The Strait of Hormuz is blocking not only "crude oil," but perhaps also "chips."

The crisis in the Strait of Hormuz triggered by the US-Iran conflict is dragging the global technology supply chain into an unexpected energy shock. This strait, the lifeline of global oil trade, is also the natural gas supply channel supporting global chip manufacturing—a hidden risk that has yet to be fully priced in by the market.

According to a Bloomberg opinion column on Friday, more than half of the world's DRAM and NAND memory chips are produced in South Korea, while about 70% of advanced logic chips are produced in Taiwan, China. These two chip manufacturing hubs are highly dependent on Qatari LNG.

According to CCTV News, on the morning of March 5 local time, Iran’s Islamic Revolutionary Guard Corps issued a statement saying that earlier that day, a U.S. oil tanker in the northern Persian Gulf was hit by a missile fired by its navy, and the tanker is still burning. The statement also said that military and commercial ships belonging to the U.S., Israel, European countries, and their supporters are strictly forbidden to transit this sea area and will be attacked if found.

Meanwhile, Qatar’s Ras Laffan gas plant announced a production shutdown on Monday, citing military attacks as force majeure and suspending supply. The plant supplies about one-fifth of the world’s liquefied natural gas (LNG).

This news quickly triggered a sharp sell-off in Asian energy-related stock markets. The Korea Composite Stock Price Index (Kospi) plunged 12% in a single day on Wednesday, setting a record for its largest single-day drop; the Taiwan Weighted Index (Taiex) also fell 4.4% on the same day. The dramatic fluctuations in both stock markets reflect their extraordinary vulnerability in this crisis.

Chip Manufacturing Hubs Highly Dependent on Qatari LNG

The core manufacturing capability of the global technology industry is highly concentrated in Northeast Asia. According to analysis by Bloomberg columnist David Fickling, more than half of the world’s DRAM and NAND memory chips are produced in South Korea, with Samsung Electronics and SK Hynix together accounting for about 40% of the Kospi index’s weight; about 70% of advanced logic chips are produced in Taiwan, with TSMC alone accounting for 45% of Taiex’s weight.

These two chip manufacturing hubs happen to be among the economies most reliant on Qatari LNG. About 90% of LNG produced in Qatar and the UAE is exported to Asia. By comparison, although India is the largest buyer of Qatari LNG, natural gas makes up only about 3% of its electricity mix; Japan uses a large amount of LNG for power generation, but imports from Qatar and the UAE account for only about 5% of its total imports.

Reserves Running Low, April May Be a Critical Juncture

What worries the market even more is the extremely limited LNG reserve capacity in both places. At present, South Korea’s reserves are sufficient for less than two months of import demand, which means if the ships currently en route finish unloading in early April and the Strait of Hormuz continues to be blocked, power supply will quickly come under pressure. This would be a direct threat to the production of chip wafer plants, which consume a huge amount of electricity.

In contrast, the EU’s LNG reserves can cover about one-third of its annual consumption, providing far more buffer room than the aforementioned two areas.

Currently, the South Korean government is urgently seeking alternative supply. LNG is still available on the spot market, but with significant price premiums. Australia and the U.S., both top global LNG exporters alongside Qatar, tend to be more flexible in contract terms and may seize the opportunity to expand spot sales and grab market share.

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