How the Iran war chips away at tech, AI sectors | Cash Call | Andrew Wong

The relative calm in global financial markets during the initial phase of the US and Israeli strikes on Iran was largely driven by a prevailing belief that the conflict would be resolved within a short period of time. Investors had assumed that both countries could conclude military operations within a short timeframe. However, this expectation now appears increasingly unrealistic, prompting markets to reassess the broader risks associated with a prolonged conflict.

One critical factor that has been significantly underestimated is the potential impact on the global technology and AI sectors. In particular, the supply of helium – a key material indispensable to semiconductor manufacturing – is being severely disrupted by the conflict. Helium plays an essential role in chip production, including in cooling systems and the removal of residues during fabrication processes.

The United States and Qatar are the world’s primary helium producers. However, Qatar’s production has been halted due to the war, disrupting approximately one-third of global supply. Compounding the issue, Qatar’s largest liquefied natural gas facilities have sustained damage, and repairs to the affected production lines could take years, further constraining helium output. At the same time, Iran’s blockade of the Strait of Hormuz has left an estimated 200 specialized helium shipping containers stranded. Even after hostilities cease, it is likely to take considerable time before normal shipping operations resume. As a result, global helium supply is expected to remain tight throughout the year, with direct implications for semiconductor production and availability.

The importance of helium in chip manufacturing cannot be overstated. Leading semiconductor companies such as Taiwan Semiconductor Manufacturing Company, Samsung Electronics, and SK Hynix rely heavily on stable helium supplies to sustain their production processes. Any disruption to these firms inevitably cascades through the broader technology ecosystem. Companies like Apple and Nvidia, which depend extensively on TSMC for chip fabrication, would face downstream impacts. Moreover, memory chips produced by Samsung Electronics and SK Hynix are fundamental components in modern AI systems, making supply constraints particularly consequential for the AI sector.

In this context, disruptions in helium supply represent a systemic risk that the market has yet to fully price in. The potential impact on global technology and AI markets is therefore far more significant than many investors currently anticipate.

Notably, even in the early stages of the Iran conflict, SK Hynix chairman Chey Tae Won had warned that the global semiconductor wafer shortage could persist through 2030. At the time, the Iran conflict was not considered a primary driver. 

With the escalation of geopolitical tensions now exacerbating supply constraints, the challenges facing the global semiconductor industry are becoming more severe than previously expected – suggesting that the pressure on global technology equities may intensify further.

Andrew Wong is a veteran independent commentator