Our Head of Asia Technology Research Shawn Kim explains what
disruptions to shipping in the Strait of Hormuz could mean for
the global semiconductor supply chain and the immediate future of
AI infrastructure.
Read more insights from Morgan Stanley.
----- Transcript -----
Welcome to Thoughts on the Market. I’m Shawn Kim, Head of Morgan
Stanley’s Asia Technology Team.
Today: why the Strait of Hormuz closure may matter to the global
technology industry.
It’s Friday, March 13th, at 8 pm in Taipei.
AI and advanced chips may represent the cutting edge of
technology, but they depend on something far more basic: that’s
energy. And a large share of that energy flows through one narrow
shipping lane in the Middle East – the Strait of Hormuz. When
energy supply chains are disrupted, the effects can quickly
ripple into semiconductor manufacturing.
Advanced semiconductor fabrication is, in fact, one of the most
energy‑intensive industrial processes in the world. Take Taiwan,
for example – home of the world’s largest share of leading-edge
chip production. Just one major manufacturer alone accounts for
roughly 9–10 percent of the country's total electricity
consumption. That scale of energy use means the stability of
power supply is critical.
Taiwan relies heavily on imported LNG to generate electricity.
But storage levels are limited. It maintains roughly one and half
weeks worth of LNG inventory, with several additional weeks
supplied by vessels currently at sea. If shipping through the
Strait of Hormuz were significantly disrupted, that supply chain
could come under pressure. The immediate impact might not
necessarily be an outright shortage – but rising energy costs
could still affect semiconductor production economics. And that's
important because advanced chips are foundational to everything
from cloud computing to artificial intelligence systems.
Energy isn't the only potential bottleneck. Another lesser-known
input in the semiconductor ecosystem is sulfur. More than 90
percent of the world's sulfur supply is produced as a by‑product
of oil refining. That sulfur is then used to produce sulfuric
acid, a key chemical that supports semiconductor materials, metal
processing, and battery components.
Disruptions in oil refining tied to shipping constraints or
energy market shocks could also affect sulfur supply. In other
words, a disruption in energy markets could trigger second‑order
effects across multiple layers of the technological supply chain.
And those effects extend beyond chips themselves. The downstream
impact touches industries tied to electrification, data centers,
and advanced electronics manufacturing.
History also offers some lessons learned about how technology
markets react when energy prices spike. During periods of major
oil price surges – such as in 2008 and again in 2021 through 2022
– semiconductor equities experienced significant drawdowns. In
both cases, semiconductor stocks declined by roughly 30 percent
before reaching an inflection point. The mechanism is fairly
intuitive. Higher oil prices raise costs across the economy and
can weaken consumer spending. At the same time, companies
building energy‑intensive infrastructure – like large‑scale AI
data centers – may face higher operating costs and low revenues.
So when energy markets move sharply, technology markets often
move with them. A disruption in the Strait of Hormuz wouldn’t
automatically halt chip production, but it could ripple through
power costs, materials supply, and the economics of building AI
infrastructure. And that highlights an important reality for
investors: the future of technology isn’t just written in code.
It’s powered by energy, by infrastructure, and the fragile global
networks behind the digital economy.
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a friend or colleague today.
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