Hurricane Helene May Bring Back Chip Shortage

One of the expected impacts of climate change is an increase in the frequency and severity of storm systems around the world. About halfway through the 2024 Atlantic hurricane season, 12 tropical cyclones have formed and 11 have grown into named storms. The most recent (as of this writing) to hit the US mainland was Hurricane Helene, which made landfall in northwestern Florida before sweeping through much of the Southeast. With more than 200 fatalities confirmed as of October 3, this was a severe storm that may have lasting impacts on the global economy for at least the next year or two.

While storms like Helene always have direct economic and societal impacts, in this case, the storm also demonstrated the ongoing brittleness of the global supply chain. The western North Carolina town of Spruce Pine has a population of around 2,200 people, but it is also home to two mines that produce some of the highest purity quartz in the world.

As Helene swept through the region, it dropped over 2 feet of rain in the span of less than a day. Spruce Pine and other communities such as Asheville were inundated, with many streets under as much as 10 feet of floodwater at the peak. Mining operations were suspended on September 26, ahead of the storm. While it’s still unclear what the impact will be on the mines, the local community has been devastated.

Much of the quartz from Spruce Pine is used to produce crucibles to grow massive single-crystal silicon ingots. Spruce Pine is estimated to account for 70%-90% of the global production of these crucibles. The ingots are then sliced, and semiconductors for computer chips and solar panels are produced on the wafers. The wafers are cut up into individual chip dies, sent to packaging plants, and then sent on to other factories to be soldered onto circuit boards, installed in cases, and then used in virtually anything that has electronic controls. Today, that is a huge number of consumer products from computers to cars to aircraft, as well as more mundane consumer devices like toasters and refrigerators.

The impacts of the damage in Spruce Pine are being felt by local residents now, but there will likely be a global impact felt sometime in mid-2025. The supply chain to produce electronic systems from those silicon ingots to finished products is typically at least 6-9 months and runs around the world. It’s still unclear how much direct damage has been done to the mining equipment or how many area residents employed at the mines have been displaced from the region by damage to their homes. Even if mining operations can be restored quickly, getting the quartz out is likely to be disrupted for some time, as Interstate 40 between North Carolina and Tennessee is expected to remain closed until at least the end of 2024.

While progress has been made on diversifying supply chains in the last several years, including the chip supply chain, as with any other chain, it is only as strong as the weakest link. In recent weeks TSMC began trial production of iPhone chips for Apple in Arizona, and other chip fabs are under construction away from Taiwan. But in this case, one big storm and one small town in western North Carolina may potentially have an outsize impact on the global economy a year from now. There are stockpiles of quartz and other less pure supplies in Brazil and Russia, so it’s too early to say how large that impact will be.

As we likely face more severe weather, geopolitical conflicts, and other challenges that we may or may not be able to exert control over, it’s essential that we continue to make efforts to improve resilience. The flooding of Spruce Pine will probably affect chip supplies, and as we saw from 2020-2023, this can have impacts on transportation, communications, healthcare, food production, and more. Future challenges could have more direct consequences on these other elements of the economy. The world needs to prepare for how to mitigate those consequences before it’s too late.