple, Tesla, and SpaceX, also reported no operational disturbances. According to Andrei Quinn-Barabanov, supply chain industry practice lead at Moody’s, the semiconductor industry’s resilience is largely due to chip companies’ low sensitivity to high helium prices. ‘The main reason for this resilience is that semiconductor companies are almost insensitive to high helium prices. In other words, chip companies have margins that allow them to outbid almost any other gas user to secure adequate supply,’ Quinn-Barabanov said. The chip industry consumes about a quarter of the world’s helium. Quinn-Barabanov also noted that existing storage capacity exceeds the industry’s annual consumption. Linde, the world’s largest industrial gas supplier, stated it is relatively insulated from the latest disruption thanks to its broad supply base and remains focused on meeting existing customer commitments while pursuing new multiyear contracts. Linde operates one of the world’s largest helium storage facilities in Beaumont, Texas, with a capacity of over 3 billion cubic feet, one of only three large-scale helium salt caverns globally, alongside facilities in Germany and Russia. Air Products, a major helium supplier to the electronics, aerospace, and medical imaging sectors, said the use of storage facilities in Beaumont allows it to continue serving clients despite reduced supplies from Qatar. While Qatar remains a key supplier, alternative sources are playing an increasing role in easing market pressure. The United States, the world’s largest helium producer, supports global supply through its extensive storage infrastructure and export capacity. Oxford Economics noted that shipments of rare gases, including helium, have risen sharply in recent months. ‘The US is the world’s largest helium producer and has a significant interest in the stability of chip supplies,’ Quinn-Barabanov said, adding that the industry’s ability to absorb high prices and the US national interest in supporting semiconductor production mean helium supplies would need to tighten far more severely before chip manufacturers face serious disruption. The helium case demonstrates that the technology supply chain depends not only on main components like wafers, lithography equipment, or chip designs, but also on industrial gases that are rarely visible to the public. However, the chip industry appears to have learned from previous supply chain disruptions, with supplier diversification, long-term contracts, and investments in strategic reserves making the sector more resilient to geopolitical turmoil.