Creating a full cycle of chip production in Ukraine: how realistic is it – a study
9 May 11:49
Favorable geographical location, strategic reserves of raw materials, highly skilled labor force, and active government policy for the development of the industry are prerequisites for Ukraine to become an important player in the microelectronics and semiconductor industry. This is stated in a study of the prospects for the development of the electronics industry, prepared by the Government Office for Attracting and Supporting Investments UkraineInvest, "Komersant Ukrainian" reports.
According to YC.Market, as of December 2024, there were more than 5,000 companies and individual entrepreneurs in the electronics industry in Ukraine. Despite the challenges, the electronics manufacturing index has not changed significantly.
Industry needs and potential
In Ukraine, demand for high-tech products remains high due to the critical need for electronic components for the energy sector, which has suffered significant losses due to enemy shelling and the active development of military technologies.
For example, prospects for the development of local semiconductor production are opened up by the widespread use of unmanned aerial vehicles in Ukraine, which can become not only a center of advanced development but also a significant market for manufacturers of these components.
In 2023, Ukraine’s electronics exports amounted to USD 1.63 billion, with the EU countries being the main markets. The domestic market also generates significant demand: in 2023 alone, electronics imports reached USD 6.67 billion.
The country’s technological potential is also evidenced by the availability of a highly skilled workforce – Ukraine ranks 8th in the world in terms of the number of IT specialists, which gives impetus to the development of unique equipment.
Military risk insurance and government policies aimed at improving the investment climate will also have a positive impact on the industry’s development.
Availability of raw materials
Ukraine has significant reserves of raw materials needed for the production of semiconductors, which also creates preconditions for the development of this strategic industry.
The total reserves of silicon quartzite in the country are estimated at 180 million tons, and some deposits demonstrate high quality crystalline quartzite, which makes Ukraine competitive in the European market. The content of SiO₂ in quartzite reaches 98.8%, and the projected reserves exceed 500 million tons.
In addition to silicon resources, Ukraine has significant deposits of germanium, which lies in the Lviv-Volyn coal basin and in the east of the country.
An additional advantage is the extraction of gallium arsenide, which amounts to about 5 tons annually. This gives Ukraine the status of the fourth largest producer of this material in the world, with a share of 1.1% in global production.
The country also has large graphite reserves of 18 million tons, and Ukrainian graphite is considered one of the highest quality in the world. Given the successful trials by British scientists to replace indium with graphene in electronics manufacturing, these resources could become an important factor in Ukraine’s technological breakthrough in the semiconductor industry.
Integration into the international market
Ukraine is one of the few countries in Europe that has the resources to create a full semiconductor production cycle.
Moreover, the Ukrainian electronics market is already integrated into international production processes. Some companies cooperate with Asian factories, performing the initial production stages in Asia and the final stages at their own facilities in Ukraine.
In this context, the country’s favorable geographical location and the existence of 19 free trade agreements with 46 countries are important.
Development initiatives
The government is actively developing the electronics industry. The Ministry of Digital Transformation has identified the semiconductor industry as one of the 12 priority areas of innovation policy.
The strategic goal is for Ukraine to become one of the top 15 global leaders in microelectronics and to account for 1% of global chip production by 2030. As part of this plan, the Chips Act UA and a plan to build Ukraine’s first chip manufacturing plant were presented in 2024. Its capacity is expected to produce up to 50 thousand chips per month within three years after launch.
Combined with a developed R&D infrastructure (more than 100 centers), affordable financial instruments for startups, and ambitious government plans, all this creates favorable conditions for scaling up investments.
Global demand for electronics is growing rapidly – by 2029, more than 3 billion users of electrical equipment of various levels are expected, and the semiconductor market could reach about USD 1 trillion by 2030.
In this context, the Government Office for Investment Attraction and Support emphasizes that Ukraine has all the prerequisites to become a new Eurasian hub for the production of electronics and components.
