Russia’s chip supply at risk from US-led sanction push

The Biden administration and EU’s call for sanctions against Russia will jeopardize the country’s ability to buy semiconductors and other technology—and it could affect military technologies in the future.

The U.S. government on Thursday said it will implement export controls designed to cut Russia off from semiconductors and other advanced technology crucial to the military, biotechnology, and aerospace industries. Allies such as Japan, Taiwan and South Korea—all key chipmaking countries—have either followed suit or indicated that they will. 

Brussels on Friday morning confirmed its sanctions would attempt to impact Russia’s supply chain.

“We will hit Russia’s access to important technologies it needs to build a prosperous future—such as semiconductors or cutting-edge technologies,” European Commission President Ursula von der Leyen said.

More uncertain is whether Chinese chip companies, particularly Semiconductor Manufacturing International Corp., will also cut off Russia. Shanghai-based SMIC, as the company is known, makes chips that are less advanced than those from the likes of Taiwan Semiconductor Manufacturing Co., but they’re sophisticated enough for at least some military applications. 

While China isn’t joining in with Russia sanctions, the U.S. rules cover companies anywhere in the world that use American technology, including software. SMIC uses equipment from American suppliers like Applied Materials Inc. to make its chips.

SMIC did not immediately provide comment.

“While the impact of the new rules to Russia could be significant, Russia is not a significant direct consumer of semiconductors, accounting for less than 0.1% of global chip purchases, according to the World Semiconductor Trade Statistics organization,” said John Neuffer, president and chief executive officer of the Semiconductor Industry Assn., in a statement Thursday. 

Russia is not a major factor in the semiconductor supply chain. However, local companies instead are heavily dependent on third countries for access to parts, including chips coming from the EU that end up in cars and industrial applications and sensors, said Jan-Peter Kleinhans, a researcher at the German think-tank Stiftung Neue Verantwortung.

The threat of U.S. sanctions have already impacted Russia’s access to chips, with the head of Russian carmaker Avtovaz saying earlier this week that the company is looking for alternative sources.

European chip companies including Bosch said they are closely following the situation and will comply with any legal action taken. Dutch chip producer NXP added that while it’s premature to speculate about the impact of sanctions, it doesn’t “anticipate any significant impact” on its business based on current information.

X-Fab, a German chip supplier, also said in a statement that the impact would be small on the company but the “tremendous” demand for chips “would allow us to immediately use that capacity for other business.”