Automakers brace for second chip crisis as Russia-Ukraine war intensifies: Report

Neon is used to manufacture microchips and 70 percent of its supply comes from Ukraine, where conflict is currently taking place between Russia and Ukraine.

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Ukraine is among the primary exporters for a critical raw material used to manufacture microchips, which will soon impact new car manufacturing as the Ukraine-Russia conflict Intensifies. As a result, automakers are bracing themselves for new production disruptions due to the withdrawal of critical parts and supplies that have plagued the industry since 2020.

Seventy percent of the world's neon comes from Ukraine, which is used to power lasers that manufacture microchips. In the midst of solving microchip supply chain issues, this new resource shortage may make things more challenging.

In addition, the Russian Federation is also a significant producer of neon, but the trade sanctions prevent it from trading, leaving the world in an awkward position in terms of neon supply.

The CEO of the Centre for Automotive Research, Carla Bailo, told Auto News, “Of course, people will look for alternative sources of neon as quickly as they can — but that's not something that can just be switched on.”

Several chip manufacturers are reported to have stockpiled neon in anticipation of the current conflict. Therefore, the production of chips will not be affected immediately, unless things improve. If this isn't the case, we may experience a reduction in vehicles and other products which rely on microchips.

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