Iran Attacks Threaten Helium Supply Chain – Chipmakers, Energy Markets at Risk

The escalating conflict in the Middle East is posing a surprising threat to the global technology supply chain: helium. Iran’s recent attacks on Qatar’s natural gas export facilities have forced a halt to helium production in the country, which supplies approximately 30% of the world’s supply of the critical element. While often associated with party balloons, helium is indispensable in the manufacturing of semiconductors, the building blocks of modern electronics, including the advanced chips powering the artificial intelligence boom.

QatarEnergy halted production of liquefied natural gas (LNG) and “associated products” – including helium – on March 2nd, citing Iranian drone attacks. Further strikes on Wednesday and Thursday caused “extensive” damage to the Ras Laffan facility, the world’s largest LNG plant, and will cut annual helium exports by 14%, according to QatarGas. Phil Kornbluth, president of Kornbluth Helium Consulting, stated that the damage suggests a prolonged disruption, potentially lasting years to fully repair.

A Critical Component in Chipmaking

Helium’s unique properties make it essential in several stages of semiconductor fabrication. It’s used for cooling wafers – the silicon discs upon which microchips are built – during the etching process, where intricate circuitry is formed. “You really want to maintain a constant temperature over the wafer,” explains Jacob Feldgoise, an analyst at Georgetown University’s Center for Security and Emerging Technology. “Helium is an excellent thermal conductor…chip fabs will blow helium over the back of the wafer in order to speed heat removal and keep heat removal consistent.” Currently, there are no viable alternatives to helium for this crucial cooling process.

The disruption comes at a particularly sensitive time. South Korea, home to semiconductor giants Samsung Electronics and SK Hynix, is heavily reliant on Qatari helium, importing roughly 65% of its supply from the nation, according to Fitch Ratings. While both companies reportedly hold several months of inventory, experts emphasize the need to rapidly diversify supply chains. Jong-hwan Lee, a professor of semiconductor devices at South Korea’s Sangmyung University, notes that the conflict could disrupt supplies of other essential materials beyond helium, further destabilizing production.

Supply Chain Complications and Rising Prices

The helium supply chain is uniquely vulnerable due to the element’s physical properties. Helium’s tiny molecules easily escape containment, requiring it to be chilled into liquid form and transported in specialized, heavily insulated containers. Approximately 200 of these containers are currently stranded in the Middle East, each costing around $1 million. Kornbluth notes that the limited number of available containers will exacerbate the shortage as it takes time to reposition them and refill them with helium from alternative sources.

Spot prices for helium have already doubled since the crisis began and are expected to continue rising. While spot trading represents a small portion of the overall market, the potential for significant increases in long-term contract prices is substantial. The industry typically prioritizes supply to critical sectors like chipmaking and healthcare in times of shortage, suggesting these industries will likely bear the brunt of any price increases.

Beyond Semiconductors

The impact of the helium shortage extends beyond the semiconductor industry. Helium is also vital for medical imaging, specifically cooling the superconducting magnets used in magnetic resonance imaging (MRI) machines. The space industry relies on helium to purge rocket fuel tanks, a demand expected to grow with the increasing frequency of launches by companies like SpaceX and Blue Origin.

The United States is currently the largest producer of helium, accounting for 81 million cubic meters last year. However, Qatar, Algeria, and Russia are also significant suppliers, with Russian supplies currently restricted due to international sanctions. The U.S. Geological Survey estimates the United States has recoverable helium reserves of 8.5 billion cubic meters, while the rest of the world combined holds 31.3 billion cubic meters.

The situation underscores the fragility of global supply chains and the interconnectedness of seemingly disparate industries. As the conflict in the Middle East continues, monitoring the helium supply will be crucial for assessing the potential impact on the technology sector and beyond. Experts suggest that companies reliant on helium should proactively explore alternative sourcing options and prepare for potentially sustained higher prices.