Chinese suppliers of noble gases such as krypton, xenon and neon, key materials in chipmaking, are churning out products to meet the surge in orders. Fears are growing that it could cause unprecedented supply disruptions after trade activity at the southern port of Ukraine, a globally important exporter of the rare gas, was reported to have been disrupted.

While the Ukraine issue has escalated and has been exacerbated by sweeping U.S.-led Western sanctions on Russia, industry insiders say the disruptions will push the semiconductor-related industry to tilt toward countries such as China to fend off risks.

On Monday, several Chinese noble gas producers said their daily inquiries for orders from home and abroad had increased five to sixfold due to the military conflict in Ukraine. A large domestic inert gas producer said it received dozens of inquiries for new orders every day, compared with three to five in the past, mostly from domestic and foreign semiconductor makers.

Speculation about inert gases in the chip industry is growing amid the rapidly changing situation in Ukraine, the manufacturer said. The company produces krypton, xenon and neon gases for international customers. The company said that despite the additional demand, it has reached its production cap and capacity expansion will take time.

Ukraine is a major exporter of noble gases, with neon accounting for 70 percent of global supply and krypton 30 percent, according to the China Industrial Gas Industry Association.

Market prices for the noble gas have soared as trade activity has been suspended, including some large shipping lines at the main southern port of Odessa, Ukraine.

For example, the price of neon gas in China’s domestic market has exceeded 1,650 yuan ($261.5) per cubic meter, up 65% from the start of the year and quadrupling from the October 2021 low.

Ma Yinchuan, president of the China Industrial Gas Industry Association and general manager of Beijing Shougang Natural Gas Co., Ltd., a large domestic natural gas producer, said there had been a marked increase in inquiries from new and old customers this week, all asking about the price and supply of inert gas.

“A chip manufacturer came to us today and asked to urgently purchase dozens of cubic meters of xenon gas, which is a lot of money for us, because our annual output of xenon gas is 200-300 cubic meters,” Ma Yinchuan Say.

While the demand for more noble gases is understandable, Ma Yinchuan said there is no need to worry too much about market shortages.

“Even if the noble gas in Ukraine may be interrupted now, its impact on market supply should be manageable, as most domestic companies will hold inventories for at least 3-6 months,” Ma Yinchuan said.

Jiefa Technology, a semiconductor-related company based in Hefei, eastern China’s Anhui province, said it was in close communication with industry chain partners, including TSMC, on the potential impact of the changing situation in Europe.

According to Jiefa Technology, the company’s business has not been affected at present, and it will not be affected in the short and medium term. “The upstream supply chain of chip foundries is relatively long, and even if some inert gases are in short supply upstream, it will take a certain amount of time to deliver them downstream,” said a source from Jiefa Technology.

According to recent media reports, in the face of the Ukraine problem, international semiconductor-related companies, including ASML, are looking for a diversified source of neon gas.

Ma Yinchuan said that China has always been self-sufficient in krypton, xenon and neon, but supply may tighten as global demand for China increases.