In late February, the U.S. imposed a ban on selling high-tech products including semiconductors and telecommunications systems used by the defense, aerospace and maritime industries to Russia and its ally Belarus, days after Russia invaded Ukraine. The ban also extended to certain foreign items produced with U.S. equipment, software or blueprints.
South Korea and Taiwan, which dominate in high-end chips, and Japan, strong in chip-making materials and tools, have also banned exports of the items that the U.S. has put on its export-control list. Their moves cut off Russia’s access to many top-end chips, and materials and components needed to re-create production of such items locally.
For Russia, the impact from the coordinated sanctions will be significant, said Tom Rafferty, Asia regional director at the Economist Intelligence Unit. “The big export bans are going to be on semiconductors and high-end semiconductors in particular, for which Korea and Taiwan almost monopolize production. So there won’t be supply of that anywhere that Russia can lean on.”
While the sanctions would appear to limit Russia’s access to chip supplies, the actual impact couldn’t fully be determined. Russia’s Ministry of Industry and Trade, and the Ministry of Economic Development didn’t respond to requests for comment.
Russia continues to largely rely on foreign technology to design chips and has limited chip-production capabilities of its own. In 2020, Russia imported roughly $440 million worth of semiconductor devices, including components like diodes and transistors, and around $1.25 billion worth of electronic integrated circuits, or “chips,” built by incorporating various components, according to the United Nations Comtrade database.
While the majority of these imports come from Asian countries that aren’t imposing sanctions, Russia would still be left in the dark on high-end chips or homegrown chips. Taiwan produces most of the world’s cutting-edge semiconductors, with the rest produced in South Korea, data from Washington, D.C.-based trade group Semiconductor Industry Association showed. South Korea also dominates in memory chips, while Japan is a stronghold of semiconductor materials and manufacturing tools, both crucial for chip building.
Taiwan Semiconductor Manufacturing Co., the world’s biggest contract chip maker, said it is committed to complying with the new export-control rules. South Korea’s Samsung Electronics Co., a leading memory-chip maker and an electronics producer, said this month it has suspended shipment of all its products to Russia because of geopolitical developments and is monitoring the situation to determine its next steps.
Russia’s chip-building technology lags behind that of industry leader TSMC by more than 15 years, said Western semiconductor-industry executives who have studied the state of Russia’s industry. The country’s leading chip maker, Mikron Group, has said it is the only local company capable of mass producing semiconductors with 65-nanometer circuitries—a technology introduced to the industry for mass production around 2006. Mikron didn’t respond to a request for comment.
Some of the leading Russian-designed chips are assembled by TSMC. Russia could lose access to some of these chips, though it couldn’t be determined whether these chips would be hit by sanctions.
The latest Baikal microprocessors, widely used in many Russia-made computers and servers, are built by TSMC, according to Baikal Electronics JSC, a Russian company that designs the chips. Certain latest Elbrus microprocessors, designed by the Moscow Center of SPARC Technologies, were slated to be manufactured by TSMC, documents from the Russian company showed.
TSMC declined to comment beyond its statement on the sanctions. Baikal and MCST didn’t respond to requests for comments.
The international tech sanctions are in effect immediately, though their impact will take months, potentially years, to be felt across Russia’s strategic industries, analysts said.
One such area is arms sales, an important source of both geopolitical influence and revenue for the state, said Samuel Bendett, a research analyst with the Center for Naval Analyses, a federally funded defense-research institute based in Virginia.
Russia is the world’s second-largest arms exporter after the U.S., with Russia-made weaponry including advanced air-defense systems, radar and missiles accounting for roughly 20% of global arms sales, according to the U.S. Congressional Research Service.
Semiconductors that go into military applications are developed with specialized materials and circuit designs enabling them to withstand radiation while maintaining performance, according to the U.S. Defense Department. Improving such aspects is critical for next-generation weapons.
In addition, artificial intelligence, high-speed 5G internet service and robotics—technologies partly driven by advanced chips—have become priorities for Russia’s leadership in recent years as it looks to modernize and diversify its economy. Russia’s tech ambitions would hit a snag without the high-end chips, said Kevin Wolf, a former Commerce Department official who now advises companies on export controls at law firm Akin Gump Strauss Hauer & Feld LLP.
The tech sanctions largely exclude consumer tech products. It is unlikely Russia would carve out chips from consumer devices like smartphones and repurpose them for weapons, given the costs and technical difficulties, said James Lewis, senior vice president at the Center for Strategic and International Studies, a Washington, D.C.-based think tank.
China is Russia’s strategic partner, and some Chinese chip makers could replace suppliers of capacitors and transistors, Mr. Lewis said. However, Chinese chip makers aren’t able to mass produce the industry’s cutting-edge chips, lagging behind in technology.
And even for the older-technology chips, Chinese companies may not be in a position to step up, reluctant to risk escalating tensions with the U.S., said Mr. Rafferty, of the Economist Intelligence Unit.
“Should companies take steps to evade these controls, they run the real risk of being cut off from access to U.S. technologies,” a spokesperson for the Commerce Department said.
