[Iran Crisis] Strait of Hormuz Blockade: South Korea and Taiwan Face Natural Gas Shortages, Chip Production Hit Harder

After the blockade of the Strait of Hormuz in the Middle East, its impact will not be limited to the oil market but may also affect the highly power-consuming chip manufacturing industry. Bloomberg pointed out that more than half of the short-term and long-term memory (DRAM) and NAND flash memory chips needed for electronic devices are produced in South Korea.

South Korea and Taiwan’s power grids heavily rely on natural gas, and their import strategies are also heavily dependent on Gulf countries, making them most vulnerable to disruptions. Currently, South Korea’s reserves are only enough to sustain less than two months of imports, while Taiwan’s reserves are less than one month. This threatens their power-intensive chip production.

Qatar Gas Plant Attacked and Shut Down, 1/5 of Global LNG Supply Disrupted

Qatar’s Ras Laffan natural gas plant supplies about one-fifth of the world’s liquefied natural gas. On Monday (the 2nd), QatarEnergy, the management company, announced that the plant was shut down due to a military attack.

KOSPI Plunges 12%, Largest Single-Day Drop, TSMC Drags TAIEX Down 4.4%

On Wednesday (the 4th), South Korea’s KOSPI index fell 12%, the largest single-day decline, with Samsung Electronics and SK Hynix, two memory chip manufacturers, accounting for about 40% of the index. Taiwan’s TAIEX also dropped 4.4% on the same day, with Taiwan Semiconductor Manufacturing Company (TSMC), the world’s largest contract chip manufacturer, accounting for about 45% of the Taiwan Weighted Index.

LNG Supply Disruption Has Limited Direct Impact on China, India, and Japan

In comparison, natural gas power generation accounts for only about 3% in China and India, while Japan’s liquefied natural gas imports from Qatar and the UAE combined account for only about 5% of its total imports.

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U.S. and Australia May Seek to Capture LNG Market

The ongoing liquefied natural gas ships are expected to complete their final deliveries by early April. Bloomberg pointed out that there is ample supply of spot LNG in the market, but premiums are high. If the Hormuz Strait crisis persists, LNG prices could rise further. Australia and the U.S., as top LNG exporters alongside Qatar, often have more flexible contract terms and may seize the opportunity to expand spot sales and gain market share.

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