Asia’s chipmakers feel the heat as naphtha crunch hits photoresist supply
The distant geopolitical conflict in the Middle East is sending shock waves through Asia’s semiconductor industry, exposing fresh vulnerabilities in the supply chain as shortages of photoresist – a critical chipmaking material – emerge as the latest weak link.
With the Strait of Hormuz effectively closed since early March, supplies of naphtha – a key feedstock for specialty chemicals used in semiconductor production including photoresist – have been sharply curtailed.
Produced during the refining of crude oil or natural gas, naphtha is essential to the manufacture of advanced chips used in applications ranging from artificial intelligence to car systems.
South Korea’s memory chip giants Samsung Electronics and SK Hynix are among those most exposed.
Major Japanese photoresist suppliers had warned both firms of looming disruptions to raw material procurement, according to South Korean media outlet TheElec. The companies did not immediately respond to requests for comment on Thursday.
The shortage is expected to hit advanced nodes that rely on extreme ultraviolet (EUV) lithography the hardest, given the process’s sensitivity and tight tolerances.
“How long it lasts really depends on the duration of the war,” said Gary Ng, a senior economist at Natixis Corporate and Investment Bank.
Japan dominates the global photoresist market, with JSR, Tokyo Ohka Kogyo, Shin-Etsu Chemical and Fujifilm leading supply across semiconductors, displays and printed circuit boards.
These four companies accounted for 76 per cent of the global market in 2023, with an even stronger grip on high-end materials, according to Shenzhen Enterprise Investment Research, citing data from the China Electronics Materials Industry Association.
The situation underscores the fragility of Asia’s semiconductor supply chain, where chipmakers remain highly sensitive to upstream disruptions and logistical bottlenecks.
The broader technology sector is already bracing for prolonged instability in the Middle East, which could weigh on chip production and slow the expansion of AI data centres.
The shortage of PGME and PGMEA – the crucial solvents chemically refined from naphtha that make chip printing possible – was set to affect advanced nodes that use EUV lithography, according to Phelix Lee, a senior equity analyst at Morningstar.
“Semiconductor manufacturers store months of safety inventory, and coupled with partial replacements from the US, we expect a half year, or slightly more than that, is still considered ‘safe’ in the sense of maintaining chip output,” Lee added.
Taiwan and South Korea remain the largest markets for photoresist.
Taiwan – home to Taiwan Semiconductor Manufacturing Company (TSMC) – accounted for an estimated 26.4 per cent of global demand, followed by South Korea with 25.4 per cent, according to Tokyo-based research firm Fuji Keizai.
The firm expects the global photoresist market to reach US$2.7 billion by 2026, up 9 per cent from 2025.
Joseph Chung, an analyst at Isaiah Research, said the short-term impact on TSMC may be contained.
“In terms of raw material sourcing, TSMC continues to diversify its supply strategy and has established a globally diversified supplier base,” he said, noting that major chipmakers typically maintained inventory buffers for key materials ranging from several weeks to a few months.
China’s semiconductor supply chain appears less immediately affected than South Korea’s, reflecting its focus on mature process nodes and its push for self-sufficiency.
“Leading Chinese semiconductor companies are also demonstrating strong supply chain resilience based on our investigations,” Chung said.
The country was less affected in the sense that it had a relatively complete industrial supply chain to produce various materials and seek alternative solutions, Natixis’ Ng said.
Even so, China remains dependent on Japan for advanced materials. While local substitution efforts were under way, replacing certain inputs “may still affect yield and increase costs”, Ng added.
Japan accounted for 56 per cent of China’s imported photoresists in the first half of 2025, according to semiconductor research firm ICWise.