If someone were to mention neon gas, an image of a glowing sign would probably come to mind.
Yet there’s a far more important application for the noble gas… semiconductor production.
The media has recently made a big fuss about neon gas and how there will be a shortage caused by the crisis in Ukraine… and that this will upset the already overtaxed semiconductor industry.
The reason? Between 45–54% of the world’s neon gas used for semiconductor manufacturing is made by two Ukrainian companies – Ingas and Cryoin.
Of course, the war has shut down those plants… hence the panic.
Yet the context is critically important to understand.
Neon gas is a byproduct of steelmaking, and it is further refined to 99.99% purity to help produce semiconductors.
As a result, several countries around the world are capable of increasing neon production. China, India, South Korea, the United States, and even Japan come to mind.
And industrial gas companies like Air Products (APD) and Linde (LIN) have stockpiled and can produce more of the gas.
So while it may take a few months to scale up production of neon gas, there are enough stockpiles of neon to keep the industry running.
Even more important, however, is that we only use neon in deep ultraviolet (DUV) machines, not in bleeding-edge, extreme ultraviolet (EUV) machines.
EUV machines are the ones necessary to manufacture the most advanced semiconductors for smartphones, computing systems, and artificial intelligence (AI) applications.
So for the most advanced semiconductor production, neon gas is not required at all.
That means neon gas will be a short-term problem for the semiconductor industry, if at all.
Yet there’s one other potential problem looming on the horizon that could have a much greater impact…
A Creeping Occupation
While the world is distracted by the impacts of the war going on in Ukraine, there’s a far greater threat to semiconductors that I foresee.
And that’s the tension between China and Taiwan.
This geopolitical chaos could provide an opportune moment for China to make a move to take over Taiwan.
I don’t believe that it will be a violent takeover. A much more likely scenario will be along the lines of what transpired in Hong Kong – a slow administrative takeover of the island.
Therefore, it won’t be an “invasion” like the one that we’re seeing in Ukraine, but more like a creeping occupation.
China has a clear interest in taking control of Taiwan. Right now, Taiwan is the No. 1 country in the world when it comes to semiconductor manufacturing.
Taiwan Semiconductor Manufacturing Company (TSM) alone makes about 92% of the world’s most advanced semiconductors. It also makes around 60% of the less advanced chips our cars need.
As a result, it would be devastating to see it fall under China’s chokehold. Taiwan-based chipmakers are responsible for the semis in almost all of our electronics – from medical devices and home appliances to our cars and phones and beyond.
This would give China the ability to control, alter, allocate, or completely stop the supply of key semiconductors in electronics that we use and need every day.
Ultimately, I see this as a far greater threat to semiconductors… and the world as a whole. And I’ll continue to watch this scenario closely to keep my readers up to date as this risk evolves…
The State of the Tech Market
Geopolitical concerns are a reality every investor must face. They can have an outsize effect on our portfolios…
Yet conflict around the world is just one of the issues currently making headlines. We’re currently seeing rapidly climbing inflation… concerns about energy production… and continued supply chain problems.
That’s one reason I’ve been working hard to prepare my readers for the coming months.
We need a way to profit despite what’s going on in the world… and no matter what the overall markets are doing.
And I’ve found it.
There’s an investment strategy often relegated to the Wall Street elite… the Silicon Valley insiders… and America’s wealthiest families.
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And now, these investments are going to help us make truly generational wealth.
Tonight, at 8 p.m. ET, I’m going to hold a State of Tech Market strategy session to discuss all the details.
There, I’ll explain exactly what this unique asset class is… and how to get started.
So please, plan to attend this event. You can sign up by going right here.
And I’ll look forward to seeing you tonight!
Editor, The Bleeding Edge
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