(Bloomberg) -- Hurricane Helene caused havoc in North Carolina, killing dozens of people and stranding others, washing away homes, businesses and crops and knocking out electricity and water.
It also shut two mines that together produce about four-fifths of the world’s highest-quality quartz — a crucial ingredient in the production of semiconductors.
Chipmakers as far away as east Asia were hurrying to assess the impact of the mine closures in the stricken town of Spruce Pine. The incident underscores how small corners of today’s globalized supply chains can contain hidden vulnerabilities.
Here’s more on how the closure of the mines operated by SCR-Sibelco NV and Quartz Corp. could impact chip production.
What is the quartz used for?
It’s used in the production of semiconductors and solar panels. Quartz is used to create the crucibles where silicon is heated, melted and reformed into the single-crystal structure that makes an ideal base to create semiconductors. It’s called the Czochralski method, after the Polish scientist who accidentally discovered the structure more than a century ago when he dipped his pen in a crucible full of molten metal instead of an ink pot.
Any impurities in the crucible could introduce unwanted flaws into the silicon, affecting the circuitry that’s printed on it and raising the risk that the chips will be defective. That’s why quartz, which is stable at high temperatures and doesn’t easily react with other materials, helps to ensure the quality of the silicon that’s produced.
What makes the North Carolina quartz so special?
The quartz that comes from the Spruce Pine mines is some of the purest in the world. That may be because the quartz was formed hundreds of millions of years ago under conditions with uniquely little water, according to Sibelco. The lack of water meant that there were fewer opportunities for impurities to be introduced as the mineral was forming.
The rare purity of Spruce Pine quartz helps to ensure the silicon produced will be flawless. That makes it a vital part of the global semiconductor supply chain, according to Ed Conway, a journalist who wrote about the importance of the mines in his 2023 book Material World.
How will the mine closures affect the chip industry?
That may depend on how long it takes to reopen both the mines themselves and the transportation links that connect them to the outside world.
Chipmaking giants Samsung Electronics Co., Infineon Technologies AG, SK Hynix Inc., and Taiwan Semiconductor Manufacturing Co. have said they don’t anticipate a significant impact on their operations for the time being.
More directly affected are silicon wafer makers such as Shin-Etsu Chemical Co., Sumco Corp., and GlobalWafers Co., which supply to the likes of TSMC.
Some of these companies have months of existing inventory, according to industry research firm SemiAnalysis. But if the Spruce Pine situation drags on, they may move faster to diversify their sourcing of quartz, benefiting Sibelco and Quartz Corp.’s rivals.
Major chipmakers learned the dangers of bottlenecks in their supply chains during the coronavirus pandemic, when labor shortages and misjudgments over the level of demand created enormous backlogs that have only recently been fixed.
The industry is still under pressure, with component suppliers busy trying to ramp up production to meet soaring demand for some categories of chip, especially those needed for a new generation of artificial intelligence applications.
What are the alternatives to Spruce Pine quartz?
Some natural and synthetic alternatives to Spruce Pine quartz are produced by Indian and Chinese suppliers, including Jiangsu Pacific Quartz Co. and Triumph Science & Technology Co.
But other quartz mines may not meet the same purity standards crucial for the inner walls of the crucibles, according to BloombergNEF analyst Jenny Chase.
This can reduce the efficiency of wafer production because the crucibles have to be replaced more often. That can lead to higher costs — which solar and semiconductor companies may then decide to pass on to their customers.
For now, high purity quartz is such a small component of chip production that any increase in production costs is unlikely to be large enough to derail or disrupt production in the short term.
--With assistance from Debby Wu, Edwin Chan, Mayumi Negishi and Peter Elstrom.
©2024 Bloomberg L.P.
