The situation in the Middle East continues to deteriorate, sending shockwaves through the core of the global semiconductor supply chain. South Korea—one of the world's most important chip production bases—has sounded the alarm first.
On Friday, Kim Young-bae, a member of the ruling Democratic Party of Korea, publicly stated at a television press conference after meeting with executives from Samsung Electronics, SK Hynix, and domestic industry associations that if the geopolitical tensions in the Middle East continue to spread, it will pose a substantial threat to South Korea's semiconductor industry. He pointed out that rising oil prices will increase domestic electricity costs, thereby weakening the price competitiveness of South Korean chips, while disruptions in the supply of key raw materials and rising logistics costs are also significant risks facing the industry.
South Korea's high dependence on Middle Eastern energy is the root cause of this risk exposure. Kim Young-bae noted that 70% of South Korea's oil supply comes from the Middle East. If conflicts in the region continue to escalate, rising oil prices will directly increase the cost of industrial electricity in South Korea, and since semiconductor manufacturing is a highly energy-intensive industry, the increase in electricity costs will directly compress the profit margins of chip manufacturers and weaken their price competitiveness in the global market.
In addition to energy, the key raw materials required for semiconductor production also face supply risks. Kim Young-bae stated that South Korean semiconductor companies procure core production materials such as helium from the Middle East, and if related supplies are disrupted, it will directly affect chip production capacity. He also emphasized that rising logistics and transportation costs will be the &#34;biggest problem&#34; brought about by the situation in the Middle East, as blocked shipping routes or significantly increased freight costs may put pressure on the supply chain management of South Korean chip companies.
In response to industry demands, the South Korean government has begun to take countermeasures. Kim Young-bae stated that he is promoting a proposal to flexibly utilize the national strategic petroleum reserves based on the specific needs of various industries. The authorities have opened the national oil reserves to domestic refiners to limit the impact on industrial production.
Analysts at BNP Paribas expect the South Korean government to introduce more support measures to mitigate the economic impact of the current situation and point out that the government may also consider further reducing fuel taxes

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Members of the ruling party in South Korea have stated that if the geopolitical tensions in the Middle East continue to spread, it will pose a substantial threat to South Korea's semiconductor industry. They pointed out that rising oil prices will increase domestic electricity costs, thereby weakening the price competitiveness of South Korean chips. Additionally, disruptions in the supply of key raw materials and rising logistics costs are also significant risks facing the industry

- The escalating geopolitical tensions in the Middle East are posing substantial risks to South Korea's semiconductor industry, a key player in the global market.  
- Lawmaker Kim Young-bae warned that rising oil prices could increase domestic electricity costs and disrupt the supply of crucial raw materials, impacting chip manufacturers' profitability and competitiveness.  
- In response, the South Korean government is exploring the use of strategic oil reserves and is expected to implement additional support measures to mitigate economic impacts from the ongoing crisis.

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Middle East conflict threatens, South Korea warns: Chip supply chain faces "disruption" risk!