How Hurricane Helene may cause semiconductor chip shortages

The significance of Spruce Pine, N.C.

Spruce Pine -- a remote town in North Carolina that is approximately 172 miles from Charlotte -- is one of the world's primary sources of high-purity quartz. The town is home to two mines -- one operated by Sibelco and the other by The Quartz Corp. Both operations mine high-purity quartz, which is essential for semiconductor manufacturing.

High-purity quartz has many useful physical and chemical properties, including high-temperature resistance, corrosion resistance and low thermal expansion. These attributes make it a foundational material for the semiconductor industry.

The quartz deposits in Spruce Pine are recognized as being of particularly high quality and purity, which has made the area and its mines a preferred source for the material to meet global supply demands. The two mines in Spruce Pine supply an estimated 70% to 90% of the world's high-purity quartz used in the semiconductor industry.

The impact of Hurricane Helene on Spruce Pine

The impact of Hurricane Helene on Spruce Pine was devastating. More than 2 feet of rain fell, triggering large-scale flooding in the area from the North Toe River. Flooding and landslides forced both Sibelco and The Quartz Corp. to halt production on Sept. 26, 2024.

While the mining facilities themselves reportedly sustained only minor damage, local infrastructure was significantly affected, with roads and rail lines cut off. The state of North Carolina reported more than 450 road closures across the state because of the hurricane. Included among them were parts of Interstate 40, which were washed out due to flooding. Interstate 26 -- another major highway used to access Spruce Pine -- was also severely affected, with numerous bridges and overpasses destroyed by flood waters.

The primary CSX rail line that serves the Spruce Pine area was also damaged by the storm. Both mines primarily relied on the CSX rail line for transporting the quartz.

Power transmission lines into the area were also damaged, further affecting operations in Spruce Pine and surrounding towns. Additionally, town residents who work at the mines suffered damages to their homes -- and in some cases, homes were washed away.

It is unclear how long it will take for the roads, rail lines and power infrastructure in the Spruce Pine area to be fully restored. On Oct. 11, Sibelco announced that it had restarted production as well as shipments to customers. As of Oct. 15, The Quartz Corp had not publicly stated when its operations would resume.

The threat of a semiconductor chip shortage

With the shutdown of these mines in Spruce Pine, there is concern about the impact on the global supply chain for semiconductors. Though Sibelco has resumed operations, it's not clear how much of an effect the shutdown had on production and customer deliveries. It's also not clear if Sibelco has been able to resume the same level of production it had before the hurricane. With the continued shutdown of The Quartz Corp.'s mines, there is an ongoing delay in quartz shipments from that mine.

The shutdown of the two mines and associated delays in quartz production could potentially have significant implications in the following ways:

• Critical supply. The Spruce Pine mines supply the majority of the world's high-purity quartz used in semiconductor manufacturing.
• Limited alternatives. While there are other sources of high-purity quartz in other countries, Spruce Pine's quartz is noted for its unique combination of purity, availability and cost-effectiveness.
• Global economic impact. Given the importance of semiconductors in modern technology, a shortage could have wide-reaching effects on the global economy.
• Potential consequences. A chip shortage could cause some industries to halt production, similar to how the 2021 global chip shortage affected various sectors -- particularly the automotive industry.
• Price increases. A shortage could potentially drive up prices for semiconductor chips and, consequently, for consumer electronics and other tech products.

But the actual effect on chip makers might be muted -- at least in short term.

"Frankly, before this event we weren't even aware of this single point of failure in the complex chip supply chain," said Gaurav Gupta, vice president and analyst of emerging technologies and trends at Gartner. "However, based on our discussions with some of the chipmakers, it seems they are confident of riding this through as they have sufficient inventory until Spruce Pines mines recover from the hurricane."

Gupta said that the mine shutdown could still be an issue for smaller players with limited foundries.

During the COVID-19 pandemic, supply chain issues and production bottlenecks with semiconductors led to severe shortages across various industries, particularly affecting automakers and consumer electronics manufacturers. As of this writing, it is unclear how the Spruce Pine shutdown will compare. But there will be some form of short-term supply shock for those foundries that do not have sufficient inventory. A prolonged disruption in the supply of high-purity quartz could potentially lead to extended lead times for chip manufacturing and create a ripple effect throughout the global supply chain.

Other high-purity quartz mines around the world

While Spruce Pine is noted for its high-purity quartz and production capacity, there are other high-purity quartz mines around the world. Locations where quartz mining could potentially pick up include the following:

• Brazil. The Minas Gerais region in Brazil has quartz mining operations.
• China. China has numerous mining operations across different provinces.
• Russia. Russian Quartz LLC, based in Kyshtym, Chelyabinsk, Russian Federation, is the only manufacturer of high-purity quartz in Russia.
• Australia. The Australian Silica Quartz Group Ltd is among the top companies in the high-purity quartz market.
• Norway. The Quartz Corp. operates in Norway and has an annual production capacity of 30,000 tons of high-purity quartz.
• Canada. Sinova Global is developing and expanding production at the Horse Creek historic quarry, renamed as Sinova Quartz, near Golden, British Columbia, Canada. It is permitted for more than 1 million tons of annual quartz production.

Broader economic consequences

The potential semiconductor shortage resulting from Hurricane Helene's impact on Spruce Pine could have broader economic consequences. Here's how this could affect supply chains and drive the cost of items higher:

• Automotive industry. The automotive industry could face significant production delays that might lead to less availability and higher car prices.
• Consumer electronics. Smartphones, laptops and other consumer electronics may see price increases due to chip scarcity. Semiconductor shortages could also delay product launches.
• Artificial intelligence. The shortage could also affect the production of AI accelerator technologies relying on advanced semiconductors, such as chips from Nvidia.
• Industrial equipment. Manufacturing and industrial sectors that use semiconductor-equipped machinery may face production slowdowns that could result in higher prices for manufactured goods.
• Healthcare technology. Medical devices and diagnostic equipment production could be affected.
• Renewable energy. Solar panels and wind turbines, which rely on semiconductor technology, may face production constraints. Less production could slow the transition to renewable energy.

Sean Michael Kerner is an IT consultant, technology enthusiast and tinkerer. He has pulled Token Ring, configured NetWare and been known to compile his own Linux kernel. He consults with industry and media organizations on technology issues.