Published On: Fri, Jun 24th, 2022

Chipmaking under renewed production risks

Dante Deo Chief Executive Officer, Leon Steyn

Dante Deo Chief Executive Officer, Leon Steyn

by MTHULISI SIBANDA
JOHANNESBURG – THE mounting Russia-Ukraine war could have a dire impact on the availability of semiconductors.

This sector already bears the burden of the COVID-19.

The renewed threat on chipmaking is a consequence of the closure of two Ukranian companies- Ingas and Cryoin- which are among the world’s largest manufacturers of neon gas.

They produce around half of the world’s total neon gas, of which 75 percent is used in the production of semiconductors.

Leon Steyn, Chief Executive Officer of Dante Deo, said given the ongoing shortage of chips in the market, this might further impact the availability of critical components, especially in edge computing technologies and industrial laser applications.

This is due to companies giving preference to fast-moving, higher-margin goods production and some parts not being manufactured for the foreseeable future.

“And, just as the supply and demand started to recover and the world managed to start normalising, the war in the Ukraine brought a renewed threat in terms of chipmaking,” Steyn said.

In an exclusive interview with CAJ News Africa, he explained neon gas is a critical component in laser technology.

In order to make computer chips, neon gas is needed to engrave circuits onto wafers to turn them into chips.

“With the Russian invasion, manufacturers were forced to stop operations, taking a huge percentage of the world’s available neon gas manufacturing out of play,” Steyn said.

He said although there is enough gas available to deal with the immediate need, should the war continue for a significant amount of time, there would be insufficient gas manufacturing capability in the world to meet the demand.

“This, in turn, will drive up costs, and given that every single appliance and industrial device have a chip these days, it will fuel further inflationary and price pressures onto goods,” Steyn said.

Besides the impact on consumers, for companies that rely heavily on laptops and tablets to deliver their services to the market, the impact of a chip shortage might result in the unavailability of preferred devices.

“For manufacturers, especially those that have invested in advanced process control and predictive analytics, the impact may even be more significant,” Steyn said.

Given that these organisations rely on technology to produce, the chip shortage may result in production stoppages as a result of equipment failure.

“We are already seeing something like this happening,” Steyn disclosed.

He revealed that recently, the company had to engage with suppliers in order to alleviate significant pressures on industrial equipment needed for operational processors.

“The suppliers, in turn, were forced to divert equipment across the world to meet the need, placing enormous pressure on the logistic systems by moving goods from warehouses that are not close to their end customer.”

Steyn offered some immediate options but all these have significant risks.

The most would be to accept a longer lead time but this is sometimes not ideal, especially when certain parts are required to repair equipment.

Another is sweating assets, which means utilising equipment and devices 30 percent to 50 percent longer than their anticipated operating life.

A third option could be to level up in terms of technology when purchasing devices.

The drive to be connected through the use of smart technology has resulted in just about every implement containing a computer chip.

When COVID-19 hit the world, a rush to buy consumer electronics ensued.

Mostly it was to keep entertained during lockdowns or acquire the necessary technology to help connect employees working from home.

“This placed enormous strain on the chip manufacturing capabilities of the world to meet this demand,” Steyn concluded.

– CAJ News

 

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