It’s not just “crude oil” stuck in the Strait of Hormuz, but perhaps “chips” as well

# Zhao Ying

Source: WallStreetCN

The US-Iran conflict has triggered a crisis in the Strait of Hormuz, exposing the global chip supply chain to a severely underrated energy shock.

Over half of the world’s memory chips are produced in South Korea, and 70% of advanced logic chips in Taiwan, China. Both regions rely heavily on Qatari LNG.

South Korea’s current reserves will last less than two months, making April a potential tipping point for a supply collapse — a direct threat to chip fabs, which consume massive amounts of electricity.

The Hormuz Strait crisis sparked by the US-Iran conflict is dragging the global tech supply chain into an unexpected energy shock.

This strait, a lifeline for global oil trade, is also a critical natural gas supply route for global chip manufacturing — a hidden risk not yet fully priced in by the market.

On Friday, according to a Bloomberg column, more than half of the world’s DRAM and NAND flash memory chips are produced in South Korea, and roughly 70% of the world’s advanced logic chips in Taiwan, China.

Both major chip-making hubs are highly dependent on Qatari LNG.

According to CCTV News, on the morning of March 5 local time, the Islamic Revolutionary Guard Corps of Iran announced that a US oil tanker was hit by missiles fired by its navy in the northern Persian Gulf in the early hours of the same day, and the tanker was still on fire.

The statement also said that military and commercial vessels belonging to the United States, Israel, European countries and their supporters are strictly prohibited from passing through the area, and will be attacked if found.

Meanwhile, Qatar’s Ras Laffan natural gas plant announced a production shutdown on Monday, declaring force majeure due to military attacks and suspending supplies.

The plant supplies about one-fifth of the world’s liquefied natural gas (LNG).

The news quickly triggered heavy selling in energy-related Asian stock markets.

South Korea’s Kospi plummeted 12% in a single day on Wednesday, its largest one-day drop ever; Taiwan’s Taiex index fell 4.4% the same day.

The sharp volatility in both markets reflects their unusual vulnerability in this crisis.

## Chip hubs rely heavily on Qatari LNG

The core manufacturing capacity of the global tech industry is highly concentrated in Northeast Asia.

As analyzed by Bloomberg columnist David Fickling, more than half of the world’s DRAM and NAND memory chips are made in South Korea, where Samsung Electronics and SK Hynix together account for about 40% of the Kospi index.

About 70% of the world’s advanced logic chips are produced in Taiwan, China, with Taiwan Semiconductor Manufacturing Company (TSMC) alone making up 45% of the Taiex index.

These two chip-making centers are also among the economies most dependent on Qatari LNG.

About 90% of LNG produced in Qatar and the UAE is exported to Asia.

By contrast, although India is the largest buyer of Qatari LNG, natural gas accounts for only about 3% of its power mix.

Japan also uses large volumes of LNG for power generation, but imports from Qatar and the UAE make up only about 5% of its total imports.

## Reserves running low; April may be a critical point

Of greater market concern is the very limited LNG storage capacity in both regions.

South Korea’s current reserves can cover less than two months of import demand.

This means that once vessels currently at sea finish unloading in early April, a continued blockage of the Strait of Hormuz would quickly put power supplies under pressure.

For power-hungry chip fabs, this would pose a direct production threat.

By comparison, the EU’s LNG reserves cover roughly one-third of annual consumption, providing far more buffer.

The South Korean government is urgently seeking alternative supplies.

LNG is still available on the spot market, but at a significant premium.

Australia and the United States, alongside Qatar as the world’s top LNG exporters, generally offer more flexible contract terms and may seize the chance to expand spot sales and gain market share.

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