Fears of a neon shortage due to Russian invasion
Two key suppliers of neon have shut down operations in Ukraine due to the Russian invasion, sparking concerns for chip shortages. Ingas and Cryoin are responsible for 45-54% of the world’s semiconductor grade neon but have halted operations, according to company representatives. Countries around the world are dependent on their supply, with over 90% of neon used in the US chip industry being sourced from Ukraine.
Neon is a noble gas which is required for the lasers that cut patterns into semiconductor chips, used widely in consumer electronics and vehicles. Widespread disruption due to the lack of neon has already been reported. The Society of Motor Manufacturers and Traders said UK car production fell by 41.3% in February, with 61,657 units made, “primarily due to the persistent global shortage of semiconductors causing some factories to pause production.”
Companies are worried about the long-term effects that this could have on supply chains. The Atlantic Council, a US think tank, said: “The negative impact of neon shortages on an already ailing semiconductor industry cannot be underestimated. Its ripple effect would reach far across the global economy.”
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China’s most extensive lockdown in 2 years prompts new supply chain concerns
The most populous urban area in China, Shanghai, has introduced a two-phase lockdown to try and contain COVID-19 cases. The first phase will restrict the Pudong financial district and the surrounding areas for 10 days and then the downtown area west of the Huangpu River will begin its own 5-day lockdown. During these periods, residents will have to remain at home, non-essential businesses will close, public transport will be suspended and bridges and tunnels into the city will be monitored.
It is likely that consumers and companies across the rest of the world will feel the impact on supply chains, with global companies already suspending operations. Tesla’s facility in Shanghai is the largest outside of California and all production from this site has now been stopped. “So far, the lockdown allows for continued operations at financial institutions and ports [but] anything beyond the current plan risks disruptions to financial flows and international trade,” Bloomberg economist Chang Shu said.
China believes that the long-standing “zero-tolerance” approach to the virus is the most economical and effective way to prevent rising cases, however, Scotiabank economist Derek Holt said that the shutdown “invokes deeper supply chain concerns and inflationary implications.” So far, multiple disruptions have occurred, with oil prices immediately responding to the threat of further lockdowns as well as people stockpiling food, leading to shortages.
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Vietnam’s VinFast set to build billion-dollar EV factory in the US
VinFast, an automotive company headquartered in Vietnam has signed a preliminary deal to invest $2 billion to build an electric vehicle factory in North Carolina in the United States. The site will be a hub for the production of electric buses and SUVs as well as batteries for EVs. It is hoped that construction for the factory will begin this year and be completed by 2024.
This will be the first car plant in North Carolina and the largest economic development in the state’s history, according to the governor’s office. The company is betting big on the US market, where it hopes to compete with big names with electric SUVs and a battery leasing model. Other EV startups such as Rivian have cut their production targets for this year due to supply chain disruptions caused by the pandemic.
US President Biden has commented on the VinFast investment, which will create over 7,000 jobs, saying that this is “the latest example of my economic strategy at work.” “It builds on recent announcements from companies like GM, Ford, and Siemens to invest in America again and create jobs,” said Biden, who set an ambitious goal for half of new car sales to be electric by 2030.
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