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

How is South Korea’s chip industry responding to energy vulnerabilities?

The US-Israel-Iran conflict 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, supported by semiconductors, faces challenges. Due to its long-term 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 Korean 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 storage chips, is worried that prolonged Iran conflicts will lead to rising energy costs and prices. If 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 at its recent CFO meeting. Additionally, senior executives at the DX division and below, when flying on flights under 10 hours, are now all flying economy class.

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

Energy imports and chip manufacturing power demands 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 and about 90% of high-bandwidth memory (HBM) supply. HBM and DRAM power AI systems, cloud data centers, smartphones, automobiles, and industrial computing systems. If production in South Korea is hindered, the global AI computing and consumer electronics supply chains will be affected.

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

The impact of Middle Eastern tensions on South Korea’s semiconductor industry is evident from the stock prices of 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, then rebounded as markets stabilized.

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 advanced chip manufacturing power demand 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 operate by 2027, aiming to strengthen South Korea’s dominance in all storage chip production. But 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, the South Korean 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 oil price increases caused by Middle Eastern tensions. Democratic Party 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 that coal-fired power plants operate 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%.

Impact on Korea’s semiconductor throat from helium to bromine

Affected by the conflict, Qatar Energy’s facilities were attacked in early March, leading the company to halt LNG production. The halt also affects helium, which is closely linked to semiconductor manufacturing. This has resulted in a roughly 30% reduction in global helium supply, directly impacting semiconductor production costs.

Qatar Energy announced on March 4th the activation of 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, and currently, no viable alternatives are available.

As reported by Nikkei Asia 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 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) worsened, prompting South Korea to seek alternative suppliers and boost domestic production.

The government also said 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 impact of rising energy prices, its exports to the Middle East account for only about 3%. Kiwoom Securities analysts note that recent South Korean exports are driven by the IT boom centered on semiconductors and AI investment cycles. Previously, global slowdown reduced semiconductor demand, but now increased AI investments are the main driver. Given government policy responses, the short-term impact on South Korea’s real economy is expected to remain limited.

In response to the Middle East situation, South Korean President Yoon Suk-yeol on March 5th instructed relevant departments to quickly implement a market stabilization plan worth 100 trillion won to prevent financial market risks. He also emphasized that while formulating emergency supply and demand stabilization measures for crude oil, natural gas, and naphtha, efforts should be made to diversify import sources rapidly.