Will Spikes in Oil Prices Affect the Cost of Silicon?

Growing conflicts worldwide have the potential to impact silicon prices and an increase in oil prices can potentially affect the semiconductor manufacturing supply chain.

The Link Between Oil and Silicon Prices

Oil and silicon are two types of raw materials that are not directly linked. Silicon is highly available, being the second most abundant material in the Earth’s crust, and is mainly imported to the United States from China. Oil and gas, on the other hand, are not widely abundant and are brought to the USA from various producers such as Canada, Mexico, and Saudi Arabia.

However, while seemingly unrelated, an increase in oil prices can indirectly affect the price of silicon, mainly in three ways:

• Production of silicon requires a lot of energy, particularly when metallurgical silicon is being produced or purified to electronic or solar grade. Though silicon production relies primarily on electricity (often from hydro or coal), rising oil prices can raise energy costs.
• Most silicon raw materials and completed wafers are imported into the US from abroad. As fuel prices rise, mining, shipping, and the distribution of silicon and wafers become more expensive.
• Oil prices impact chemicals, packaging, plastics, and other materials derived from oil, which are used in the fabrication of semiconductors and wafer processing.

Understand the Future of Silicon Prices—and Prepare

Oil prices have the potential to influence silicon prices through various economic and industrial channels. Trying to guess the future is impossible; however, manufacturers from sensitive industries such as semiconductor manufacturing must stay informed to be best prepared.

Being well stocked is key to avoiding noticeable spikes in silicon prices. If you need to add some silicon wafers to your inventory, contact Wafer World for more information!