The Fabs Were Never Cheap to Run

Coverage of the Gulf war's impact on AI infrastructure has focused almost entirely on US data centers — electricity costs, diesel backup, the semiconductor supply chain as an abstract downstream risk. The actual pressure point is two countries in East Asia, and one of them is South Korea.

South Korea is the world's largest per-capita LNG importer. It also hosts Samsung and SK Hynix, which together control approximately 80% of global High Bandwidth Memory production and 70% of the global DRAM market. HBM is the memory architecture that makes AI accelerators functional at the scale the buildout requires — Nvidia's H100 and H200 chips are nothing without the HBM stacked on top. DRAM is the foundational memory layer in every server. The AI buildout is not possible without the output of these two companies. Their output depends on uninterrupted energy supply to fabs that run 24 hours a day. That energy comes primarily from LNG that historically transited the Strait of Hormuz.

South Korea imports roughly 70% of its crude oil from the Middle East, and virtually all of it travels through Hormuz. At the start of the conflict, Samsung and SK Hynix both saw stock valuations fall more than 20% before partial recovery with the ceasefire announcement. The market was pricing the energy risk before the economic analysis was.

Three inputs, all exposed

The South Korea semiconductor exposure runs through three distinct material inputs, each with its own vulnerability.

LNG for power. Semiconductor fabs require continuous, stable electricity. South Korean fabs are among the most energy-intensive industrial facilities in the world; a power interruption doesn't just pause production, it destroys work-in-progress across thousands of wafers. The country's grid depends significantly on LNG. Qatar exports approximately 9.3 billion cubic feet per day of LNG, historically routing through Hormuz. The Hormuz closure — maintained for the six-week duration of the conflict — forced South Korea to draw down reserves and source alternative supply at higher cost via rerouted tankers adding approximately 19 days of transit time around the Cape of Good Hope. That premium has not disappeared with the ceasefire. Tanker routing is normalizing, but at higher insurance and fuel costs that persist until the security situation is genuinely resolved, not merely paused.

Helium for fabrication. Chip manufacturing requires ultra-high-purity helium for cooling and purging in lithography processes. Approximately 35% of global helium supply originates in Gulf LNG liquefaction facilities — helium is extracted as a byproduct of natural gas processing. Qatar's helium production was disrupted during the conflict. There is no substitution pathway for helium in advanced node fabrication. The Habtoor Research Centre's analysis puts Korean and Taiwanese fabs at direct exposure to any sustained Gulf helium supply interruption.

Bromine for etching. South Korean chip factories import 97.5% of their bromine — used in chemical etching processes — from the Dead Sea coast. The Dead Sea is in a region that experienced significant regional instability throughout the Iran conflict. Bromine supply disruption doesn't make headlines the way oil does. Its absence in a fab's input stream is as consequential.

Add tungsten: China placed tungsten on its export control list in February 2026 amid escalating US trade tensions. Tungsten prices have risen 557% in just over a year, to $2,250 per metric ton unit, according to Bloomberg data from Fastmarkets. China controls approximately 79% of global tungsten mine production. Tungsten is used in ion implantation processes in chip fabrication. The semiconductor supply chain was already facing a material input squeeze before the Gulf conflict opened a second front.

What industrial policy cannot fix

South Korea has an AI industrial policy. It has invested heavily in domestic AI development, positioned Samsung and SK Hynix as national strategic assets, and maintained significant government coordination of the semiconductor sector. None of that addresses the structural energy import dependency.

The Carnegie Endowment for International Peace documented in March 2026 that the Iran conflict had exposed "a long-standing vulnerability in the South Korean chip sector and wider economy created by the country's dependence on imported fossil fuels." This is not a new vulnerability — it has been visible for years in Korea's energy import statistics. What changed is that the theoretical risk became an operational reality within a six-week window, during which the most important semiconductor manufacturers for the global AI buildout were managing an acute energy security crisis simultaneously with record demand for their products.

South Korea cannot build domestic oil production. It cannot rapidly diversify away from Gulf LNG on a timeline that matters for the current AI buildout cycle. It can accelerate nuclear power deployment — and there are active policy discussions doing exactly that — but nuclear plant construction timelines are measured in years, not months. The near-term energy security of the world's most important AI chip manufacturers depends on a shipping lane that was closed for six weeks and is currently covered by a two-week ceasefire with negotiations underway in Islamabad.

What the US-centric coverage missed

The framing of AI infrastructure risk as a US data center problem — electricity costs, diesel backup, supply chain as downstream risk — obscures where the actual production constraint lives. American data center operators face cost pressure when energy prices rise. South Korean semiconductor manufacturers face production constraint when energy supply is disrupted. These are different problems of different severity.

A US data center paying more for electricity has higher operating costs. A South Korean fab that cannot source LNG at adequate volume has to make choices about which production lines to run and at what pace. Given that Samsung and SK Hynix supply the HBM and DRAM that every major AI accelerator requires, any production constraint at the fab level propagates immediately to the hardware layer of the AI buildout — with lead times of six to twelve months between fab production decisions and finished accelerator availability.

The AI infrastructure buildout was modeled on the assumption that the manufacturing tier would maintain stable output, which required assuming stable energy at the nation-state level for the countries that do most of that manufacturing. South Korea is the clearest case where that assumption was not just theoretical — it was tested under live operational conditions, for six weeks, during the period of highest demand for the products its fabs make.

The ceasefire has eased the immediate pressure. It has not changed the underlying structure.

Sources: Sourceability, "Geopolitics are reshaping semiconductor supply chain risk in 2026," 2026; Habtoor Research Centre, "Strait of Hormuz Closure: Strategic Implications for the Global Semiconductor Industry," 2026; Carnegie Endowment for International Peace, "Iran, Korea, Semiconductor Chips, Energy, Oil, Hormuz," March 2026; Bloomberg / Fastmarkets, tungsten price data, March 2026; Al Jazeera / Kpler, Gulf export data, April 8, 2026; The Economist, "South Korea's AI industrial policy meets the energy shock," April 9, 2026 (cited; paywall access unavailable).