Qatar's helium, Israel's bromine, and Middle Eastern oil: the Strait of Hormuz choking Korea's chip industry.

The Israel-Hamas war has driven up global oil prices. Many Asian countries that are far from the battlefield and highly dependent on Middle Eastern energy imports are experiencing disproportionate impacts, including the semiconductor industry, which faces soaring costs and increased supply chain risks. Among these, South Korea’s semiconductor-driven economy faces challenges; due to its long-standing 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 semiconductor industry, which accounts for about two-thirds of global storage chip supply, is worried that prolonged Iran conflicts will lead to rising energy costs and prices. If key materials cannot be procured from the Middle East, semiconductor production could be disrupted.

Recently, South Korean tech companies have been cutting costs and tightening their belts. According to South Korean media reports on the 16th, Samsung Electronics’ DX division set a goal to reduce costs by double digits percentage-wise compared to the previous year at its recent CFO meeting. Additionally, senior executives at the DX division at or below vice president level now always opt for economy class when flying flights under 10 hours.

Analysts point out that since South Korea leads in critical areas of the memory chip market, even if more chip production occurs outside 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 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 Korea is hindered, the global supply chain for AI computing and consumer electronics will be affected.

However, about 70% of Korea’s crude oil and 20% of 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. Rising energy prices will also increase logistics and production costs, squeezing corporate profits.

The impact of Middle Eastern tensions on Korea’s semiconductor sector is evident from the stock prices of the two major chip giants. Samsung and SK Hynix form the backbone of Korea’s chip industry, accounting for nearly 40% of the country’s stock market value. Last week, their market caps shrank by over 20% in two trading days, only rebounding after market stabilization.

Fossil fuels dominate 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 oil-driven.

A March article on the Carnegie Endowment for International Peace website pointed out that for years, the mismatch between Korea’s energy import needs and the electricity demand of advanced chip manufacturing 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 Korea pushes for higher chip output, energy demand will increase. The global largest chip cluster under construction in Yongin, Gyeonggi Province, is expected to partially operate by 2027, aiming to strengthen 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. Korea’s peak demand is about 94 GW, meaning the cluster will consume roughly 17% of the country’s peak electricity.

On the 16th, the 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 mitigate oil price increases caused by Middle Eastern tensions. Democratic Party lawmaker Ahn Do-jae told the media that 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 gradually complete maintenance on six nuclear reactors by mid-May, increasing nuclear power plant operation rates from below 70% to about 80%.

From Helium to Bromine, Korea’s Semiconductor Bottleneck Faces Impact

Affected by the conflict, Qatar Energy’s facilities were attacked by military forces in early March, leading to the suspension of LNG production, and the halt of helium production, which is closely linked to the semiconductor industry. The shutdown has reduced global helium supply by about 30%, directly impacting semiconductor manufacturing costs.

Qatar Energy announced on March 4th the invocation 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 transfer cryogenic equipment and re-verify supplier relationships, a process that could continue for months even after production resumes in Qatar.

South Korea is one of the most affected countries. According to the Korea International Trade Association’s 2025 statistics, Korea’s helium imports depend on Qatar for up to 64.7%. Semiconductor manufacturing relies heavily on helium to cool silicon wafers, with no feasible alternatives currently available.

As reported by Nikkei Asia Review on the 12th, Korea’s Ministry of Trade, Industry and Energy has launched a demand-supply survey covering 14 semiconductor materials and manufacturing equipment highly dependent on Middle Eastern sources. Besides helium supply concerns, Korea’s stable bromine supply is also increasingly worrying. Bromine is used in semiconductor circuit formation, with production highly concentrated in Israel and Jordan. Korea relies on Israel for 98% of its bromine imports.

SK Hynix stated that 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) also intensified, prompting Korea to seek alternative suppliers and promote domestic production.

The Korean government also stated that 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 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, a Korean financial services firm, believes that recent Korean exports are driven by the IT boom centered on semiconductors and AI investment cycles, which is a significant shift. Previously, global consumption slowdown would reduce semiconductor demand, but recently, increased AI investments by companies have become the main driver of semiconductor demand. With government policy responses, the short-term impact on Korea’s real economy is expected to remain limited.

Regarding the Middle East situation, President Yoon Suk-yeol on March 5th instructed relevant departments to swiftly implement a market stabilization plan worth 1,000 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 to diversify import sources should be accelerated.