Helium supply concerns amid the Middle East conflict may limit Singapore’s chip output and drive up manufacturing costs in coming months: RHB economist

SINGAPORE: Party businesses in Singapore have recently reported that their overall operating expenses have risen amid higher helium costs linked to the Middle East conflict. However, it seems concerns over helium supply may spill over and disrupt Singapore’s manufacturing sector, especially the semiconductor industry, which is the backbone of the artificial intelligence (AI) boom, risking Singapore’s chip output and driving up manufacturing costs in the coming months.

Barnabas Gan, group chief economist and head of market research at RHB Bank, told Singapore Business Review that business sentiment is expected to remain positive through September 2026 despite geopolitical uncertainty, thanks to “firms supporting the global semiconductor industry, particularly those in the semiconductor equipment industry, amidst strong AI-related investment globally.”

However, he warned that potential disruptions to helium supplies from the Gulf region could constrain semiconductor and high-value manufacturing output, pushing up costs and limiting Singapore’s capacity in the coming months.

This comes as Singapore’s manufacturing sector is showing signs of recovery, with the Purchasing Managers’ Index (PMI) rising to 50.7 in April 2026, marking the ninth straight month it has expanded and the highest reading since February last year, thanks to an AI-fuelled electronics boom that has lifted new orders, exports, factory output, input purchases, and employment.

While often overlooked, helium, supplied mostly by the United States and Qatar, is essential in semiconductor manufacturing, especially in chip fabrication, where it helps maintain optimal conditions in various stages of production.

As American economist and Johns Hopkins’ applied economics professor Steve Hanke told Fortune, “Helium doesn’t get much attention in the AI supply chain, but it should. Not only is it essential for cooling wafers during chip etching, there is no viable substitute at scale.”

According to a recent Moody’s Ratings report, helium supply disruptions linked to the Middle East conflict could pose a US$650 billion (S$827 billion) risk to hyperscalers, including Amazon, Microsoft, Google, and Meta, which are investing in AI infrastructure, assuming the supply chain holds.

Concerns over helium supply remain as tensions between the US and Iran continue, compounded by the fact that helium isn’t manufactured. In fact, liquid helium can only be stored in containers for about 45 days before it begins to degrade. /TISG

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