Global Connectivity and Supply Chain Impacts from the Russia-Ukraine War

Far-reaching consequences continue to affect industries and markets around the world

Supplies are limited for many electronic components and other commodities, and average prices remain elevated above pre-pandemic levels. Conditions have been this way for a while and will continue to fluctuate for some time. This is due in part to limited availability of certain materials to make the semiconductors needed to power innovations. Raw-material suppliers in Russia and Ukraine are faced with trade restrictions, shutdowns, partial staffing issues, and other logistics disruptions, which have rippled throughout the global semiconductor manufacturing chain.

Geopolitical uncertainty and supply challenges lead to raw-material price increases

Disruptions in noble gases from Ukraine and metals produced by Russia for use in semiconductor manufacturing are leading to additional supply backlogs and uncertainty. Supply constraints of palladium and neon are of the most concern, as they are crucial materials for the production of electronic components. Ukrainian neon refiners Cryoin and Ingas remain closed, and, although no semiconductor manufacturer has reported shortages for gases needed for their production, pricing for neon has quadrupled since the beginning of the Russia-Ukraine war. The price of palladium is also elevated at 8-10% higher than prewar prices. Automotive OEMs, in particular, are facing some of the most severe issues when looking to source capacitors made from palladium for production. For example, German automakers lost up to 150,000 units of production in March from supply disruptions resulting from the ongoing Russia-Ukraine war.

Navigating supply chain disruptions with proactive solutions  

Smith captures and synthesizes market intelligence to help our customers build more sophisticated procurement strategies for excess opportunities. As a buyer and seller of electronic components, Smith can match customers who have an excess of parts with customers who need parts. The severity of the ongoing semiconductor shortage has led many organizations to expand their resources and work with partners outside of their usual scope. Another proactive and potentially greener approach many companies have introduced to face procurement challenges is expanding their date-code requirements. Rather than trying to procure the very latest models of parts, some manufacturers and engineers have designed earlier innovations into boards so they can deliver a finished product.

Smith is committed to the quality of every electronic component and semiconductor we source. While the current geopolitical tensions have added uncertainty in pockets of the semiconductor market, staying aware of these issues, planning ahead with quality management procedures, and acting quickly can help customers manage their supply chain lines more efficiently.

Due to the restrictions and sanctions imposed by the U.S. and the EU, Smith is prohibited from shipping products to or for customers in Russia, Belarus, or the Crimea, Donetsk, and Luhansk regions of Ukraine. Any requests to have products sent through a third country with an end destination in these locations will also be blocked. As part of our compliance with these restrictions, we have updated our Export Compliance Certificate to have customers confirm that they will not ship or resell into Russia, Belarus, or the Crimea, Donetsk, or Luhansk regions. All new customers will be expected to sign this certification as part of Smith’s customer application.

For more details on our market intelligence information and analysis, please contact your Smith sales representative, or read more here: https://smithweb.com/insights/market-intelligence-report/