Observation | Qatar's Helium, Israel's Bromine, and Middle Eastern Oil: The Strait of Hormuz Holds Korea's Chip Supply Chain by the Throat

The Israel-Hamas war has driven up global oil prices. Many Asian countries, far from the battlefield and heavily dependent on Middle Eastern energy imports, are experiencing disproportionate impacts. The semiconductor industry has also been affected, with soaring costs and increased supply chain risks. Among these, South Korea’s economy, which relies heavily on semiconductors, faces challenges. Due to its long-standing energy vulnerabilities, geopolitical shocks could quickly translate into severe economic pain.

According to CCTV News, in early March, the South Korean stock market, dominated by semiconductors, experienced two consecutive days of sharp declines, triggering a circuit breaker. Although the market later rebounded, the burden of raw material costs and energy concerns in the electronics sector is growing heavier.

South Korea’s ruling party lawmaker Kim Young-ho recently stated after meetings with executives from Samsung Electronics and other companies that South Korea’s chip industry, which supplies about two-thirds of the world’s memory chips and around 90% of high-bandwidth memory (HBM), is worried that prolonged conflict in Iran could lead to rising energy costs and prices. If certain key materials cannot be sourced from the Middle East, semiconductor production could be disrupted.

Recently, South Korean tech companies have been cutting costs and tightening belts. According to South Korean media reports on the 16th, Samsung Electronics’ DX division set a goal to reduce costs by double digits compared to the previous year during its recent CFO meeting. Additionally, senior executives at the DX division, including vice presidents and below, are now flying economy class on flights under 10 hours.

Analysts point out that since South Korea leads in the critical area of memory chip markets, even if more chip production occurs outside Korea, any disruptions will still impact the global supply chain.

Energy imports and the power demands of chip manufacturing are mismatched

According to a March report from the international high-tech industry market research firm TrendForce, Samsung Electronics and SK Hynix together control about 70% of the global DRAM memory supply and approximately 90% of high-bandwidth memory (HBM). HBM and DRAM power AI systems, cloud data centers, smartphones, automobiles, and industrial computing systems. If production in South Korea is hindered, the global supply chain for AI computing and consumer electronics will be affected.

However, about 70% of South Korea’s crude oil and 20% of its liquefied natural gas (LNG) depend on imports from the Middle East. Tensions in the Strait of Hormuz could exacerbate the country’s energy supply and demand instability. Rising energy prices will also increase logistics and production costs, squeezing corporate profits.

The impact of Middle Eastern tensions on South Korea’s semiconductor industry is evident in the stock prices of its two major chip giants. Samsung and SK Hynix form the backbone of South Korea’s chip industry, accounting for nearly 40% of the country’s stock market capitalization. Last week, their market values shrank by over 20% in two trading days, only rebounding after market stabilization.

Fossil fuels dominate South Korea’s energy structure, with oil accounting for 36.6% of primary energy use, followed by coal and natural gas. The energy-intensive semiconductor industry is considered to be driven by oil.

The Carnegie Endowment for International Peace noted on its website on the 13th that for years, the mismatch between South Korea’s energy import needs and its demand for electricity in advanced chip manufacturing has posed a significant risk to its semiconductor leadership. The country’s transition to more self-sufficient alternative energy sources such as nuclear, solar, wind, and biofuels remains slow.

As South Korea pushes for higher chip output, energy demand will increase. The global largest chip cluster, currently under construction in Yongin, Gyeonggi Province, is expected to partially come online in 2027, aiming to strengthen South Korea’s dominance in all memory chip production. However, this ambition comes at a high cost, with energy being a core challenge.

According to an energy assessment by the Gyeonggi Research Institute, operating the Yongin cluster will require 16 gigawatts (GW) of energy. The country’s peak demand is about 94 GW, meaning the cluster will consume roughly 17% of the nation’s peak electricity.

On the 16th, South Korea’s government and the ruling Democratic Party held a meeting and agreed to release a total of 22.46 million barrels of strategic petroleum reserves over the next three months to ease rising oil prices caused by Middle Eastern tensions. Lawmaker Ahn Do-jae told the media that South Korea’s current oil reserves can sustain supply for 208 days, and LNG reserves for 9 days. The government also decided to lift the restriction on coal-fired power plants operating at no more than 80% of their capacity starting from the 16th, and will complete maintenance on six nuclear reactors by mid-May, increasing nuclear power plant operation rates from below 70% to about 80%.

From helium to bromine, South Korea’s semiconductor supply chain faces impacts

Due to the conflict, Qatar Energy’s facilities were attacked in early March, halting LNG production. The shutdown also stopped helium production, which is closely linked to semiconductor manufacturing. This has led to a roughly 30% reduction in global helium supply, directly affecting semiconductor costs.

Qatar Energy announced on March 4th that it had invoked force majeure clauses on existing contracts, exempting it from supply obligations. According to industry media Gasworld, if the shutdown lasts more than about two weeks, industrial gas distributors may need to relocate cryogenic equipment and re-verify supplier relationships. Even after Qatar resumes production, this process could take months.

South Korea is among the most affected countries. According to the Korea International Trade Association’s 2025 statistics, South Korea’s helium imports depend on Qatar for 64.7%. Semiconductor manufacturing relies heavily on helium to cool silicon wafers, with no feasible alternatives currently available.

As reported by Nikkei Asia Review on the 12th, South Korea’s Ministry of Trade, Industry, and Energy has launched a supply-demand survey covering 14 semiconductor materials and manufacturing equipment highly dependent on Middle Eastern sources. Besides helium supply concerns, South Korea is increasingly worried about bromine, used in semiconductor circuit formation, which is highly concentrated in Israel and Jordan. South Korea imports 98% of its bromine from Israel.

SK Hynix stated that it has diversified suppliers for helium and other materials and secured inventories. After the Russia-Ukraine conflict erupted in 2022, shortages of helium and neon (used in photolithography to transfer circuit patterns onto wafers) also intensified, prompting South Korea to seek alternative suppliers and boost domestic production.

The South Korean government also said that companies can “seek alternative sources or shift to domestic production,” so the impact of Middle Eastern imports will be limited. However, prolonged supply disruptions could lead to shortages and price increases.

Although South Korea’s economy will inevitably feel the effects of rising energy prices, its exports to the Middle East account for only about 3%. Kiwoom Securities, a South Korean financial services firm, believes that recent South Korean exports are driven by the IT boom centered on semiconductors and AI investment cycles. Historically, slowing global consumption would reduce semiconductor demand, but recently, increased AI investments by companies have become the main driver of demand. With government policy responses, the short-term impact on South Korea’s real economy is expected to remain limited.

Regarding the Middle East situation, President Yoon Suk-yeol on March 5th instructed relevant departments to swiftly implement a market stabilization plan worth 1,000 trillion won (about $770 billion) to prevent financial market risks. He also emphasized the need to develop diversified import sources for crude oil, natural gas, and naphtha to stabilize supply and demand.

Reporter Chen Qinhang, The Paper