Hormuz blockade exposes fragile foundations of global semiconductor supply chain

08:50

By: Dakir Madiha

Hormuz blockade exposes fragile foundations of global semiconductor supply chain

The ongoing conflict involving the United States, Israel and Iran is revealing critical vulnerabilities in the global semiconductor industry as disruptions linked to the blockade of the Strait of Hormuz threaten energy supplies and essential chemical inputs used in chip manufacturing.

As the war enters its third week, Iran continues to restrict shipping through the strategic waterway, a route that normally carries about 20 percent of the world’s crude oil and a significant share of global liquefied natural gas shipments. According to maritime analytics firm Kpler, tanker traffic through the strait has fallen by roughly 90 percent since Iran began enforcing the blockade in early March.

The disruption poses immediate risks to East Asia’s semiconductor production hubs, where chip fabrication plants rely heavily on stable electricity and industrial chemicals.

Taiwan is particularly exposed. The island hosts Taiwan Semiconductor Manufacturing Company, or TSMC, the world’s most advanced semiconductor foundry and producer of about 90 percent of the planet’s most advanced chips. TSMC’s operations consume nearly 9 percent of Taiwan’s total electricity output. The island generates about 85 percent of its power from thermal sources and relies heavily on imported fuels, sourcing around 70 percent of its crude oil and roughly 30 percent of its liquefied natural gas from the Middle East.

A prolonged disruption in these energy flows could directly constrain semiconductor output, raising concerns about downstream effects across the global technology industry.

South Korea faces similar risks. The Carnegie Endowment for International Peace noted that the country imports about 70 percent of its crude oil from the Middle East, with nearly all of it transported through the Strait of Hormuz.

Major chipmakers Samsung Electronics and SK Hynix depend on this energy supply to power their manufacturing facilities. Together, the two companies control around 80 percent of the global market for high bandwidth memory chips and close to 70 percent of worldwide DRAM production.

The crisis is also affecting the supply of sulfur, a critical industrial input tied to oil and gas processing. About 92 percent of the world’s sulfur is produced as a byproduct of petroleum refining and natural gas treatment. Sulfur is the main feedstock for sulfuric acid, a key chemical used in semiconductor wafer processing.

As refining activity tied to Middle Eastern crude faces disruption, supplies of electronic grade sulfuric acid are at risk of tightening, potentially creating cascading shortages in semiconductor manufacturing.

Industry executives warn that the issue extends beyond oil markets. The disruption highlights how closely linked global supply chains are to a narrow maritime corridor only about 21 nautical miles wide, with few large scale domestic alternatives for producing these critical inputs.

Financial markets across Asia have already reacted sharply to the escalating tensions. South Korea’s Kospi index suffered its worst single day decline since 2008, dropping more than 12 percent. Shares of Samsung Electronics and SK Hynix each lost over 20 percent of their market value across two trading sessions.

Taiwan’s stock market fell 4.4 percent during the initial sell off, while Japan’s market declined 3.7 percent. In Thailand, the drop was severe enough to trigger a temporary trading halt.

Meanwhile, United States President Donald Trump has urged several countries, including China, France, Japan, South Korea and the United Kingdom, to send naval forces to help reopen the Strait of Hormuz. Analysts warn that escorting oil tankers through the narrow passage remains dangerous because of Iran’s land based missile and drone capabilities.

South Korea’s presidential office said it would consider the request carefully. Iranian officials rejected the proposal and reiterated that the strait would remain closed to vessels linked to the United States and its allies.

The crisis underscores how geopolitical conflicts in energy corridors can ripple through global technology supply chains, exposing structural dependencies in industries that underpin the modern digital economy.