The semiconductor industry faces a deepening crisis. According to reporting on the subject, manufacturers say prices for key chipmaking metals have doubled, with gallium climbing sharply as the ongoing Middle East conflict disrupts already fragile supply chains.
The problem is straightforward to understand, even if its solution is not. Gallium, along with other rare materials essential to modern chip production, relies on a tightly concentrated supply chain. China has restricted gallium exports, already squeezing manufacturers worldwide. Now, as conflict in the Middle East disrupts shipping through critical maritime routes, the pressure intensifies.
Consider what happens when you layer one constraint atop another. You do not get a doubling of the original problem; you get something closer to an exponential crisis. Two supply shocks hitting simultaneously have forced prices higher across a wide range of chipmaking materials, according to the reporting.
The Strait of Hormuz sits at the centre of this latest disruption. Through this chokepoint passes roughly a fifth of global crude oil and liquefied natural gas. As reported by SBS News, maritime traffic in the strait has all but halted in recent weeks, with Iran controlling shipping access. This matters to Australia not merely as an energy question, but as a supply chain question. Materials that travel through these waters face unpredictable delays and cost escalations.
The counter-argument deserves serious consideration: is this a temporary spike that will resolve once geopolitical tensions ease, or the beginning of a structural shift in how we source critical materials? History suggests both outcomes are possible. Supply shocks during the 1973 oil embargo and the 1990-91 Gulf War did eventually stabilise. But the longer disruptions persist, the more likely manufacturers are to seek alternative suppliers or accept higher baseline costs as the new normal.
Australia has particular reasons to monitor this situation. As reported by 9News, Australia imports 90 per cent of its oil needs and relies heavily on refined petrol from South Korea and Singapore, both of which source their crude from the Middle East. The same supply chain pressures affecting fuel supplies affect semiconductor materials. If refineries slow, if shipping costs spike, if alternative sourcing becomes necessary, Australian industries dependent on semiconductors and electronics face higher input costs.
Strip away the technical jargon and what remains is a fundamental question about resilience. Does Australia have the capacity and will to maintain domestic or regional supply chains for materials critical to our technological future? Or do we accept continued vulnerability to distant geopolitical shocks? The doubled prices manufacturers are now paying represent not just a cost problem, but a strategic one.