Semiconductor chips, the seemingly mundane component responsible for derail global supply chains over the past two years could play a central role in the international community’s efforts to stem Russia’s invasion of Ukraine. Whether these tactics actually work as intended remains far from certain.
Semiconductors have become the equivalent of 21st century nuts and bolts, underpinning everything from smart phones for Ford F-150. Although Russia and Ukraine are not known for producing semiconductors, they are both key sources of the neon gas and palladium used to produce these coveted chips. Like CNBC Remarksthe United States’ neon supply comes almost entirely from these two countries, a major dependency that has some experts worried about impending supply shocks that threaten to derail global supply chains just like shortages appeared be under control.
For some context: Neon prices saw a staggering 600% increase during Russia’s last conflict with Ukraine in 2014. To make matters worse, Russia, Reuters Remarkssupplies the United States with about 35% of its palladium, a mineral that is integral to sensors and other applications that the tech industry relies on.
“It will have an impact,” said Techcet President and CEO Lita Shon-Roy Recount CNBC. “This will continue to limit the source of the chip.”
Experts and members of the chip industry told Reuters that supply shocks caused by Russia’s invasion may take time to manifest, in part because many chipmakers have spent the two years to diversify their supply chains to face the last shortage. But while chipmakers and vendors expressed optimism about their ability to weather the disruption earlier this week, few really predicted the strength and scale of the Russian invasion.
Concerns about the chips may be just beginning as the United States and others appear poised to use components as economic leverage on the Russian government.
Late Thursday afternoon, the Biden administration responded to the attack on Ukraine by announcing it issued new sanctions against the Russian government. These included new Commerce Department export controls that would have placed restrictions on semiconductors, computers, telecommunications, information security equipment, lasers and sensors preventing them from being exported. be used by Russia.
At a press conference, President Joe Biden said the new measures would “impose a significant cost on the Russian economy, both immediately and over time.”
While the exact details of those sanctions remain unclear, the Biden administration has been considering some variations to the semiconductor restrictions for some time. Earlier this month, the administration threatens cut Russia off from its supply of semiconductors if the country were to invade Ukraine. This is important because while the United States can rely on Russia for access to materials, Russia conversely depends heavily on the United States for chips and chip designs.
The administration has warned that it could not only restrict Russia’s access to US-made chips, but also chips from other foreign countries, a restriction that could have a devastating impact on Russia’s economy.
“If Russia wants to develop these [technology] sectors, it must import technologies and products that only we and our allies and partners produce,” a White House official said. Recount Axios “And so that would lead to Russia’s production capacity atrophying over time.”
This plan, however, is not foolproof. Semiconductor restrictions won’t stop Russia helicopters and tanks to engulf Ukraine in the short term, and some experts fear such a move could backfire on the United States and others down the road. In one maintenance Along with Politico, Paul Triolo, head of technology policy at consultancy Albright Stonebridge Group, said a US policy shutting down access to chips to an entire country was “unprecedented” and could lead other manufacturers to foreign chips to reconsider incorporating American technologies into their products.
“At a minimum, this adds to industry concerns about the unintended consequences of the US government weaponizing US technological dominance in the semiconductor sector,” Triolo said. Such a move could also potentially open the United States and other countries to retaliatory cyberattacks from Russia, Triolo said.
It’s also far from clear whether a US-led effort to cut off semiconductors from Russia would work as elegantly as the Biden administration thinks.
As others have underline, semiconductor manufacturing represents one of the great complexities of the modern interconnected economy with elements of a product often traveling across many countries and even continents before arriving at its destination in its final form. Even if the administration manages to resolve these complexities, it is possible that Russia will simply turn to a friendlier China, which some say estimates already accounts for around 70% of Russian imports of computers and smartphones.
None of this means there’s nothing to be done, but it does underscore the mind-boggling headaches of trying to impose economic sanctions using technologies that, by design, depend on international trade.