Value Chain Analysis of the Semiconductor Grade Neon Gas Market

What core factors influence market dynamics?

The Demand for Semiconductors is Shifting The Market for Semiconductor-grade Neon. There Are Only A Few Sources of Neon Globally, and Demand is Moving Supply. The Supply is Still Trying To Adapt To Shocks that Occurred in 2022 and Are Expected To Continue Into 2026. Lucintel Weighs The Forces of Supply and Demand and Classifies The Findings Under The Following Headings: Drivers and Challenges.

Drivers

Demand from Fab Expansion

• Demand for chips and associated gases is expected to grow at a compounded annual growth rate of nearly 30% for the next few years as AI hardware advances and begins to dominate the semiconductor industry.

Advancements in Recycling Technology

• Gigaphoton has developed a new technology that allows a 92% reclamation ratio for neon with each wafer processed. With scaling production, there is a drop in the demand for newly produced neon.

Reinforced Infrastructure

• Air Liquide has invested $250 million in a dedicated gas plant in Idaho to support Micron's fab, beginning gas production to support fab expansion.

Government Policy and Industrial Standards

• In 2022, Japan's METI began funding plans for a neon separation facility in Japan being developed by Air Liquide. The target date for the start of operations is 2027, and Japan currently imports nearly all its semiconductor-grade neon.

Challenges

Extreme Supply Concentration

• The separation of gases in air is only feasible at a large scale for the largest Air Separation Units (ASUs). Given that neon is only 0.0018% of the air, these ASUs have a very low recovery rate. Therefore, the separation of neon is a very slow process.

Geopolitical Challenges

• Prior to the 2022 invasion of Ukraine by Russia, approximately 50% of the world's semiconductor-grade neon was produced in Russia. Cryoin, located in Ukraine, has only resumed operations in 2022, after the war. This demonstrates how fragile the current market is.

Price Volatility

• Buyers continue to expect ten-fold price fluctuations, as seen during the major shocks of 2022.

High Barriers to Entry

• Harvesting neon economically requires operations that process at least 1,000 metric tonnes of oxygen daily. This further consolidates the few large firms in the market.

What key trends are shaping this market, and what's driving them?

Between 2024 and 2026, the oligopoly on semiconductor-grade neon from Ukraine was disrupted as new neon suppliers emerged, creating a multi-regional supply chain. In response to diversified sourcing, Lucintel is tracking five forces.

Regional Supply Chain Diversification

• Due to the CHIPS Act, first mover installation contracts were signed in 2023 leading to new fabs in Arizona and Texas. Eastern European crude neon was used less frequently, and from 2025-2029, buyers will split requirements between US, Qatari, and German separation units.
• By 2025, Samsung’s Pyeongtaek facility implemented pipeline-connected cryogenic storage, reducing the reliance on cylinders and creating a tight contract for spot buyers for the subsequent three years.

Circular Economy and Gas Recovery

• From 2025, Samsung sought to replace 75% of their neon with recycled neon, and SK Hynix replaced 72.7% of their neon with recovered neon, generating a yearly savings of $30 million. As a result, the virgin air-separation output will be used less frequently through 2030.
• As of 2025, Gigaphoton’s laser recycling achieved a 92% reclaim ratio on ArF tools, and this record is being pursued race-wise by their competitors.

Automation in Gas Delivery

• Major fabs have installed pipelines for gas delivery in place of gas cylinders, enabling real-time gas delivery and purity controls.
• By 2025-26, the implementation of onsite gas separation units, as per the CHIPS Act, will significantly reduce the risks of transport contamination.

Sustainability Through Byproduct Recovery

• The model of recovering neon as a byproduct from rolling mill operations, first implemented by Air Water in Japan, is likely to be adopted by more suppliers in the Asia-Pacific region, as neon rolling mills are readily available. Neon can be recycled at the fab level, and this will meet the sustainability goals of the semiconductor industry, as it significantly reduces the carbon footprint.

Precision Demand from Advanced Lithography

• High Bandwidth Memory produced using Aritrary Integration (AI) is estimated to grow almost 30% each year until 2030, increasing gas consumption at Deep Ultraviolet (DUV) Hubs in Hsinchu.
• Continual advances in fabrication node shrinking coupled with traditional methods of neon recycling will only lead to further increases in demand even with an intensifying recycling effort.