Taiwanese chipmaker UMC acknowledged headwinds from the Iran war and a deepening memory crisis, yet maintained a forecast for resilient demand, exposing a sharp divide between foundry optimism and escalating geopolitical risks.
Taiwanese chipmaker United Microelectronics Corp. said on Wednesday it sees resilient market demand, even as the war in Iran threatens to sever 99% of the world's internet traffic via subsea cables in the Strait of Hormuz and memory chip prices are forecast to nearly triple by 2026.
"In a situation of active military operations, the risk of unintentional damage increases, and the longer this conflict lasts, the higher the likelihood of unintentional damage," said Masha Kotkin, a geopolitical and energy analyst.
The conflict has already halted production at a key Qatar plant responsible for over one-third of the world's helium, a gas critical for semiconductor manufacturing. This supply shock is compounded by a memory crunch that has dynamic random access memory (DRAM) prices projected to soar from $3.76 per gigabyte in 2025 to $9.71 in 2026, according to IDC.
UMC's statement highlights the precarious position of semiconductor firms navigating record AI-driven demand against unprecedented supply chain volatility. While hyperscalers like Amazon and Microsoft are committed to spending over $200 billion and $107 billion respectively on AI infrastructure, the rising costs of memory, energy, and logistics threaten to erode profitability across the entire tech sector.
The war in Iran has brought fresh attention to the vulnerability of the Strait of Hormuz, a narrow waterway not just for oil, but for the global internet. An estimated 99% of the world's data traffic flows through subsea fiber-optic cables, several of which are concentrated in the strait. These cables connect major data hubs in Asia, the Middle East, and Europe, forming the backbone of the digital economy.
Iran has explicitly warned that these cables represent a vulnerable point. While state-sponsored sabotage is a risk, experts note that 70-80% of cable faults are accidental, often from fishing and ship anchors. An incident in the Red Sea in 2024, where a vessel attacked by Houthi militants drifted and severed cables with its anchor, serves as a stark precedent. Repairing damaged cables in a conflict zone is a significant challenge, complicated by insurance, permits, and the physical dangers of mines and sunken vessels.
UMC's confidence in demand is underpinned by a massive AI infrastructure buildout. The world's largest tech companies, including Alphabet, Amazon, Meta, and Microsoft, have announced plans to spend well over half a trillion dollars this year. Amazon CEO Andy Jassy defended his company's plan to increase spending by over 50% to $200 billion, stating, "We're not going to be conservative in how we play this."
This spending spree is colliding with a severe memory shortage. Micron's CEO Sanjay Mehrotra noted in March that demand for memory used in servers and AI chips will exceed supply throughout 2026. The price pressure is immense, with spot prices for Nvidia's H200 GPUs climbing from $2.27 per hour in January to $3.82 this month. While hyperscalers are currently absorbing these costs, the squeeze is creating what Baird tech strategist Ted Mortonson calls "one of the most mispriced cycles I've seen in my career," warning that investors are complacent about the disruptions.
This article is for informational purposes only and does not constitute investment advice.
