Geopolitical scholars define globalisation as a process in which the world is interconnected and interlinked in such a manner that an event on one side of the globe will affect events on the other.
The practical application of this theoretical idea is evident in the ongoing conflict in West Asia. The war that’s been ongoing in the Gulf since February 28 has severely impacted the other parts of the world. Almost all regions and sectors are witnessing their repercussions at an unprecedented scale. The semiconductor production and the supply chain associated with it are one such arena.
The protracted conflict in the Gulf has posed a direct threat to global semiconductor production. This connection has received less attention than the oil price shock, but may prove equally consequential.
Countries far from the war zone are also experiencing outsized shocks, triggering dramatic economic effects across the globe.
Ripples across the globe
South Korea, a booming semiconductor trade hub, has seen its stock market plunge 18 per cent since the war began, wiping out more than $500 billion in market value.
Taiwan, which produces the vast majority of the world’s advanced chips, relies on imports for 97 per cent of its energy needs, including liquefied natural gas (LNG) that cannot currently transit the Strait of Hormuz due to the ongoing blockade.
The semiconductor industry depends on a range of raw materials, from Bromine to Helium, the majority of which are produced and supplied by the Gulf. Both of these are critical to semiconductor manufacturing. Helium is primarily used for ultra-clean cooling, and bromine for precision circuit etching. Helium is also essential for controlling temperatures during chip manufacturing, while bromine enables high-precision etching of patterns on silicon wafers.
Experts have long warned of this import dependency on the Gulf, which remains vulnerable to supply chain shocks. In other words, the war in Iran and the closure of the Strait of Hormuz haven’t actually created this problem. Instead, it has revealed how a decades‑old dependence has become far more dangerous for an energy-poor economy.
Analysts warn that if the strait remains blocked for long, the war’s economic damage won’t be confined to energy markets alone but will ripple through other industries that depend on the chips that power the modern world.
