Tag: TSMC

  • Neon, Krypton, and Xenon: The Invisible Gases That Make Every Chip on Earth

    On February 24, 2022, Russia invaded Ukraine. Within days, two companies in Odessa and Mariupol — Cryoin and Ingas — shut down their operations. Together, they had been producing roughly 50% of the world’s semiconductor-grade neon. Ukraine as a whole supplied approximately 70% of global neon, 40% of krypton, and 25-30% of xenon — the three noble gases that power the lasers used to etch circuits onto every advanced semiconductor chip manufactured on the planet. Neon prices in China rose tenfold within weeks. Krypton prices in Japan quadrupled. Xenon, which had traded at $15 per liter in 2020, spiked above $100. The world’s most sophisticated industry — semiconductor fabrication — discovered that it was dependent on gases captured from Soviet-era steel mills in a war zone, purified by two mid-sized companies in cities that were being bombed. The concentration wasn’t the result of geological scarcity. Neon, krypton, and xenon exist everywhere — they’re in the air you’re breathing right now. The concentration was an accident of industrial history, and the fact that the accident had never been corrected in three decades of post-Soviet globalization tells you something about how supply chains actually work: nobody fixes a single point of failure until it fails.

    What the gases do

    Neon, krypton, and xenon are noble gases — chemically inert elements that don’t react with other materials, which is precisely what makes them useful in environments where contamination would destroy the product.

    Neon’s critical application is semiconductor photolithography. The excimer lasers used to etch circuit patterns onto silicon wafers — the deep ultraviolet (DUV) systems that still produce the majority of the world’s chips — use gas mixtures that are approximately 96% neon, with small amounts of argon, krypton, fluorine, or xenon depending on the wavelength required. ArF (argon-fluorine) lasers at 193 nanometers and KrF (krypton-fluorine) lasers at 248 nanometers are the workhorses of the semiconductor industry. Every fab that runs DUV lithography consumes neon. The gas mixtures degrade during use and must be regularly replaced. TSMC, Samsung, Intel, and every other chipmaker on Earth — including the Chinese fabs the CHIPS Act was designed to compete against — need a continuous supply of ultra-high-purity neon to keep their lasers firing.

    Krypton serves double duty. In semiconductor manufacturing, it’s a component of the laser gas mixtures. Outside the fab, krypton fills the gap between panes in energy-efficient triple-glazed windows — a growing market as building energy codes tighten globally. It’s also used in high-intensity lighting for airports and stadium illumination.

    Xenon has the broadest application portfolio of the three. It’s an anesthetic in medicine — safer than nitrous oxide, with faster recovery times, though dramatically more expensive. It fills the flash tubes in high-end photography equipment. It’s used as a contrast agent in CT imaging. And — increasingly — it fuels the ion propulsion systems on communications satellites and Earth observation spacecraft. SpaceX’s Starlink constellation and Amazon’s Project Kuiper are driving xenon demand as satellite constellations proliferate. When a Starlink satellite adjusts its orbit, it’s expelling ionized xenon. The space economy’s growth curve is, unexpectedly, a noble gas demand curve.

    Why Ukraine had 70% of global neon

    The answer is Soviet military planning. During the 1970s and 1980s, the Soviet Union treated neon as a strategic material for high-powered laser weapons research — the kind of Cold War physics that the Battlefields of the Future course covers from the other side. Every major air separation unit in the Soviet Union was equipped with neon, krypton, and xenon enrichment facilities. Air separation units produce oxygen — which steel mills need in enormous volumes — and the noble gases are captured as by-products of the oxygen production process. The Soviet Union had massive steel mills. The massive steel mills had massive air separation units. The massive air separation units captured massive quantities of noble gases. When the Soviet Union collapsed, the steel mills ended up in Ukraine — particularly in the industrial cities of the Donbas and Black Sea coast — and the noble gas capture equipment went with them.

    For three decades, Ukrainian companies collected these gases, purified them to semiconductor grade (99.999% purity for neon), and exported them to the global chip industry at prices that made building competing production capacity uneconomical anywhere else. The same by-product supply structure that constrains indium and tellurium applies here: neon is a by-product of oxygen production, which is a by-product of steelmaking. You cannot produce more semiconductor-grade neon without operating air separation units at steel mills, and the economics of operating those units are determined by steel demand, not neon demand. Ukraine’s dominance wasn’t because Ukrainian neon was better. It was because Ukrainian steel mills had the gas capture equipment installed, nobody else had bothered to install it, and the resulting supply was cheap enough to discourage competition.

    What happened after the shock

    The predicted catastrophe — fabs shutting down, chip shortages deepening, economic disaster — largely didn’t materialize. The semiconductor industry responded faster than most analysts expected, for several reasons.

    First, the major chipmakers had prepared. After neon prices spiked 600% during the 2014 Crimean annexation, TSMC, Samsung, and others diversified suppliers and built strategic stockpiles. Most large fabs had 3-6 months of gas reserves when the 2022 invasion began.

    Second, recycling technology scaled rapidly. Modern DUV scanners can recover and purify over 90% of the neon used in each laser pulse, dramatically reducing virgin neon consumption per wafer. TSMC’s neon recycling program became a model for the industry.

    Third, new production came online. Linde had invested $250 million in a neon production facility in La Porte, Texas, after the 2014 scare. Chinese air separation companies expanded noble gas capture. South Korean and Japanese producers increased output. By 2023, the acute shortage had eased. Prices retreated from their peaks. The industry congratulated itself on resilience.

    Fourth — and this is the detail that changes the long-term picture — the technology is shifting. ASML’s extreme ultraviolet (EUV) lithography systems, which are required for the most advanced 5-nanometer and 3-nanometer chips, do not use neon. EUV lasers vaporize tin droplets rather than exciting noble gas mixtures. As EUV adoption expands and DUV’s share of leading-edge production declines, neon demand from the semiconductor industry will structurally decrease. The gas that nearly crippled the chip industry in 2022 may become less critical to the chip industry by 2030 — not because the supply chain was fixed, but because the technology moved on.

    Where it stands in 2026

    The noble gas market in 2026 is more diversified than 2022 but still structurally fragile. Ukrainian production has partially recovered — Cryoin’s Odessa facility has resumed operations, though at reduced capacity, and the Mariupol facilities remain destroyed. China, Japan, South Korea, and the United States have all expanded noble gas production and purification capacity. The acute price crisis is over.

    But the underlying architecture hasn’t fundamentally changed. Noble gases remain by-products of air separation at steel mills and industrial gas plants. The decision to capture them — rather than venting them into the atmosphere — is discretionary, driven by the economics of the gas market relative to the cost of operating the capture equipment. When neon was $100 per liter, everyone captured it. At lower prices, the incentive weakens. The antimony supply chain showed that price normalization after a crisis doesn’t mean the structural vulnerability has been resolved — it means the market has priced in the assumption that the crisis won’t recur.

    Xenon faces its own emerging constraint. Satellite constellation demand is growing faster than xenon supply. SpaceX’s Starlink alone operates over 6,000 satellites, each requiring xenon for station-keeping maneuvers. Amazon’s Kuiper constellation will add thousands more. If the space economy’s xenon demand outgrows the industrial gas industry’s xenon capture, the same by-product ceiling that constrains indium, tellurium, and iridium will constrain the propellant supply for the satellite industry. SpaceX has already begun testing krypton as a cheaper, more abundant xenon substitute in some Starlink applications — a substitution that trades performance for supply security, and that shifts demand pressure from one noble gas to another rather than relieving it.

    Why they share a lecture

    Neon, krypton, and xenon are the Rare Earth Elements course’s case study in accidental concentration — the supply chain vulnerability that exists not because of geological scarcity or deliberate resource nationalism, but because of industrial inertia. Nobody cornered the noble gas market. Nobody imposed export controls. The Soviet Union installed gas capture equipment at steel mills for laser weapons research. The equipment ended up in Ukraine. Ukraine supplied the world for thirty years. Then a war started and the supply vanished overnight.

    The nickel case is about deliberate resource nationalism — Indonesia’s export ban was a strategic decision. The gallium/germanium and antimony cases are about deliberate export controls — China’s licensing regime is an instrument of state policy. The noble gas case is about none of those things. It’s about a supply chain that concentrated by accident, stayed concentrated through inertia, and broke because of a war that had nothing to do with semiconductors. That’s a different category of supply chain risk — one that no critical minerals policy is designed to prevent, because it’s not the result of any policy at all. It’s the result of nobody looking at the map and asking what happens when the cheapest supplier is in a country that borders Russia.

    This is the kind of supply chain our Rare Earth Elements course was built to map — where the gases that power every chip laser on Earth were by-products of Soviet steel mills repurposed for Cold War laser weapons, concentrated in two cities in a war zone, and the industry that needed them only found out when the bombs started falling.

  • The Global Helium Shortage: Why a Party Balloon Gas Is a National Security Concern

    In March 2026, Iran struck Qatar’s largest liquefied natural gas facility. The damage knocked helium production lines offline—lines that could take years to rebuild. Qatar produces roughly one-third of the world’s helium supply, approximately 63 million cubic meters out of a global total of 190 million in 2025. That output is now functionally zero. About 200 specialized containers used to transport liquid helium are stranded near the Strait of Hormuz. The World Economic Forum estimates that conflict-related disruptions have removed approximately one-third of the global helium supply from the market. Spot prices have doubled since the war began. QatarEnergy issued a force majeure declaration on March 4, 2026, triggering cascading contractual mechanisms across every industry that depends on a gas most people associate with birthday balloons.

    Helium is not a rare earth element. It’s the second most abundant element in the universe. It is, however, vanishingly scarce on Earth in usable concentrations, impossible to synthesize economically, and—unlike every other industrial gas—cannot be recaptured once it escapes into the atmosphere. It floats up and is gone. Every cubic meter of helium vented, leaked, or released from a party balloon is helium that the planet’s industrial base will never use again. The global economy runs on a nonrenewable gas with no substitute for its most critical applications, produced as a byproduct of natural gas processing in a handful of countries, and one-third of that supply just went offline because of a conflict that has nothing to do with helium.

    What helium actually does

    The party balloon market accounts for a negligible fraction of global helium consumption. The applications that matter are the ones where no alternative exists.

    MRI machines require approximately 1,500 to 2,000 liters of liquid helium to cool their superconducting magnets to operating temperature—near absolute zero. There are roughly 40,000 to 50,000 MRI scanners installed worldwide, each requiring refills every two to six weeks. Healthcare accounts for roughly 32 percent of global helium consumption. When helium runs short, hospitals delay installations of new MRI systems, and existing systems face refill scheduling constraints. Each nonfunctional MRI scanner eliminates approximately 20 to 30 daily patient examinations.

    Semiconductor manufacturing accounts for 24 percent of global consumption in 2025, projected to reach 30 percent by 2030. Helium cools superconducting magnets during chip fabrication, flushes toxic residue after wafer washing, and supports leak detection in the vacuum systems that advanced lithography depends on. EUV lithography—the technology that makes sub-5-nanometer chips possible—has driven semiconductor helium demand from roughly 6 percent of global consumption in 2015 to 10 to 12 percent by 2025. With TSMC, Samsung, and Intel all building new fabs under the CHIPS Act and equivalent programs worldwide, and 42 new fabrication facilities scheduled to come online by 2026, semiconductor demand for helium is growing 15 to 20 percent annually. In 2024, Samsung’s Vietnam fabrication plant experienced a 72-hour outage from helium supply disruption, resulting in approximately $300 million in losses.

    Aerospace consumes 18 percent of global demand. NASA’s Artemis program alone requires 3.2 million cubic feet per Space Launch System launch. Quantum computing requires helium-cooled cryogenic systems to maintain qubits at millikelvin temperatures. The International Energy Agency has warned that helium shortages could delay quantum computing adoption by two to three years. Defense applications—missile guidance systems, surveillance technologies, and components manufactured using helium-dependent processes—consume classified but significant volumes.

    The CHIPS Act allocated approximately $2.1 billion specifically for helium infrastructure to support domestic semiconductor production. The Department of Defense has established a target of maintaining a six-month helium reserve by 2026, up from the 83-day reserve that existed before the current crisis. Twenty-two countries now require special licenses for helium exports, citing national security concerns.

    Why supply is this fragile

    Helium is produced almost entirely as a byproduct of natural gas processing. You don’t mine helium. You extract it from natural gas fields where it occurs in concentrations of 0.1 to 7 percent, separated during cryogenic processing of the primary product—LNG. This byproduct structure creates a fundamental vulnerability: helium production depends entirely on natural gas production decisions. When QatarEnergy halted LNG operations, helium supply ceased automatically—not because the helium market changed, but because the primary revenue driver went offline.

    Three countries dominate supply. The United States has historically been the largest producer, anchored by the Federal Helium Reserve in Amarillo, Texas—a strategic stockpile that the U.S. government began building in the 1920s for military airships. Congress passed the Helium Privatization Act in 1996, directing the Bureau of Land Management to sell off the reserve and wind down government involvement in helium markets. That logic—reducing government involvement in commodity markets—made sense when helium’s primary applications were party balloons and weather balloons. It looks catastrophically shortsighted in 2026, when helium is a strategic material for semiconductors, quantum computing, MRI systems, and defense.

    Qatar became the world’s second-largest producer and is now offline. Russia’s Amur Gas Processing Plant was supposed to change the math—potentially supplying 25 percent of global demand at full capacity. Gazprom started helium production there in 2021, but the facility has been hit by explosions, technical setbacks, and Western sanctions. As of early 2026, Amur is running well below capacity. Russia has increased helium exports to China—up 60 percent in 2025 alone—but the volumes remain far below what was planned. Algeria rounds out the major suppliers, but production there has been flat.

    New projects in Saskatchewan, Tanzania, and South Africa are in various stages of development. None are close to meaningful output. Greenfield helium developments typically require 7 to 10 years from exploration to production. The supply that’s missing today won’t be replaced by new sources for the rest of the decade.

    Who gets it when there isn’t enough

    Helium allocation in a shortage follows a predictable hierarchy. Essential medical uses—MRI machines, NMR systems—receive the highest protection. Defense and space applications sit immediately below. Semiconductors are high-priority industrial users but rank below medical and defense in a severe allocation scenario. Lower-value and more substitutable uses—welding, leak detection in non-critical applications, party balloons—face the sharpest cuts first.

    South Korea is under the greatest near-term strain. The country produces roughly two-thirds of the world’s memory chips and sourced 64.7 percent of its helium imports from Qatar in 2025. Samsung is the most exposed major chipmaker, with an estimated buffer of six to twelve weeks. Taiwan entered the crisis with better short-term cover—one major supplier maintained stockpiles in both Japan and the United States—but remains exposed to cost inflation if the market stays tight for months. Chipmakers can store about six weeks’ worth of supply in specialized cryogenic containers, and once insulation is depleted, the helium warms, expands into gas, and escapes. You can’t stockpile it the way you stockpile oil.

    The semiconductor equipment industry has responded by accelerating helium recycling system development. Current technology recovers 60 to 80 percent of helium used in fabrication, at installation costs of $2 to $5 million per facility. Semiconductor fabs achieve recycling rates of 95 percent or higher for some applications. But recycling reduces consumption; it doesn’t eliminate the need for fresh supply. And MRI machines—the largest single consumer—recycle at 70 to 80 percent, significantly worse than semiconductor fabs.

    The pattern

    This is the fourth major helium shortage since 2006. Shortage 1.0 in 2006 to 2007. Shortage 2.0 in 2011 to 2013. Shortage 3.0 in 2018 to 2020. Each one driven by the same combination: plant outages, demand spikes, and the structural fragility of having a nonrenewable, non-substitutable industrial gas produced as a byproduct in a handful of geographically concentrated facilities. The 2026 crisis is different in scale—one-third of global supply offline due to military conflict rather than equipment failure—but the underlying vulnerability is identical.

    Helium is the material that makes the gap between “critical resource” and “national security concern” visible. It’s not scarce in the way rare earths are scarce—controlled by one country through deliberate industrial policy. It’s scarce in a more fundamental way: the planet has a finite amount, it cannot be manufactured, it cannot be recaptured once released, and the applications that depend on it—medical imaging, advanced semiconductors, quantum computing, space launch, defense systems—are the applications that define whether a country can function at a 21st-century technological level. A gas that lifts party balloons is now determining whether Samsung can make memory chips and whether hospitals can run MRI machines. The constraint was always there. It took a war to make it visible.

    We cover the helium shortage alongside neodymium supply chains, semiconductor geopolitics, and the full landscape of critical materials that underpin modern technology across our Rare Earth Elements course—including why the most strategically important substance in advanced manufacturing is lighter than air and impossible to get back once it floats away.

  • The Semiconductor Supply Chain in 2026: Why Chips Are Still a Geopolitical Weapon

    The global semiconductor industry is expected to hit $975 billion in revenue in 2026—a 26 percent increase over 2025, which itself grew 22 percent. The combined market capitalization of the top 10 chip companies reached $9.5 trillion by December 2025, up 181 percent from two years earlier. TSMC introduced the world’s most advanced 2-nanometer chip, promising 10 to 15 percent faster speeds and 20 to 30 percent lower power consumption than its 3-nanometer predecessor. And the United States and China are engaged in a technology control regime that a Texas National Security Review analysis compared, unfavorably, to Cold War-era CoCom—the multilateral export control system that tried and largely failed to prevent the Soviet Union from accessing Western technology.

    The semiconductor supply chain was the most globally integrated industrial system ever built. It is now fragmenting along geopolitical lines, and every major government on earth is treating chip access as a national security priority rather than a commercial one.

    The chokepoints

    The semiconductor supply chain has a concentration problem that makes OPEC look diversified. Three American companies—Nvidia, Qualcomm, and Broadcom—account for over 75 percent of advanced chip design. TSMC in Taiwan manufactures 80 to 90 percent of the world’s sub-7-nanometer chips. Two Korean companies, Samsung and SK Hynix, plus one American company, Micron, produce essentially all the world’s high-bandwidth memory. ASML, a single Dutch company, manufactures the extreme ultraviolet lithography machines that are required to produce chips below 7 nanometers—and ASML is the only company on earth that makes them.

    Each of these chokepoints is a potential geopolitical weapon, and several have already been deployed as one. The U.S. began restricting semiconductor exports to China in October 2022, targeting advanced AI chips and the equipment used to manufacture them. Those controls were tightened in October 2023, again in December 2024, and again in March 2025, when the Trump administration blacklisted dozens of additional Chinese entities. The Biden administration’s January 2025 AI Diffusion Rule proposed a three-tiered global framework that categorized every country on earth by its access to advanced chips—essentially creating a semiconductor caste system aligned with U.S. strategic interests. The Trump administration rescinded parts of that rule but imposed its own restrictions. The Netherlands, under sustained U.S. pressure, restricted ASML’s sales of advanced lithography equipment to China. Japan implemented similar controls on semiconductor manufacturing equipment.

    China responded with its own export controls on critical minerals—gallium, germanium, and other materials essential to chip manufacturing—explicitly leveraging its dominance of the mineral supply chain as a countermeasure. The tit-for-tat is ongoing, escalating, and structurally embedded in both countries’ industrial strategies.

    What the controls actually accomplished

    The honest assessment, three years into the U.S. export control regime, is that the controls disrupted China’s semiconductor industry without stopping it. CSIS analysis found that the restrictions created equipment shortages for Chinese chipmakers, produced severe bottlenecks, limited manufacturing yields, and forced workforce reductions across China’s chip sector. Chinese manufacturing yields for advanced chips reportedly run 30 to 50 percent, compared to over 90 percent for U.S.-allied manufacturers. Huawei’s Ascend 910C AI processor, China’s most advanced domestically produced AI chip, is limited to an estimated 250,000 to 300,000 units in 2026 production, bottlenecked primarily by high-bandwidth memory availability. For comparison, U.S. production of Nvidia B300-equivalent chips reached 3.67 million units in 2025—and each B300 is roughly five times more powerful than a 910C.

    But China adapted faster than the controls’ architects expected. Cut off from ASML’s state-of-the-art EUV lithography machines, China’s Semiconductor Manufacturing International Corporation (SMIC) used older deep ultraviolet machines to produce 7-nanometer and even 5-nanometer chips—behind TSMC’s leading edge of 3 nanometers, but far more advanced than the controls were designed to allow. Huawei reportedly used shell companies to trick TSMC into manufacturing 2 million chiplets for its Ascend 910 processors. China is investing in domestic lithography equipment, recruiting former ASML employees by the thousands, and pursuing alternative chip architectures—including a 2D transistor from Peking University researchers that reportedly operates 40 percent faster than TSMC’s 3-nanometer devices while consuming 10 percent less energy.

    The CSIS report summarized the fundamental problem: chipmaking equipment is heavy, produced in small lots, and hard to smuggle. Chips are tiny, produced by the millions, and easily concealed. Design software can be moved across borders undetected. Export controls can restrict equipment. They struggle to restrict everything else. The Texas National Security Review analysis drew the Cold War parallel explicitly: CoCom did not prevent the Soviet Union from accessing key technologies, and China is a “more adept target” than the USSR was.

    The cost of the controls to the U.S.

    The restriction regime isn’t free for the restrictor. An ITIF economic model estimated that full U.S.-China semiconductor decoupling would cost American chipmakers approximately $77 billion in first-year revenue losses. U.S. semiconductor R&D investment could decrease by 24 percent, or $14 billion. Over 80,000 American semiconductor jobs would be at risk. Korean firms would gain roughly $21 billion of that lost U.S. business; EU firms would pick up $15 billion; Taiwanese firms $14 billion; Japanese firms $12 billion.

    Nvidia has already raised prices on nearly all its AI GPUs—gaming cards up 5 to 10 percent, high-end AI accelerators up 15 percent—citing increased manufacturing costs and tariff impacts. TSMC is considering a 10 percent price increase on advanced wafers. The semiconductor industry was built as a globally interdependent system where each region specialized in what it did best. Breaking that interdependence doesn’t just hurt the target. It raises costs for everyone, reduces R&D reinvestment for the companies leading innovation, and creates market share opportunities for competitors in countries that aren’t implementing controls with the same rigor.

    The geopolitical imperative and the economic imperative are pulling in opposite directions, and no government has figured out how to resolve the tension. Restrict too aggressively and you damage your own industry. Restrict too loosely and you fund your adversary’s military modernization. The U.S. government approved Nvidia to sell H200 AI chips to selected customers in China in December 2025—the same government that had blacklisted dozens of Chinese entities months earlier. The policy is simultaneously hawkish and permissive because the constraints are genuinely contradictory.

    The Taiwan variable

    Underlying all of this is a single geographic fact: the island of Taiwan, 180 kilometers off the Chinese coast, with a population of 24 million, manufactures the overwhelming majority of the world’s most advanced semiconductors. TSMC’s fabrication facilities in Taiwan represent a concentration of strategic capability that has no parallel in any other industry. If those facilities were destroyed, captured, or rendered inoperable by a Chinese military action—or by the threat of one—the global technology supply chain would experience a disruption that would make the COVID-era chip shortage look trivial.

    This is why the U.S. is funding TSMC’s construction of fabrication plants in Arizona under the CHIPS Act. It’s why Japan, the EU, and South Korea are all building or expanding domestic chip manufacturing. The entire reshoring effort is an insurance policy against a Taiwan contingency—and it’s going to take a decade to meaningfully reduce the concentration risk, because building a leading-edge fabrication facility takes three to five years and costs $15 to $20 billion per facility.

    The semiconductor supply chain in 2026 is not a market. It’s a battlefield where the weapons are export controls, lithography machines, rare earth minerals, fabrication capacity, and the strategic ambiguity surrounding a 180-kilometer strait. The $975 billion flowing through it annually isn’t just commerce. It’s the material substrate of AI development, military capability, and economic power for every country on earth—and the fight over who controls it is the defining industrial conflict of the decade.

    We cover the semiconductor supply chain alongside rare earth monopolies, conflict minerals, and the full landscape of critical material geopolitics across our Rare Earth Elements course—including why the most important factory on earth is on an island that one country claims as its own and another has promised to take.