The crisis in Ukraine continues to impact global trade, and this time it’s coming for your car. The current situation in Ukraine represents a serious threat to the lives of many innocent people, which is far worse than the small inconveniences experienced by those who are indirectly impacted. Our thoughts are with all of those who are directly affected. When it comes to global trade and specifically the current chip crisis, things are about to get much worse. Ukraine is responsible for a critical raw material used to manufacture microchips, which will soon impact new car manufacturing.
Ukraine provides 70% of the world's neon, which is a critical component used to run lasers required to manufacture microchips. As the world was working to remedy supply chain issues specific to microchips, this new resource shortage may push things into a more challenging position. Russia is also a large producer of neon, however, trade sanctions do not allow for trade with Russia at this time leaving the world in a tough position when it comes to neon supply.
In an interview with Auto News Carla Bailo, CEO of the Center for Automotive Research stated, “Of course, people will look for alternative sources of neon as quickly as they can — but that's not something that can just be switched on.” This means as firms seek out new sources, the supply chain is in a state of rebuilding to meet current demand.
Rumors suggest many chip manufacturers have been stockpiling neon as the current conflict seemed almost inevitable. This means there will not be an immediate reduction in chip production, however, if things don’t improve we may feel an impact on the supply of new vehicles and other products that rely on microchips.