In late February, Iran effectively blocked the Strait of Hormuz, disrupting a key passage for one-fifth of the world’s oil and gas. The immediate fallout was as expected: a surge in crude prices, volatile energy markets, and a flood of alarming headlines. A less anticipated repercussion, however, was the rapid impact on Asia’s semiconductor sector.
South Korea, home to industry giants Samsung and SK Hynix—which control about 70% of the global DRAM market and 80% of high-bandwidth memory production—finds itself highly affected by the disruption. The country obtains about 45% of its naphtha, a crucial petrochemical feedstock, with around 77% of those imports historically coming from the Middle East, a supply chain now largely disrupted.
On Monday, South Korea’s Ministry of Trade, Industry and Resource announced the import of 27,000 tonnes of Russian naphtha, marking its first purchase since the beginning of the US-Israel war with Iran. The buyer, LG Chem, the nation’s largest chemical company, moved the shipment to its Daesan industrial complex in South Chungcheong Province. This transaction was facilitated by a temporary US sanctions waiver allowing Russian shipments already en route to complete their deliveries between March 12 and April 11, with the US confirming non-dollar payments wouldn’t provoke secondary sanctions.
This purchase isn’t so much a strategic shift as a stopgap measure. LG Chem had to halt operations at the No. 2 naphtha cracker in its Yeosu complex, an 800,000 tonne-per-year facility, due to a shortage of feedstock. Other companies like Yeochun NCC have declared force majeure on their contracts, and both Lotte Chemical and LG Chem have warned of potential further declarations. Industry experts note that petrochemical inventories in South Korea have dwindled to about two weeks’ worth of stock.
The crisis led Seoul to enact its most assertive supply-side measures in years. Since Friday, South Korea has banned naphtha exports, redirecting the 11% of domestically produced naphtha previously exported overseas. The government also now has authority over naphtha production and allocation in emergencies.
Naphtha’s significance in chipmaking isn’t as obvious as in plastics but is equally important. Its derivatives, such as olefins and aromatics, are essential for making the high-purity chemicals, solvents, and plastics needed for chip production, including photoresist coatings used in circuit patterning and wafer-cleaning agents. Ethylene, derived from naphtha cracking, is often called the “rice of industry” in South Korea due to its wide use in manufacturing.
Naphtha is just one component in a wider disruption. South Korea’s industry ministry has identified 14 semiconductor supply chain items severely affected by the Middle East conflict. Among the most crucial is helium, vital for cooling silicon wafers and hard to replace. Qatar, which produces more than a third of the world’s helium, halted operations at its 77 million tonne-per-annum facility on March 2 after Iranian drone strikes damaged the Ras Laffan complex. In 2025, South Korea imported nearly 65% of its helium from Qatar.
Bromine, another vital component used in circuit formation and chip inspection equipment, poses a similar concentrated risk. Roughly two-thirds of global bromine comes from Israel and Jordan, with South Korea sourcing 90% of its supply from Israel.
This vulnerability extends beyond South Korea, though South Korea’s situation is the starkest. Japan sources about 42% of its naphtha from the Middle East, with several Japanese petrochemical companies announcing production cuts. Taiwan, which produces approximately 90% of the world’s most advanced semiconductors via TSMC, imports about 97% of its energy, with about one-third linked to Middle Eastern suppliers.
Major chipmakers are maintaining a stance of cautious reassurance. SK Hynix states it has diversified its helium sources and holds sufficient stock. TSMC is monitoring the situation but currently doesn’t foresee a significant impact from the Qatar helium halt. GlobalFoundries asserts that mitigation plans are ready.
These assurances could prove valid if the conflict is brief. However, the naphtha crisis comes when the semiconductor sector can least afford disruptions. Samsung and SK Hynix recorded stellar performances in 2025, fueled by unprecedented demand for AI memory chips. They both plan aggressive production expansions for 2026 to meet the voracious demands of AI infrastructure development. Ironically, geopolitical instability threatening chip supply chains is simultaneously driving demand: companies are investing billions in AI data centers, elevating the very demand for memory chips that makes this disruption so detrimental.
By March 25, spot naphtha prices in Singapore exceeded $1,000 per metric tonne, a roughly 60% increase from the previous month. Northeast Asian benchmark prices were even higher, between $1,010 and $1,050 per