Global chipmaking hit as Hurricane Helene disrupts quartz mining

Unlock the Editor’s Digest for free

Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.

Hurricane Helene has exposed a little-known vulnerability in the semiconductor supply chain, after flooding at mines in North Carolina halted production of ultra-pure quartz that is vital to chip manufacturing.

The storm, the most deadly to hit the US mainland since Hurricane Katrina in 2005, flooded the mountain town of Spruce Pine last weekend, which experts say produces as much as 90 per cent of the world’s ultra-pure quartz. This scarce mineral is used to make the crucibles in which the high-grade silicon used in semiconductors is produced.

Any long-term interruption could affect downstream production of the essential components in a wide range of electronics, from smartphones and computers to solar panels. That hit would come at a time when soaring demand for servers to process artificial intelligence is already outstripping supply of the most advanced chips.

“There are other sources of high-purity quartz around the world but so far nobody has found anywhere else that has the same purity, the same quantity and the same ease of access,” said Vince Beiser, who visited Spruce Pine while writing his 2018 book on the role of sand in the global economy, The World in a Grain.

Despite the existence of some small alternative producers in Russia, Brazil, India and China, supply chain concentration of this essential material in a small mountain town with a population of around 2,000 is “pretty crazy”, Beiser said. “There’s no real substitute for it.”

Sibelco, the Belgium-headquartered mining conglomerate that operates the largest quartz production facility in Spruce Pine, said that the area was “hit particularly hard”.

“The hurricane has caused widespread flooding, power outages, communication disruptions and damage to critical infrastructure in the area,” Sibelco said earlier this week after halting operations on September 26, as the storm approached.

The company said on Friday its recovery efforts had made “significant progress”, adding: “The initial assessment indicates that our operating facilities in the Spruce Pine region have only sustained minor damage.
Detailed assessments are ongoing.”

The Quartz Corporation, another miner in Spruce Pine, said earlier this week it was “too early to assess” how long it would take to resume production. “However, we remain confident of our ability to avoid any supply disruption for our high purity quartz customers,” it said on Wednesday.

The Oslo-headquartered company has described Spruce Pine as “the only mine on earth with quartz pure enough to produce the crucibles needed to manufacture semiconductor ingots”.

The silicon ingots produced in quartz crucibles are sliced into the thin wafers upon which transistors and circuits are imprinted to make chips, making them a fundamental building block of the $600bn semiconductor industry.

The quartz used in these crucibles has to be at least 99.999 per cent pure, to avoid them reacting in intense heat with the even purer “polysilicon” from which computer chips are made.

“My guess is [Hurricane Helene’s disruption] will certainly mean a short-term crunch that’s going to raise prices,” said Beiser. As well as flooded mines, transport infrastructure in the region has been seriously affected by storm damage.

SemiAnalysis, a chip consultancy, estimates that silicon wafer manufacturers such as GlobalWafers, Siltronic and Sumco have between 3 to 8 months of inventories available to chipmakers such as Intel, Samsung and TSMC. “Existing inventory is a buffer” to any disruption, its analysts said, and mining activities can “probably” restart before those are run down.

But Ed Conway, author of Material World — a book examining six of the most important substances in modern industry, including sand — believes it could take many more months for operations to reach their previous capacity.

“It’s quite hard to imagine this won’t have at least some impact,” he wrote in a newsletter this week. “The episode also underlines . . . the fragility of the economic underpinnings of our lives. Few people spend much time thinking about a place like Spruce Pine, until something like this happens and then all of a sudden it’s all important.”