The war in Ukraine is causing all kinds of hardship and suffering, but it is also affecting the rest of us. One of its less known but potentially significant impacts is a world shortage of the gas neon.

Why Does Neon Matter?

Neon gas is used as a buffer in krypton/argon lasers, which are used in photolithography. In plain English, it is used as part of the process of etching circuits onto a chip.

Without sufficient neon, the world’s chip manufacturers simply cannot manufacture enough chips. While neon is in the air all around us, it has to be extracted to be used in lasers. It is then released back into the air when the laser is used. It is not consumed (neon is a noble gas that does not react to others and thus cannot be destroyed), but it is essentially returned to nature.

Where Is It Used Now?

You may think of neon primarily as something that was used to make pretty colored lights. In fact, modern “neon” lighting is typically LED lighting, which uses a lot less power.

As mentioned, neon is used in lasers to etch computer chips. This is the primary global use of the gas. However, neon is also used for a number of other applications, including:

• High-voltage indicators and switching gear
• Lightning arresters
• Diving equipment
• Refrigeration

Why Is There a Shortage?

So, why is there a neon shortage, and what does it have to do with the war? It might seem strange to have a shortage of something we literally breathe. However, neon is present in Earth’s atmosphere at a low concentration, just 18 parts per million. What’s more, it has to be extracted.

You can’t capture it directly from the air, so it has to be distilled into a liquid form, separated out, and then purified. Typically this is done at facilities that are using this air separation technology for other purposes as well.

Those facilities are most often steel plants. The former Soviet Union had all kinds of things in mind for gas-based lasers, including space weapons, that never panned out. Because of this, though, they equipped some of their steel plants with neon-extracting technology, anticipating heavy use that only came much later.

It just so happened that much of the Soviet steel industry was in Ukraine. The rest was, of course, in Russia. The war has taken that capacity offline, which accounts for about a third of the neon produced in the world. China has been racing to produce more neon, but they are not making enough. When it comes to semiconductor-grade neon, which has to be particularly pure, half of it was produced in Ukraine.

What Does The Future Look Like?

For right now, chip companies have a stockpile of neon, but this is going to run out eventually. If the war continues, then the existing semiconductor shortage will expand and worsen.

This means a window of opportunity for alternative technologies that might allow chip production without neon, although none are close to the horizon. The stronger opportunity is, of course, for companies in other locations to ramp up neon production.

How Is The Industry Trying to Recover?

In the short term, chip manufacturers are handling the shortage by tweaking the way they use neon. This includes adjusting lasers to use less of the gas and attempting to capture and recycle the neon released when used. Recycling the neon is a good long-term solution (especially as steel production has dropped) that will help the semiconductor industry become more sustainable.

Some of these conservation attempts, however, have been ongoing since the last neon shortage in 2016. The industry has also been working on ways to broaden the supply chain.

Ultimately, gas recycling is a huge part of the answer. However, the neon shortage is, in the short term, going to increase chip prices further and impact the price of consumer electronics worldwide.