What's Happening at Spruce Pine...?

One of the world's most important sources of a critical ingredient in silicon chip manufacture just went down. What happens next...?

Spruce Pine processing plant. Image: Sibelco

If you’ve read Material World you will already know all about Spruce Pine - a small town in North Carolina which, unbeknownst even to many residents, is one of the most important locations in the global economy, for a very simple reason. It is responsible for the production of the vast majority of the high purity quartz sand used to make the silicon wafers which go on to become semiconductors and solar panels.

This is not the time or place to run through the long, complex and actually quite fascinating journey a silicon atom goes through on the way from the quarry to the insides of a smartphone (or for that matter a solar panel). You’ll have to refer back to chapter 3 of the book for that.

But suffice it to say, Spruce Pine’s role in this journey is very important indeed. Because when you’re taking ultra pure 99.99999999% silicon (polysilicon, as it’s known) and turning it into a silicon wafer (which is not just chemically pure but also atomically structured into a perfect monocrystal) you need a similarly pure quartz crucible in which to melt it.

And those crucibles, used in what’s known as the Czochralski process, need to be made of a pristine form of quartz sand - which is where Spruce Pine comes in.

High Purity Quartz crucibles. Image: Shin-Etsu

As I wrote in the book:

There are a few micro producers in India and Siberia, but nothing to rival the consistency and quality of the two mines in Spruce Pine, which raises some unsettling questions. What if something happened to those mines? What if, say, the single road that winds down from them to the rest of the world was destroyed in a landslide? Short answer: it would not be pretty.

We may be in the process of learning the answer to those questions, because Hurricane Helene has caused terrible flooding in North Carolina and, to judge from pictures I’ve seen online and been sent by folks in the industry, it doesn’t look good.

At this stage it’s worth emphasising that we still know very little about the status on the ground and in the refineries at Spruce Pine. More to the point, human lives are still at risk, and so the most important thing to bear in mind is the human cost of a disaster like this. The town has only one major road into it and that looks to be cut off - so all thoughts are with the emergency workers, not to mention the people of Spruce Pine.

But the episode also underlines something that crops up again and again in Material World - the fragility of the economic underpinnings of our lives. Few people spend much time thinking about a place like Spruce Pine, until something like this happens and then all of a sudden it’s all important.

It’s a little like the fertiliser plant I wrote about in the book, which shut down and then all of a sudden the UK was out of another chemical no-one had spent much time contemplating. So lesson one is: these pinch points are everywhere. And we should really try harder to identify them before disasters rather than after them.

Lesson two comes back to the question everyone is asking: what does this mean for the global economy? After all, roughly 99 per cent of global GDP depends, one way or another, on semiconductors. The pace of the energy transition depends on solar photovoltaic cells. And now a critical cog in the supply chain for these two products is in question. So what next?

That depends on two things. First, just how long Spruce Pine quartz output is knocked out. We know that Sibelco, the biggest producer there (the smaller being the Imerys-owned Quartz Corp) has announced that it is “temporarily halting operations”. If those operations can recommence in a few weeks - or even a month or two - that would not be especially disruptive for global semiconductor production.

The thing to remember here is one lesson that came from the Covid-era semiconductor shortage. Back then, the industry struggled to respond to the sudden increase in demand for silicon chips (as people started working from home in their droves). And in large part that was because making computer chips is a surprisingly slow process. It takes weeks - sometimes months - to turn some lumps of polysilicon into a perfect silicon wafer. It takes weeks if not months to turn that piece of silicon into a silicon chip. This is not, in other words, a “just in time” business like car manufacturing, where a part turns up at 10am only to be fitted into a car an hour or two later.

One of the TSMC fabs. Wafers whizz around these places for MONTHS. Image: TSMC

And in some senses that slowness might actually benefit the industry this time around. Because, unlike just in time supply chains, silicon wafer producers tend to keep decent stockpiles of both wafers and crucibles. As it happens, those stockpiles have been run down quite a bit in recent months, as the excellent Semianalysis points out. But still… you’re talking about months of stockpiles rather than days or weeks.

Even so, if the Spruce Pine facilities are down for more than, let’s say, three months, then that leaves a big gap between those stockpiles and new supply of high purity quartz. So what are the omens there?

Here we get into the speculation side of things, so treat the following with caution, but I did speak recently to John Walker, a former chief executive of The Quartz Corp - so someone who, unlike nearly everyone else talking about this (including me) actually has personal experience of working in High Purity Quartz production at Spruce Pine.

How long does he think the plant will be down for? He didn’t want to put a figure on it, but I came away with the impression that six months would be a good result. Why?

“Safety must be the number one priority at this time,” said Walker. “You’ve got to let the flood waters subside and water quality to return to normal levels - that may take several weeks. Then you’ve got to clean everything and ascertain what equipment you need to replace.

“If the damage is extensive, equipment lead time and availability of labour are significant factors how long it takes to get operations up and running. We must mindful that many people have lost their homes and been displaced, which is a tragedy.

“Several processing and refining facilities are right on the river. If the river has risen as much as six metres as reported, and what photos from the area suggest, then production facilities will have will have been flooded. Local sources have indicted that the railway tracks have also been damaged as has the road, power, water treatment and communications infrastructure in the area.

“Also, any finished goods inventories, or intermediate finished products, may well have been damaged by floodwater.

“If the river has risen that high, every pump and motor and gearbox will be underwater.

“And since this is high purity quartz, you have now got silt and soil in there. Cleaning and sorting it out will take time.”

So that’s not especially encouraging. But that brings us to an equally important question: let’s say Spruce Pine is down for a while. How long until alternative sources of high purity quartz are located and brought online?

After all, as I wrote in the book, it’s not as if there’s no high purity quartz elsewhere. It’s more that Spruce Pine has a near unique combination of purity, availability and price. There are mines in Russia and Brazil, not to mention China, which already produce lots of high purity quartz. There are some companies which are able to make high purity quartz synthetically.

So yes, in the long run, this will not be the end of the world. This will not “end” semiconductor or solar cell manufacture. Then again, as someone once said, in the long run we’re all dead. In the short run, actually ramping up that alternative production will take some time and, just as importantly, some cost.

All of which is to say, it’s quite hard to imagine this won’t have at least some impact (might be small, might not) on the cost of silicon wafers. Does that mean semiconductors and solar panels become more expensive or for that matter more scarce in the coming months? Hard to say. Very possibly. But let’s see. The folks I’ve spoken to in the industry in recent days seem relatively sanguine about it, but they’re certainly spending a lot of time checking their stockpiles and talking to suppliers. It’ll be a nervy few weeks.

In the meantime, perhaps the best thing to ponder is the extent to which capitalism has, in recent decades, concentrated large amounts of economic activity on certain pinch points.

Spruce Pine is one of them - but is far from the only one. What about the plant I wrote about in the book which provides nearly all of the chlorine for the UK - without which we’d be rationing drinking water in a matter of days? What about the metal pressing plant in Birmingham which provides more than 50 per cent of the global supply of electrodes for rear view mirrors in cars? Or the plants that went down following the Fukushima disaster, causing a ripple effect across the world economy?

Part of the reason Spruce Pine is so important is geological. But part of the reason is price: we like cheap things and Spruce Pine quartz is both cheap and really good quality. Getting equally high quality stuff from elsewhere might be more expensive. But if you’re also getting a bit more security and diversity for that price…? Well, perhaps that’s a price worth paying.

All of which is to say, when you take a step back and think about what’s going on here, you start to realise that if the world economy is going to become more stable in future, and to minimise risks of pinch points having crises, then maybe that might mean things are going to cost a bit more in future. Everything.

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UPDATE FRI 4 OCT

Sibelco has posted the following update which looks promising, and suggests a more positive interpretation than the one from John Walker above. So that’s good news. Fingers crossed:

Recovery efforts in the areas around our operations impacted by Hurricane Helene have made significant progress. All Sibelco employees, and contractors who work for the company, have been accounted for and are safe. 

We are actively collaborating with the community, local authorities and businesses to support recovery activities. Our efforts have included road clearing and repairs, the provision of temporarily power supply to organizations in greatest need, the supply of fuel and working with the cities of Spruce Pine and Bakersville to establish temporary water supply systems for residents.  

Thanks to Sibelco’s long-standing commitment to sustainability, which includes measures to mitigate the impact of extreme weather events such as Hurricane Helene, our operations have shown resilience.

The initial assessment indicates that our operating facilities in the Spruce Pine region have only sustained minor damage. Detailed assessments are ongoing. Our dedicated teams are on-site, conducting cleanup and repair activities to restart operations as soon as we can.

Restoring power remains crucial to resuming our operations. The repair of power lines leading to our plants has progressed significantly. We expect to give a further update on the status of power supply in the near term. 

Our final product stock has not been impacted. We are working closely with our customers to assess their needs and plan the restart of product shipments as soon as we can. 

Our thoughts are with all those affected by Hurricane Helene. We extend our gratitude to our employees, the first responders, and the construction crews who are working tirelessly on recovery activities in the region.