The recent US-Iran war has introduced significant uncertainty into global supply chains. One of the most immediate economic risks lies in the potential disruption of the Strait of Hormuz, a narrow maritime chokepoint through which roughly 20% of global oil supply transits.
For semiconductor manufacturing, the implications extend beyond energy markets. The industry relies heavily on petrochemical derivatives, specialty gases and globally integrated logistics networks. Any disruption in energy markets or shipping routes can quickly cascade into rising costs for semiconductor materials and squeezing profit margins.
2. Terrain Analysis
Below are among the structural forces currently affecting semiconductor supply chains:
A) 20% of Oil & Gas Global Supply Disrupted
Due to the disruption and effective closure of the Strait of Hormuz, global energy markets have experienced significant volatility. The strait is one of the world’s most critical energy chokepoints, with roughly 20 million barrels of oil per day, around 20% of global supply passing through it, along with about 20% of global liquefied natural gas (LNG) trade.
Recent disruptions linked to the conflict have pushed crude prices sharply higher. Brent crude briefly surged toward $120 per barrel, the highest level since 2022, while analysts warn prices could exceed $100 per barrel if tanker flows through the strait remain constrained.
B) 30% of Helium Global Supply Disrupted
Qatar’s Ras Laffan produces 30% of the world’s helium supply, and it has been destroyed by Iranian drone strikes causing major disruption. Helium is used for essential for wafer cooling and advanced lithography; without it, high-volume fabrication lines cannot operate.
C) 66% of Global Bromine Production Disrupted
At the same time, Israel and Jordan account for about 66% of global bromine production, tightening supplies of hydrogen bromide (HBr) used in semiconductor etching and threatening memory chip output from firms like Samsung Electronics and SK Hynix.
D) Sulphuric Acid
A quieter bottleneck lies in sulphur, used to produce sulfuric acid, the primary wafer-cleaning chemical and a key reagent in copper extraction. Disruptions therefore affect both chip fabrication yields and the copper interconnect supply that underpins modern processors.
E) Petrochemical Dependencies & Energy Intensive Processes
Several materials used in semiconductor manufacturing depend indirectly on petrochemical supply chains or energy-intensive industrial processes.
These include:
- specialty gases used in etching and deposition
- chemical solvents used in wafer processing
- photoresists and polymer materials
- ultrapure chemicals used during fabrication
Because these materials are produced in a globally concentrated supply base, any disruption affecting upstream petrochemical production or logistics can quickly translate into price increases. If the logistics through the Strait of Hormuz or the Malacca Strait are compromised, these niche but vital chemicals cannot reach fabs in time, as they often have short shelf lives and require refrigerated transport.
Malaysia’s semiconductor ecosystem, while highly advanced in assembly and testing, remains reliant on imported materials for many of these inputs.
F) Financial Market Signals
Financial markets often provide early indicators of supply chain stress. Semiconductor-related indices and exchange-traded funds, such as the VanEck Semiconductor ETF, frequently react quickly to geopolitical developments.
Volatility in semiconductor equities often reflects investor expectations of rising input costs, potential production disruptions, or delays in capital investment. These signals highlight the sensitivity of the industry to geopolitical shocks.
3. Implications for Malaysian Semiconductor Manufacturing
Rising prices of materials will increase operational costs, squeeze the profit margins of manufacturers and cause inflation. Malaysia’s semiconductor ecosystem remains heavily reliant on imported wafers, chemicals, and process materials from key suppliers in Japan, South Korea, the United States, and Europe. If geopolitical tensions disrupt upstream production or logistics, Malaysian manufacturers may face limited short-term substitutes, reinforcing the need to strengthen supply chain diversification and resilience.
4. Suggested Actions
Below are some actions that may be considered by manufacturers:
I) Immediate actions should focus on rapid risk assessment. Manufacturers should map exposure to energy-sensitive inputs, review supplier concentration for critical materials and identify logistics dependencies across shipping routes and freight capacity. This provides a clear view of where geopolitical disruptions could translate into operational bottlenecks.
II) Medium-term priorities center on strengthening resilience. Manufacturers should diversify suppliers for critical materials, maintain strategic inventory buffers for hard-to-replace inputs, and implement digital supply-chain monitoring to improve real-time visibility across supplier networks.
III) Long-term strategy requires structural adjustments. Companies should deepen regional supply networks, incorporate geopolitical risk analysis into corporate planning, and redesign supply chains to balance efficiency with resilience.
Despite these challenges, Malaysia retains several structural advantages that can help cushion the impact of prolonged geopolitical disruption. Continued oil and gas revenues, a diversified export base, and ongoing industrial upgrading initiatives provide a degree of macroeconomic stability that supports industrial activity.
In addition, Malaysia is uniquely positioned within the semiconductor value chain as a global hub for outsourced semiconductor assembly and test (OSAT). The deep ecosystem of packaging, testing, and support services built over decades makes large-scale relocation both costly and operationally inefficient for many firms.
Conclusion
For manufacturers, the implication is clear: operations in Malaysia remain strategically viable, but resilience must be actively managed.
Companies should implement contingency plans immediately, stress-test supply chains for disruptions lasting weeks or months, and secure alternative suppliers or logistics routes where possible. With proactive planning, Malaysia’s industrial base and specialized semiconductor capabilities can continue to offer strong operational resilience despite external shocks.
In an era of heightened geopolitical volatility, resilience is no longer simply a defensive measure. For semiconductor manufacturers, it is becoming a core source of long-term competitive advantage. If you have questions about supply chain risk management, please do not hesitate to contact us at inquiries@aheaddetect.com.my.
References
1. Darcie Draudt-Véjares and Tim Sahay, “The Iran War Is Also Now a Semiconductor Problem.” Published by Carnegie Endowment for International Peace. Accessed at https://carnegieendowment.org/emissary/2026/03/iran-korea-semiconductor-chips-energy-oil-hormuz on 16 March 2026.
2. Luke James, “Qatar helium shutdown puts chip supply chain on a two-week clock — SK hynix forced to diversify after 30% of global supply removed from the market.” Published by Tom’s Hardware. Accessed at https://www.tomshardware.com/tech-industry/qatar-helium-shutdown-puts-chip-supply-chain-on-a-two-week-clock on 16 March 2026.
3. Arjun Kharpal and Dylan Butts, “How the Iran war and rising energy prices are threatening semiconductor demand.” Published on CNBC. Accessed at https://www.cnbc.com/2026/03/10/iran-war-semiconductor-memory-chip-impact.html on 16 March 2026.