West Asia crisis: A war far from fabs is rattling the chip supply chain

The global semiconductor narrative has long been anchored around a handful of countries. The United States dominates chip design, the Netherlands controls critical lithography equipment, Taiwan leads advanced fabrication, while South Korea, Japan and Malaysia anchor memory, materials and packaging.

What rarely features in this map is West Asia. Yet the region sits quietly upstream, supplying critical inputs such as helium, bromine and energy that underpin chip manufacturing.

As the US–Israel–Iran conflict enters its third week, those hidden dependencies are beginning to surface.

“For now, the impact on semiconductor manufacturers appears limited. However, a prolonged conflict could eventually lead to disruptions or require adjustments in the sourcing of key materials,” said Pareekh Jain, CEO of EIIRTrend & Pareekh Consulting. “The buffer inventories built since the pandemic-era shortage are providing some cushion, but they are finite.”

The upstream vulnerability

West Asia may not host fabs or packaging plants, but it plays a critical role in the semiconductor value chain through raw materials and industrial inputs. The region is a key supplier of helium, bromine, sulphur and other chemicals essential to chip manufacturing, and any disruption can ripple quickly across fabs and OSAT facilities worldwide.

Among these, helium is emerging as the most immediate risk. It is widely used in wafer cooling, leak detection, purge applications and advanced lithography and etching processes, making it indispensable to chip production.

“Helium is the highest-risk: it’s non-substitutable, and with Qatar supplying over one-third, any prolonged outage will impact fab operations,” said Kathir Thandavarayan, Partner at Deloitte India.

Bromine presents another critical vulnerability. While used in smaller quantities, it plays a specialised role in semiconductor packaging and high-purity etching chemicals. Its supply is heavily concentrated in the Dead Sea region, spanning Israel and Jordan, alongside the US.

“Bromine is primarily used in producing flame retardants for semiconductor packaging and in specialised Chemical Vapour Deposition (CVD) processes. While alternatives exist in some applications, high-purity bromine remains essential for specific steps,” said Danish Faruqui, CEO of Fab Economics.

Sulphur and sulphuric acid, which are used extensively in wafer cleaning and etching, face a different kind of risk. Around 40% of global sulphur exports originate from West Asia, with a significant share moving through the Strait of Hormuz. Here, the concern is less about absolute shortages and more about logistics disruptions and price volatility, particularly for ultra-high-purity grades required in advanced manufacturing, stated Thandavarayan.

Oil shock amplifies costs

Beyond materials, the conflict’s most immediate impact is being felt through energy.

Semiconductor fabs are among the most energy-intensive industrial assets in the world and rising crude prices directly inflate operating costs. The effect is not limited to electricity bills but extends to industrial gases, freight and insurance premiums.

“Rising crude oil impacts the semiconductor supply chain by driving up energy and logistics costs,” said Manish Rawat, semiconductor analyst at TechInsights. “Energy-intensive processes like oxidation, CVD and etching see higher electricity expenses, while transportation costs rise with fuel surcharges.”

The ripple effect extends into petrochemicals, which form the backbone of semiconductor packaging. Materials such as epoxy compounds, polymers and IC substrates are all derived from petrochemical feedstocks, meaning higher crude prices translate into higher input costs.

Epoxy compounds are used in wire bonding and wafer-level packaging as encapsulation materials, while advanced packaging techniques such as flip-chip and 2.5D or 3D stacking rely heavily on polymer-based substrates to connect chips to circuit boards. As crude prices rise, resin inflation begins to work its way into both packaging and fabrication inputs.

According to Jain, recent crude spikes have already raised energy costs for fabs by 20% to 30% and increased petrochemical input costs by 8% to 10%. If elevated prices persist, chip manufacturing costs are likely to rise, with eventual pass-through to customers.

Another area where the West Asia conflict acts more as a price and logistics amplifier than a direct supply disruption is in high-temperature metals such as tungsten, tantalum and molybdenum. These materials are used in sputtering targets, conductive layers, barriers, heaters and high-reliability packaging and equipment parts. While global supply is more diversified, disruptions to shipping routes, insurance costs and energy prices can still push up procurement costs and lead times, Jain added.

A ticking clock

For now, inventory buffers built after the pandemic-era chip shortage are cushioning the impact. However, this resilience is inherently time-bound.

Modelling by Fab Economics and global multi-variate simulation by Global Semiconductor Policy Council, a think tank on competitive geo-politics and geo-economics of semiconductors across various world regions, outlines how the impact could escalate if the conflict persists. A four-week disruption could wipe out as much as $500 billion in market capitalisation across the top 10 players of logic, memory, and analogue semiconductor ecosystem, and at six weeks, they could begin missing revenue schedules. If the disruption stretches to ten weeks, the industry could see a phased chip shortage, beginning with leading-edge nodes and spreading across end markets.

“The widely touted $1 trillion in AI GPU sales from Nvidia will also be impacted if the conflict persists beyond eight weeks,” said Faruqui. “Beyond ten weeks, it could trigger a major shortage in sectors like automotive.”

Not all chips will be affected equally. Mature, high-volume commodity chips such as power management ICs and memory products like DRAM and NAND are particularly sensitive to cost and logistics disruptions, where even small price increases can affect allocation decisions. Packaging-intensive chips, including those using advanced stacking technologies, are also vulnerable due to their dependence on materials and global logistics networks.

A stress test for India

For India, which is still in the early stages of building its semiconductor ecosystem, the situation presents a significant stress test.

“Rising crude and petrochemical costs are pressuring India’s near-completion semiconductor fabs and advanced packaging units, inflating capex and operating expenditure while extending lead times for critical materials,” said Rawat. “This could erode India’s competitiveness versus Southeast Asia.”

India’s heavy reliance on imported raw materials further amplifies its exposure. The current disruption serves as a reminder of how fragile and interdependent semiconductor supply chains remain, where even a single material constraint can cascade into large-scale production losses.

At the same time, it highlights areas where India can accelerate domestic capability. These include high-purity electronic chemicals such as semiconductor-grade sulphuric acid, as well as industrial gas infrastructure and recycling systems.

“There is also an opportunity to expand domestic production of packaging materials such as epoxies, polyimides and speciality polymers, where India already has a base in speciality chemicals,” said Thandavarayan.

Beyond fabs

If the pandemic exposed vulnerabilities in chip manufacturing capacity, the current conflict is revealing a deeper structural weakness.

Resilience in semiconductors does not stop at fabs or chip design. It extends into the upstream layers of materials, chemicals and energy that make production possible.

As geopolitical tensions reshape global supply chains, the industry may be forced to rethink not just where chips are made, but where their most critical inputs come from.