Middle East Conflict Threatens AI & Semiconductor Supply Chains

Shares of Samsung and SK Hynix fell 20% on the KOSPI index Monday as conflict in the Middle East threatens the supply of critical minerals used in semiconductor manufacturing, according to reports from Seoul.

The disruption stems from escalating tensions in Iran, which plays a key role in supplying materials vital to the production of microchips, including aluminum and helium. The conflict is creating significant risks for artificial intelligence and technology companies, according to a report from Sindonews.

Neil Shearing, chief economist at Capital Economics, warned that the longer the conflict persists, the greater the risk of significant disruption to the supply of these essential materials. “The longer the conflict lasts, the greater the risk that essential materials produced in the region for other supply chains – for example, helium in semiconductors – will become a major problem,” Shearing said.

The three largest global suppliers of chip memory – Samsung, SK Hynix, and Micron – are heavily reliant on these minerals. Their customers include major tech firms such as Nvidia, Microsoft, and Apple, collectively known as the Magnificent 7.

The situation is unfolding as the United States reportedly deploys 10,000 AI-powered interceptor drones to the Middle East in an effort to counter Iran, according to a YouTube broadcast from March 14th. Meanwhile, reports indicate Iran is employing a defensive strategy, focusing on mobilizing resources and structural resilience, rather than direct confrontation.

Recent analysis suggests that Iranian proxies may have utilized artificial intelligence tools to map vulnerable US infrastructure, raising concerns about potential cyberattacks. The availability of internet access and AI tools has provided adversaries with the means to identify critical weaknesses, according to a report in the Times of India.