(Yicai) March 12 -- Prolonged instability in the Middle East could disrupt supplies of key materials used in chip manufacturing, while rising energy costs may slow the construction of artificial intelligence data centers and dampen chip demand, industry experts said, as markets grow increasingly concerned about the conflict’s potential impact on the semiconductor sector.

The turmoil could disrupt chipmakers’ operations, especially when it comes to sourcing helium and bromine, said Ray Wang, a memory analyst at SemiAnalysis. Global chip manufacturers may need to adjust how they procure these critical materials.

Qatar accounts for more than one-third of the world's helium production, according to data from the US Geological Survey. Helium is used for cooling during chip manufacturing and is also essential in photolithography, which is a key technology used to print complex circuits onto chips. At present, there are no viable substitutes.

Not only is helium production affected, but with the strategically important Strait of Hormuz effectively closed, transporting helium out of the Middle East may also become increasingly difficult.

If the Strait of Hormuz remains shut for a prolonged period, more than a quarter of the world's helium supply will be unable to reach global markets, said Phil Kornbluth, president of US consulting firm Kornbluth Helium Consulting.

Bromine, which is another key element used in semiconductor manufacturing, is also drawing significant interest. Approximately two-thirds of the world’s bromine comes from Israel and Jordan, according to the US Geological Survey.

In addition to potential disruptions to supplies of key materials, market participants are also concerned that rising energy costs resulting from the conflict could affect the building of AI data centers.

AI data centers consume roughly three to five times as much electricity as conventional data centers, said Yu Jingjie, a stock analyst at US investment research firm Morningstar. Given the US' heavy reliance on crude oil, surging oil prices could significantly hike the cost of operating AI data centers. This could sharply raise the total cost of ownership for hyperscale data centers and pose a threat to the broader rollout of AI infrastructure.

Electricity accounts for about half of a data center’s operating costs and roughly half of that power is used by memory systems, said Huang Mingsheng, research director at market research firm Counterpoint Research. Therefore, if memory prices continue to rise due to supply chain instability and energy costs also increase, customers running data centers may cut back on AI investment and reduce their demand for semiconductors.

Editor: Kim Taylor