The Russian invasion of Ukraine this week is likely to mean a growing list of economic sanctions that will affect everyone, including the technology supply chain that relies on Ukraine for some critical raw materials used in the manufacture of fleas.
Can Apple solve the supply chain challenge?
My thoughts are with all who suffer the ravages of any war, and like everyone else this week, we turn to the people of Ukraine. The poor tend to suffer what they must, and recent history shows that lasting victory rarely comes from the barrel of a gun alone. So think of tech developers based in Kiev, Ukraine, like those I spoke to recently about MacPaw and Setapp.
You can read a statement from MacPaw here. Apple also said it would support local humanitarian efforts.
But it is not only development (and also wheat) that comes from the Ukraine; The country is also rich in hard-to-find raw materials used in silicon chips and advanced sensors. This includes neon gas used by chip manufacturing lasers, palladium, and about 90% of US semiconductor-grade neon. Citing US consultancy Techcet, Reuters warns that if the dispute escalates, some of the world's largest chipmakers could be hit. Intel, for example, gets half of its Neon from Eastern Europe.
Intel is unlikely to be the only vendor affected.
Can Apple be immune?
It's not just about the production of core processors. Even if the biggest tech companies recover, how will the scarcity of raw materials affect the supply of those hard-to-find things that Apple CEO Tim Cook calls "legacy nodes"?
Coming so soon after a pandemic-induced chip shortage, a shortage compounded by a huge growth in demand for processors as the internet gets on top of everything, this must be a headache. (And don't overlook the recent loss of a lot of global SSD supply.)
These shortcomings have a real impact. We believe that Apple had to divert some components from iPad production for use in iPhones as part of its response to silicon shortages, which we believe may have contributed to lower-than-expected iPad sales.
The industry was not blind to the threat. As mentioned, Techcet issued its warning weeks ago. Many large companies, including Apple's partner TSMC, may have already looked for an alternative supply. However, with such production concentrated in a single geographic area, the race for alternative sources will likely lead to price increases.
These increases will have an impact on a global economy that is already dealing with the fiscal consequences of the similarly protracted COVID-19 crisis.
This spreading crisis
The fact is that we are also experiencing a high demand for technology products. We are used to chips in computers, smartphones, tablets and game consoles. But the computer world we seem to be building is also putting chips into teapots, crock pots, bread makers, garage doors, and lockers. Cars, AR glasses, light switches, USB cables – all of these gadgets also contain chips.
Last year, automakers were forced to cut production of new vehicles due to problems with chip supplies. But as governments around the world also try to switch entire populations to electric cars (which also contain microchips) by 2030 and try to put in place the charging infrastructure to power them, it's hard not to see the conflict creating a cascade of new problems.
Innovations like smart cities and Industry 4.0 are not innovative at all without the right silicon to power them. And yet COP26 saw governments rely heavily on technological solutions to climate change.
Apple has scale, but the impact will be felt
Apple, as we know, has the power of scale on its side. It produces hundreds of millions of devices, so when you go to a component supplier, you often do good business and prioritize your needs. Whoever has the money (and a full order book) sets the tone.
This may well help the company secure supplies of the devices we know it's currently working on, including the iPhone SE 2022 and AR glasses. It is also to be hoped that it will not be affected by the shortage of neon while it tries to design new processors. (Although I imagine the M2 chip series machines are ready to go.)
If TSMC is struggling to secure alternative component supplies, surely Apple has to wish them well. You may even have a short list of recommendations to offer TSMC, which is currently seeking a business intelligence analyst, "interested in translating geopolitical and economic changes to impact the industry's supply chain.
It may be in Apple's interest to help TSMC find a good candidate for this position. Demand for all materials, and for the chips inside devices, is expected to grow more than 37% over the next four years.
This could be another busy day on the Slack #ToDo list from Apple's operations team. But apart from being a commercial crisis, what is happening in Ukraine (and in all other global conflict zones) is a crisis, and perhaps a failure, of dialogue and humanity.
It could, in other words, be a good time to donate money to the Red Cross. And, like Cook, to hope for the safety of all the ordinary people who suffer so much but have so little control over such conflicts.
Follow me on Twitter or join me at AppleHolic's bar & grill and Apple discussion groups on MeWe.
Copyright © 2022 IDG Communications, Inc.