The Looming Bottleneck for Global Tech

0:00Shawn Kim: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 8pm 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 the semiconductor manufacturing. Advanced semiconductor fabrication is, in fact, one of the most energy-intensive industrial processes in the world.

0:46Shawn Kim: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 % 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 1.5 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.

1:28Shawn Kim: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 % of the world's sulfur supply is produced as a byproduct of oil refining. That sulfur is then used to produce sulfuric acid, a key chemical that supports semiconductor materials, metal processing, and battery components.

2:10Shawn Kim:Disruption 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 chip 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 2021-22, semiconductor equities experienced significant drawdowns.

2:58Shawn Kim:In both cases, semiconductor stocks declined by roughly 30 % 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 cost, material supply, and the economics of building AI infrastructure.

3:40Shawn Kim: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. Thanks for listening. If you enjoyed the show, please leave us a review wherever you listen and share thoughts on the market with a friend or colleague today. The preceding content is informational only and based on information available when created. It is not an offer or solicitation, nor is it tax or legal advice. It does not consider your financial circumstances and objectives and may not be suitable for you.