TAIPEI (Taiwan News) — A disruption in the Strait of Hormuz is emerging as a threat to Taiwan’s semiconductor industry, exposing a critical supply chain risk tied to petrochemical feedstocks, Nikkei Asia said on Wednesday.
According to an op-ed by Alvin Camba, director of research at AI company Lyvi, Taiwan’s chip sector relies on naphtha, a key input for specialty chemicals for chipmaking. Without it, production of advanced chips could stall, affecting industries from AI to cars.
The risk intensified after Formosa Petrochemical halted imports of Russian naphtha last year under allied pressure. The move forced a shift toward supplies routed through the Middle East, increasing exposure to geopolitical disruptions.
That vulnerability became acute as tensions escalated around the Strait of Hormuz, a critical shipping route for global energy supplies. A prolonged disruption could choke off naphtha flows and ripple through Taiwan’s chip supply chain.
Naphtha is not directly used in chipmaking but underpins the production of photoresists, solvents, and process chemicals. These materials are essential for advanced semiconductor manufacturing, making the dependency indirect but crucial.
Taiwan’s petrochemical sector processes millions of tonnes of naphtha each year, much of which feeds into supply chains serving major chipmakers. The reliance has largely gone unnoticed in traditional assessments of semiconductor risk.
Similar vulnerabilities exist across Northeast Asia. Japan and South Korea also depend heavily on imported naphtha, much of it sourced from the Middle East, linking regional chip production to the same supply risks.
The broader impact could be significant. The global semiconductor market is projected to approach NT$31.14 trillion (US$975 billion) in annual sales this year, driven largely by demand for AI infrastructure and advanced computing.
A sustained supply disruption could quickly cascade across industries. Chips used in data centers, electric vehicles, defense systems, and consumer electronics all depend on stable upstream chemical inputs.
Short-term workarounds are limited and costly. Alternative supply routes from the US or Europe would extend shipping times and raise costs, while switching feedstocks would require technical adjustments and may not fully meet demand.
Although supply chains have been stress-tested for chips, logistics, and geopolitics, the op-ed concluded that petrochemicals are a new vulnerability, not just for Taiwan but for the world.
