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Ukraine is a major producer of neon gas, critical for lasers used in chipmaking

958 points| swores | 4 years ago |reuters.com

422 comments

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Some comments were deferred for faster rendering.

perihelions|4 years ago

I've found the reason (I think) 90% of the world's semiconductor-grade neon production is concentrated in one country. Per this German government whitepaper about the noble gas industry: the USSR massively overinvested in neon capacity in the 1980's, in order to build space-based excimer laser weapons. Ukraine's extant plants date (probably) to the 1980's; they're responsible for a global oversupply that's persisted since the Cold War.

- "Neon was regarded as a strategic resource in the former Soviet Union, because it was believed to be required for the intended production of laser weapons for missile and satellite defence purposes in the 1980s. Accordingly, all major air separation units in the Soviet Union were equipped with neon, but also krypton and xenon, enrichment facilities or, in some cases, purification plants (cf. Sections 5.4 and 5.5). The domestic Soviet supply of neon was extremely large but demand low."

- "Following the collapse of the Soviet Union, global crude neon production was approximately 500–600 million l/a (= 500,000–600,000 m3/a). It was dominated by far by large-scale air separation units associated with metallurgical combines in Russia and Ukraine. Simultaneously, demand was estimated at around 300 million l/a (cf. Section 4.2). In the years between 1990 and 2012, therefore, most crude neon was not purified, but released into the atmosphere, because there was no customer base."

https://www.deutsche-rohstoffagentur.de/DE/Gemeinsames/Produ... (chapter 5.2)

For context, this would have overlapped with Energia/Buran's launch of the Polyus weapon (which was a megawatt CO2 laser).

https://en.wikipedia.org/wiki/Polyus_(spacecraft)

credit_guy|4 years ago

Given this piece of information, it's hard to see how 500-600,000 m3/a could be used for the lasers used in chip manufacture. Even if the whole world production drops by 99.9%, there's probably going to be more than enough for those lasers to continue working.

Edit: it also appears that the current state of the art chip manufacturing does not use excimer lasers anymore [1], and the prior generations used them, but not with Neon, but rather with Kripton and Argon.

[1] https://en.wikipedia.org/wiki/Excimer_laser#Photolithography

raxxorrax|4 years ago

Investing in Neon in the 70s seems to be a somewhat forward looking and almost prophetic strategy in preparation for the next decade.

perihelions|4 years ago

How is neon extracted and why does one country have a 90% monopoly (in this specific grade)?

edit: Found this C&EN story from 2016 that adds context:

- "Chip makers, which account for more than 90% of global neon consumption, are already experiencing high prices and some shortages stemming from the Russian conflict with Ukraine, Shon-Roy says. The war, which started in 2014, interrupted global supplies of the gas, about 70% of which comes from Iceblick, a firm based in the Ukrainian city of Odessa."

- "Iceblick gathers and purifies neon from large cryogenic air separation units that supply oxygen and nitrogen to steelmakers. Most of the air separation units equipped to capture neon, which makes up only 18.2 ppm of the atmosphere by volume, are in Eastern Europe."

https://pubs.acs.org/doi/10.1021/cen-09410-notw7

This is puzzling to me, because I don't get why air separation should naturally concentrate in exactly one place. It's not tied to a rare and localized geologic formation, like helium sort-of is.

Also there's cryogenic air separation plants all over the planet, why don't they do neon too? (Asking in the spirit of curiosity)

edit #2: I've just found something that offers a possible explanation and it's far more interesting than I expected:

- "Neon was regarded as a strategic resource in the former Soviet Union, because it was believed to be required for the intended production of laser weapons for missile and satellite defence purposes in the 1980s. Accordingly, all major air separation units in the Soviet Union were equipped with neon, but also krypton and xenon, enrichment facilities or, in some cases, purification plants (cf. Sections 5.4 and 5.5). The domestic Soviet supply of neon was extremely large but demand low."

https://www.deutsche-rohstoffagentur.de/DE/Gemeinsames/Produ... (chapter 5.2)

roughly|4 years ago

Scale and geographic concentration tend to push prices lower, even if just fractionally, and relatively low costs of transport for basically anything in the world mean there's no penalty for buying from far away, so there aren't many factors pushing back from geographic concentration. Add to that concentration in other industries - a market with fewer larger buyers means larger average individual demand than otherwise, which pushes towards larger or more concentrated suppliers.

Loosely, there's a lot of economic push towards concentration, and not a lot pushing against it. Geopolitics usually operates on a slower scale than market pressures, which means we get weird things like a vested interest in Ukrainian national security due to it being the only country bothering to manufacture neon in the world.

tempnow987|4 years ago

I think it might be tied to steelmaking? Ie, if you are already doing work to generate oxy and nitrogen, getting a byproduct like neon is easier?

So CAN the USA separate air? For sure. Maybe it's just cheaper. A lot of these stories about disruptions are disruptions of the CHEAP option.

Supermancho|4 years ago

> How is neon extracted and why does one country have a 90% monopoly

Monopoly is a misused term. Many monopolies around the world are market capture due to being sunk cost low price leaders. Replace "monopoly" with "cornered the market".

Jiro|4 years ago

Neon is not the main reason they are doing it. It's a byproduct that gives them a little extra profit once they've distilled the air anyway for other reasons. Distilling the air just to get neon wouldn't be profitable.

daniel-cussen|4 years ago

It's funny I was talking to precisely a steelmaker about imports and exporters some time ago: "The American is no patriot, if steel is 30% cheaper in Japan, he will buy it there rather than at home." It looks like, in fact, these Ukranians, also in the steel industry, might actually be doing something patriotic--like people all over the world, America too--and keep the surely very tricky and specific technology to themselves.

It's not unlike German "hidden champions", companies that figured out a niche safe from industrial espionage, usually something involving very precise know-how regarding something analog, and nobody can do it like they can. German hidden champions are generally family-owned, rather than public companies, and prefer it that way; they stay in Germany typically; and there are 300 of them by some reasonable reckoning. They make the critical thing that goes in the thing that goes in the thing.

Taiwan does something similar--they see their chip industry, which is also very dependent on human know-how and highly analog, high precision--as a patriotic endeavor that protects their sovereignty economically and geopolitically.

So, apparently the reason neon comes from Ukraine is some pretty smart Ukrainians wanted it that way, for the good of Ukraine, and specifically for Ukrainian sovereignty to matter to the rest of the world.

staplers|4 years ago

As with chip making, it can be done anywhere but the tools and factories setup to mass produce are concentrated in certain areas. That's just how industry works sometimes.

It takes time to setup new supply chains for mass production.

nbernard|4 years ago

As I understand it, it could be that air separation occurs elsewhere, at different places, and that only purification to extract semiconductor-grade neon is done by Iceblick in Odessa.

saba2008|4 years ago

It can be also tied to bespoke equipment, hard-to-transfer expertise and experience. If consumption grows relatively slow, it makes sense to expand single installation, rather than duplicate it with 'copy exactly (which might take too long to pay off).

CharlieFinch|4 years ago

Ukraine supplies 90% high grade semiconductor global neon from it's iron ore mines. https://venturebeat.com/2022/02/24/ukraine-supplies-90-perce...

Key iron ore mine locations have been ''annexed'' by recent Russian invasion - Crimea, etc. in a pincer like strategic configuration. Please see map

https://www.mining-technology.com/projects/shymanivske-iron-...

Ninety per cent of neon production is in Russia and Ukraine.[43] As of 2020, the company Iceblick, with plants in Odessa and Moscow, supplies 65 per cent of the world's production of neon, as well as 15% of the krypton and xenon.[44][45]

Neon gas is extracted as a byproduct of iron smelting from neon rich iron ore.

adrian_b|4 years ago

Obviously the monopoly was due to the fact that they were able to sell it at the cheapest price for the required purity.

There should be no significant problems to create production capacities in other places, but then the price would become higher and, more importantly, a few months or even years might be needed until the neon production would be increased enough to compensate for a sudden loss of the source from Ukraine.

baybal2|4 years ago

> How is neon extracted and why does one country have a 90% monopoly (in this specific grade)?

"Specific grade" - you need very, very, very high purity gasses for lasers.

Noble gasses are very, very, very hard to purify because they are chemically inert.

Welding gas (argon) is dirt cheap, 99.99% pure argon is surprisingly expensive, and semiconductor grade Argon, or Neon at 99.99999%+ purity far more.

Ultrapure neon is a great example of a single source critical input for the semiconductor industry. There are hundreds of similar small companies around the world supplying something completely irreplaceable.

Semiconductor industry is extremely fragile.

pier25|4 years ago

We should be talking about grain, not gas.

Russia is the biggest exporter of wheat in the world with 18%. Ukraine accounts for 7% of the world's wheat.

https://www.aljazeera.com/news/2022/2/17/infographic-russia-...

This conflict will affect 1/4 of the world's wheat which will affect food prices.

In 2010 Russia stopped exporting wheat due to wildfires burning their fields (most likely caused by climate change). This caused a hike in food prices which helped trigger the Arab revolutions in 2011.

https://en.wikipedia.org/wiki/2010_Russian_wildfires

rplnt|4 years ago

> This conflict will affect 1/4 of the world's wheat which will affect food prices.

That's not 1/4 of worldwide wheat production, but 1/4 of exports of wheat. Those are numbers that differ by orders of magnitude.

immmmmm|4 years ago

We should be talking about human lives.

My Ukrainian colleague was terrified for his family today.

baybal2|4 years ago

Worse, you have to add Kazakhstan, which is now under a Russian thumb too, and Uzbekistan.

krazerlasers|4 years ago

I was personally hit by this back in 2015 as a grad student. We called up our process gas supplier and asked for a k-cylinder of Neon and were laughed off the phone, so we ended up running our experiment on krypton for setup and used a lecture bottle of Neon that a partner lab had left over for the few minutes of data collection we needed to get our result[1].

At the time, we were cursing the semi industry for using up all of the remaining Neon with their billion dollar operating budgets...

[1]https://iopscience.iop.org/article/10.1088/0953-4075/49/15/1...

blobbers|4 years ago

While the trade implications of this war are being consider, let's think of the lives of our fellow hackers. These are people who along side us develop the software of the world.

They're not necessarily soldiers, they're just regular people and right now there are missiles flying at their homes, tanks in their streets.

Surely there is a way we can help the people.

k0k0r0|4 years ago

Yeah, anyone an idea? There is outages of the internet and mobile communications in some areas? For example is there anything one can do forom here about that?

dogma1138|4 years ago

And Russia produces 50% of the worlds palladium which is critical for manufacturing ceramic capacitors.

Looks like we’re stuck between the hammer and the sickle…

Panoramix|4 years ago

The article quotes 35%.

dboreham|4 years ago

Palladium is also mined in Montana.

r00fus|4 years ago

Russia is not a communist country. That was the USSR. Your reference, while clever, is quite outdated.

jcadam|4 years ago

I'm more concerned about Ukraine's wheat exports, personally. Likely to become a critical issue much more quickly than neon gas.

contingencies|4 years ago

Well given the UN FAO already reported massive world food price growth driven by agricultural commodities, and the US, UK, Europe and China have all reported massive food price growth, this isn't going to help. The winners will be the large-scale agricultural commodities trading houses such as Cargill. They see this stuff coming and hedge appropriately before it happens.

baq|4 years ago

and corn. ZC=F today was crazy.

vondur|4 years ago

Since it's extracted from the air, it shouldn't be too hard to start doing it here. I assume we do this for other gases already, so ramping it up for Neon may not be that difficult.

MisterTea|4 years ago

This is exactly why this is a non-issue. It's not like the air over the Ukraine is magically richer in neon.

Borrible|4 years ago

I'm more concerned about the probable loss of wheat supplies to the near east, especially Turkey and Egypt. But of course,they could just eat Revani or Basbousa instead.

londons_explore|4 years ago

Wheat is pretty easy to ship, and globally is usually 'overproduced' due to farm subsidies. People won't be going hungry just because one countries production stopped.

amelius|4 years ago

EU and US response to Russia is totally ineffective. They should have moved troops in from the beginning.

scyzoryk_xyz|4 years ago

And risked an enormous escalation with a nuclear power? That would be reckless.

Don't get me wrong - I would also like to see decisive action to this attack. But escalating a relatively local dispute into a conflict between world powers would risk a WW. Moving in troops into a non-NATO ally would also be extremely difficult to explain on the world stage.

There probably is decisive action being implemented behind the scenes right now, it's just not visible to the public.

EastSmith|4 years ago

Probably a long and slow game to win economically (as in the First Cold War).

jamesy0ung|4 years ago

US and EU are superpowers. Superpowers fighting would have caused WW3.

gjsman-1000|4 years ago

First Crimea. Then Hong Kong. Then Afghanistan. Now Ukraine. Next Taiwan.

tintor|4 years ago

You left out Kosovo.

twarge|4 years ago

Here in NJ they separate neon from the air. This is not a problem.

londons_explore|4 years ago

Neon is a byproduct of producing liquid nitrogen, oxygen and other gas products.

Many other plants could start producing neon pretty easily. They just haven't so far because neon isn't profitable to produce and sell. But with a relatively-large but globally-insignificant price increase it would be.

Yuioup|4 years ago

Not anymore they're not. Time to find another supplier.

darkhorn|4 years ago

Some Russian products that you would like to avoid:

* Yandex * Lukoil * WinRAR * Kaspersky * Lada * Russian Standard Original Vodka * Stoli Vodka * Baltika * Lukoil * Gazprom * Kamaz * Masha and the Bear * Kalashnikov * Stolichnaya * Ural motorcycles * VK

bogomipz|4 years ago

First of all Stoli and Stolichnaya are the same thing. The former is a nickname. Further the Stoli vodka available outside of Russia is produced in Riga, Latvia[1] by SPI Group. Latvia is a member of both the EU and NATO. Boycotting this spirit would be as misguided as it is misinformed. Please don't post stuff like this without at least doing a tiny bit of research first.

[1] https://www.theatlantic.com/international/archive/2013/08/ga...

nomel|4 years ago

Could you explain the motivation for avoiding these? Are they run by the government? Is there a risk that they will be? If not, why exactly should I have a problem with Russian software developers?

Aeolun|4 years ago

I don’t think anyone needs any prodding to stop using Kaspersky.

stjohnswarts|4 years ago

Yandex was the only one for me. I blocked it on all the hosts files under my control and my pihole network dns

mrweasel|4 years ago

WinRAR/rarlabs is a German company.

phkahler|4 years ago

Time to move on to free electron lasers powered by compact accelerators.

sycren|4 years ago

So what happens to the chipmaking industry in the event of a Russian occupation of Ukraine and a Chinese occupation of Taiwan?

aj7|4 years ago

With some loss of performance, I think the excimer laser gas mix could use only He as an admix gas.

tgflynn|4 years ago

Can someone explain why neon is critical for "lasers used in chip manufacturing" ? I don't think they'd be using He-Ne lasers, and if they are I would think those could be replaced fairly easily with solid-state lasers.

krazerlasers|4 years ago

Somewhat counterintuitively, the primary gas species used in excimer lasers are noble gasses. A typical gas mix for a 193nm excimer laser would be ~97% neon and just a few percent of the actual argon/fluorine excimer mix. [1]

Since you mentioned them -- as hard as it may be to believe -- HeNe lasers are only just beginning to be phased out in the semi industry in the somewhat esoteric use case of precision position measurement using interferometry. The output wavelength of a HeNe lase is extremely stable--with a simple feedback loop on the cavity length (ie, temperature) a HeNe laser is essentially an atomic clock locked to the 473.612248 THz 5s2 → 3p HeNe line. Interferometers built around such systems can accurately measure sub-nanometer displacements and are able to achieve a lifetime absolute stability of better than 10ppb--comparable to a rubidium atomic clock! [2]

[1] https://www.linde-gas.com/en/images/Gasworld%20Excimer%20Las...

[2] https://www.repairfaq.org/sam/laserhst.htm#hstish3

perihelions|4 years ago

Deep-ultraviolet excimer lasers, I think (?). Not a domain expert!

- "Excimer laser gas mixtures are a combination of rare gases (argon, krypton, xenon, or neon) and halogen gases (fluorine or chlorine). The mixture of gases determines the wavelength of DUV light produced. Argon+fluorine+neon (193nm) and Krypton+fluorine+neon (248nm) are the two most common mixtures used. In terms of volume; neon makes up approximately 96–97.5% of the mixture."

https://www.linde-gas.com/en/images/Gasworld%20Excimer%20Las...

jbay808|4 years ago

There could very well be HeNe lasers used as an interferometric length standard in lithography equipment. There are some solid-state lasers that could substitute for that role, such as NPRO lasers, but they're much more expensive and not widely produced.

eanc|4 years ago

I'm glad to see we have the right reasons at heart for caring about human events.

Aeolun|4 years ago

Dunno, feels like a tech related excuse to talk about current events on here.

nomel|4 years ago

There are many externalities of war. They're all bad, all important, and all worth talking about, to help prevent wars.

MrYellowP|4 years ago

After all those lies I've been told over and over and over again, over decades, about all those countries which got invaded by the US, bombed by the US, had their governments overthrown by the US ...

... why would I believe them about Russia?

Based on an image in a news-livestream yesterday, targets are solely military structures. The reporter did not fail in trying to make russia look bad, showing actually no regard to the information itself.

Personally, I can absolutely understand the desire to remove military equipment next to my doorstep, especially when it's ran by a country which, FOR DECADES, used lies to take over countries and kill millions of people.

mblock|4 years ago

Didn’t Russia also say something like, laser weapons will be the future of warfare a while back?

ComradePhil|4 years ago

This headline is disinformation.

No, Ukraine doesn't produce neon. Russia produces it and sends it to Ukraine for processing and distribution. But, wait, there's more.

Ukranian company Iceblick is the major producer of neon. It has production facilities in Odessa, Ukraine and Moscow, Russia. But wait, there's more.

Iceblick is not a major producer of neon, Chinese companies produce a lot more... which is what is used in global chipmaking.

The claim in the article is that "[Ukraine] supplies more than 90% of U.S. semiconductor-grade neon"... which may not be true in the first place, but the modified title here suggests completely something else... which is blatantly false.

verisimi|4 years ago

Let's get that neon gas back!

tammer|4 years ago

well that explains a lot

atlantas|4 years ago

90%! Did we really let ourselves become so reliant on Ukraine and Taiwan for computer chips? Taiwan being the next country most under threat.

In fact, Reuters just reported that "Taiwan warns Chinese aircraft in its air defence zone"

https://www.reuters.com/world/asia-pacific/taiwan-reports-ni...

cbfrench|4 years ago

It’s worth noting that Chinese incursions into Taiwan’s ADIZ are a routine occurrence and don’t really represent any increase in aggression above the baseline:

“On Wednesday (February 23), two Chinese military jets flew into Taiwan's air defence identification zone (ADIZ), marking the 12th intrusion this month.”

https://www.wionews.com/world/two-chinese-fighter-jets-enter...

roughly|4 years ago

But we saved some money by shuttering all our factories and outsourcing everything, so, who's to say what the right answer was.

(/s)

philipkglass|4 years ago

Neon is used in excimer lasers that generate ultraviolet light. These lasers are used in photolithography and for annealing amorphous silicon to polycrystalline silicon in flat panel display manufacturing. Laser manufacturers and users already faced a Ukrainian neon crisis during the last round of fighting and made changes to reduce consumption of fresh neon:

https://www.photonicsonline.com/doc/how-one-light-source-man...

https://www.gigaphoton.com/wp-content/uploads/2017/10/2017_E...

I expect that neon price spikes this time are going to impact laser users less than they initially did back in 2015 since lasers now require less fresh neon.

wyldfire|4 years ago

Global trade has been a peacekeeping incentive for decades.

But despots don't act for the sake of the people's will, so it's not easy to account for that.

But anyways most markets are emergent, not planned strategically .

godelski|4 years ago

If you're a small country in a dangerous position isn't this probably the best strategy you can do?

PaywallBuster|4 years ago

I'd say its mostly about specialization

There could be 100s of companies selling NEON gas, but only a handful is producing NEON gas purified to the degree required by semiconductor industry.

In this case, it seems only one is supplying semiconductors

Rebelgecko|4 years ago

Doesn't that happen on more or less a weekly basis?

honkycat|4 years ago

It is so disgusting to me that we allowed our oligarch class to de-industrialize our country and ship all of the jobs and everything we built overseas.

100 years of industrialization and worker movements gutted, abandoned, and disassembled with the help of our two-faced neo-liberal[0] government.

And for what? 40 years of profit for the 1%? And then encountering the fact that we have outsourced ourselves into a profound strategic weakness in the international markets.

0: As in: Both sides, globalization. Not as in Dem vs Republican.

e40|4 years ago

How? Short vs long-term thinking.

And Xi moving on Taiwan at the start of increased activities in Ukraine was the thing feared the most. What a shitshow it would be if China invaded Taiwan. The pandemic shortages would pale in comparison.

livinglist|4 years ago

as a Chinese raised in China myself, this happens pretty regularly since years ago. I don’t think Winnie the Pooh has big balls to attack Taiwan in recent future. China has too much to lose right now.

zucker42|4 years ago

The nature of globalism is that there's many steps in the supply change that are dependent on one or two countries. Semiconductors are also dependent on the Netherlands (ASML) for example.

Also violations of the air defense zone, though not meaningless, are not super important. The air defense zone covers a part of mainland China larger than Taiwan, as well as waters that might at least be considered international waters. News articles about that are pretty pointless.

akmittal|4 years ago

I see same case with companies moving to aws

Maximus9000|4 years ago

Stockpiling is another option if you rely on something critical that is difficult to produce at home.

mvc|4 years ago

Are we in favor of economics/capitalism here or are we not?

Because the economics literature is quite clear that international trade is beneficial to all involved. It's what we insist that developing countries focus on exports when loaning them money. For many years, Taiwan has been the poster child that we point to when trying to change the ways of Cuba or Venezuela.

Are these principles so weak that we would allow a dictator who doesn't even have the support of his own people to shake them?

croes|4 years ago

Would we care without these dependencies?

rootsudo|4 years ago

I wonder what great name they'll think up next.

Operation Iraqi Liberation. OIL.

What fits CHIP?

gjsman-1000|4 years ago

Do you want a scary thought? Imagine if Taiwan gets invaded and China manages to steal all of America's computer chip designs. Technology problems solved.

Guthur|4 years ago

This is not the reason.

Pure and simply Russia needs people, its dying.

Low birth rate, high death rate, little immigration to make up the short fall (who wants to move to Russia :)), and to top off a weak economy that will struggle to support a small less active workforce. Interestingly Ukraine has pretty much the same population problem.

This will be increasingly common problem for countries as population growth slows.

replygirl|4 years ago

ukraine's population growth and birth rates have been negative and below russia's for some time now, so annexation only makes that worse per-capita.

it's not clear that a flattening of the growth rate is a bad thing for quality of life or economic security, in spite of how it affects an economy on paper

javajosh|4 years ago

Aging population implies a decades spike in demand for elder care. How does it imply an invasion?

partiallypro|4 years ago

The entire Western world is declining birth rates. It's very worrying. People complained about over population, but a nose dive in birth rates can become near irreversable.

umvi|4 years ago

Russia's actions make me nervous that China will be emboldened to do the same for Taiwan

nacs|4 years ago

I wonder if they'll also call the invasion a "peace keeping operation".

seanw444|4 years ago

It's a matter of when.

amelius|4 years ago

Yes this is scary. Chinese defense budget is considerable at 1/3 of US budget.

RspecMAuthortah|4 years ago

What would be some good stocks to invest to capitalize this? Perhaps some trading in Russian/Ukrainian Stock Exchange? Is there any significant US company listed in Nasdaq or NYSE in this space?

snemvalts|4 years ago

Don't put any money into both stock exchanges right now, especially the russian one.

YaBomm|4 years ago

[deleted]

ergthzerh3g|4 years ago

[deleted]

Aeolun|4 years ago

I’m not sure I would say ‘again’, he was wrong more often than not.

I’m inclined to believe that anything he said in regards to European countries sticking their heads in the sand is true though.

neves|4 years ago

No problem, the first thing invaders do is to extract and sell natural resources. See USA and Iraq oil.

redisman|4 years ago

Extract wheat in Ukraine in… February. Sure