Alexandra Alper and Karen Freifeld

WASHINGTON, (Reuters) – The White House has warned the chip industry that Russia could retaliate against U.S. sanctions by blocking access key materials.

After Techcet published on February 1, a report highlighting many semiconductor producers’ dependence on Russian or Ukrainian-sourced materials such as neon, palladium, and other, the potential for retaliation received more attention.

Techcet estimates over 90% U.S.-grade semiconductor neon supplies originate from Ukraine. Only 35% U.S. Palladium is imported from Russia, according to Techcet.

Peter Harrell is the White House’s National Security Council member. He and his staff spoke with representatives of the chip sector to learn about their exposures and encourage them to look for alternative sources.

While the White House did not comment on specific conversations, an official from the Administration reiterated the fact that it was ready in case Russia invades Ukraine.

The person stated that part of this is to work with companies in order for them to be prepared in case Russia interferes with their supply chains.

“We are fully aware of the availability of other key products, and will assist our clients in identifying and diversifying their supply sources.”

Joe Pasetti (Vice President of Global Public Policy at SEMI Chip and Electronic Manufacturing Suppliers Group) sent members an email this week to assess exposure to critical chipmaking supplies. According to Reuters’ copy, it was copied.

He wrote: “As we discussed today’s conference call,” and referring to Techcet’s summary on C4F6, Palladium. Helium. Neon. Scandium. Please let me know if you are concerned about possible supply disruptions.

Techcet says that neon, which is crucial for making chips using lasers, is a byproduct of Russian steel production. This is then purified and shipped to Ukraine. Palladium can also be used to make sensors or memory.

Russia has been threatened by the Biden administration with severe export control measures if it invades Ukraine. Russia denies any plans to attack, despite having gathered more than 100,000 troops at Ukraine’s frontier.

Some chipmakers are examining their supply chain to see if there is any potential damage from the conflict in Ukraine. Unnamed employees at a chipmaking firm acknowledged they were looking into their supply of neon and other chemicals, many of which are from Ukraine.

“Even if Ukraine was at war, it would not cut off the supply. The person stated that it would increase prices. “The market would shrink. These gases would be very scarce. But it wouldn’t stop semiconductor manufacturing,” he added.

One power chip startup executive said that unrest in Ukraine caused rare gas prices and may cause supply problems. Another gas with a high supply is fluorine. This could affect the global supply, said the executive.

William Moss is a spokesperson Intel Corp (NASDAQ:) The chipmaker said it didn’t anticipate any negative impact on neon supply.

The issue remains concerning because chip supply is tight worldwide and orders for chip products are expected to increase. Techcet projects that demand for all materials will increase by over 37% in the next four years. This is based on recent announcements made by Intel and Samsung (KS), as well as Taiwan’s TSMC, which are located in Texas, Arizona, and Ohio.

According to the U.S. International Trade Commission, neon prices rose 600% during Russia’s 2014 annexe of Crimea from Ukraine. This was because chip companies relied only on few Ukrainian businesses.