When Iran effectively closed the Strait of Hormuz in late February, choking off the corridor through which a fifth of the world’s oil and gas flows, the immediate consequences were predictable: crude prices spiked, energy markets convulsed, and geopolitical analysts reached for their most alarming adjectives. What fewer people anticipated was how quickly the crisis would travel up the petrochemical chain and land, with considerable force, on Asia’s semiconductor industry.

South Korea, home to Samsung and SK Hynix, the two companies that between them control roughly 70 per cent of the global DRAM market and 80 per cent of high-bandwidth memory production, finds itself at the sharpest end of this disruption. The country imports about 45 per cent of its naphtha, a critical petrochemical feedstock, and roughly 77 per cent of those imports have historically arrived from the Middle East. That supply line is now, for all practical purposes, severed.

On Monday, South Korea’s Ministry of Trade, Industry and Resource confirmed the import of 27,000 tonnes of Russian naphtha, the country’s first such purchase since the outbreak of the US-Israel war with Iran. The buyer was LG Chem, the country’s largest chemical company, which directed the shipment to the Daesan industrial complex in South Chungcheong Province. The transaction was made possible by a temporary US sanctions waiver permitting Russian cargoes already in transit to complete sales and offloading between 12 March and 11 April, with Washington confirming that non-dollar payments would not trigger secondary sanctions.

The purchase is not a strategic pivot so much as an act of triage. LG Chem had already been forced to shut down the No. 2 naphtha cracker at its Yeosu complex, an 800,000 tonne-per-year facility, after it could no longer secure sufficient feedstock. It is not alone. Yeochun NCC has declared force majeure on its contracts, and both Lotte Chemical and LG Chem have warned customers that further declarations may follow. Industry officials say inventories across South Korea’s petrochemical sector have dwindled to roughly two weeks.

The 💜 of EU tech

The latest rumblings from the EU tech scene, a story from our wise ol’ founder Boris, and some questionable AI art. It’s free, every week, in your inbox. Sign up now!

The crisis prompted Seoul to take its most aggressive supply-side intervention in years. Since Friday, South Korea has enforced a ban on naphtha exports, requiring refiners to redirect the roughly 11 per cent of domestically produced naphtha that was previously shipped abroad. The government has also taken powers to order production and allocation of naphtha under emergency provisions.

The semiconductor connection

Naphtha’s role in chipmaking is less obvious than its role in plastics, but no less consequential. Its derivatives, olefins and aromatics, are processed into the high-purity chemicals, solvents, and plastics required for chip fabrication, including photoresist coatings used in circuit patterning and cleaning agents essential to wafer processing. Ethylene, produced from naphtha cracking, is sometimes described as the “rice of industry” in South Korea for its ubiquity across manufacturing.

But naphtha is only one thread in a broader web of disruption. South Korea’s industry ministry has identified 14 items in semiconductor supply chains facing severe exposure from the Middle East conflict. Among the most critical is helium, used to cool silicon wafers during fabrication and widely considered to have no viable substitute. Qatar, which accounts for more than a third of global helium production, halted output at its 77 million tonne-per-annum facility on 2 March after Iranian drone strikes forced the Ras Laffan complex offline. In 2025, South Korea imported nearly 65 per cent of its helium from Qatar.

Bromine, another essential element used in circuit formation and chip inspection equipment, presents a similarly concentrated risk. Approximately two thirds of the world’s bromine comes from Israel and Jordan, and South Korea currently sources 90 per cent of its supply from Israel.

Beyond South Korea

The vulnerability is not uniquely Korean, though South Korea’s exposure is the most acute. Japan sources roughly 42 per cent of its naphtha from the Middle East, and several Japanese petrochemical firms have announced production cuts. Taiwan, which manufactures approximately 90 per cent of the world’s most advanced semiconductors through TSMC, imports about 97 per cent of its energy needs, with roughly a third of its liquefied natural gas linked to Middle Eastern suppliers.

For now, the major chipmakers are maintaining a posture of cautious reassurance. SK Hynix has said it has diversified its helium supply and holds sufficient inventory. TSMC has acknowledged it is monitoring the situation but does not currently anticipate a notable impact from the Qatar production halt. GlobalFoundries has said mitigation plans are in place.

The reassurances may prove justified if the conflict is short-lived. But the naphtha crisis arrives at a moment when the semiconductor industry can least afford supply disruptions. Samsung and SK Hynix posted record performances in 2025, driven by unprecedented demand for AI memory chips, and both companies had planned aggressive production expansions for 2026 to feed the insatiable appetite of AI infrastructure buildouts. The irony is that the same geopolitical instability threatening chip supply chains is simultaneously accelerating demand: companies are spending billions on AI data centres, driving the very memory chip hunger that makes disruption so costly.

By 25 March, spot naphtha prices in Singapore had breached $1,000 per metric tonne, a roughly 60 per cent increase from a month earlier. Northeast Asian benchmarks were assessed even higher, between $1,010 and $1,050 per tonne. Analysts at consulting firm Kornbluth Helium Consulting have estimated a minimum two-to-three-month shutdown of helium production, with four to six months before the supply chain returns to normal.

The 11 April deadline on the US sanctions waiver looms large. After that date, the legal pathway for Russian naphtha imports closes unless Washington extends the exemption, and the 27,000 tonnes LG Chem has secured will not last long. South Korea’s chip industry, which powered a record year in 2025 on the back of the AI boom, now faces a question it never expected to confront: not whether it can make enough chips, but whether it can source the raw materials and energy to keep the lights on at all.