Russian chip manufacturing is 15 years behind

Russia has been subject to international sanctions for launching a special military operation against Ukraine, including high-tech sanctions. How much impact will this have on Russia's chip industry?

Experts believe an internationally coordinated tech blockade could deprive Russia of the sophisticated semiconductors it needs to power advanced weapons and cutting-edge technologies such as 5G, artificial intelligence, and robotics.

In late February, just days after Russia began attacking Ukraine, the United States banned the sale of high-tech products to Russia and its ally Belarus, including semiconductors and telecommunications systems used in the defense, aerospace, and maritime industries. The ban also includes certain foreign products produced using U.S. equipment, software, or blueprints.

In addition to the United States, South Korea, Taiwan, which dominates the high-end chip sector, and Japan, which is powerful in chip-making materials and tools, have also banned exports to Russia of products on the U.S. export control list. Their move cuts off Russia's access to many high-end chips and the materials and components needed to re-produce those products locally.

Heavily dependent on imports

For Russia, the impact of coordinated sanctions would be huge, said Tom Rafferty, Asia director at the Economist Intelligence Unit, a business analyst firm. "This draconian export ban will target semiconductors, especially high-end semiconductors, of which South Korea and Taiwan have a near-monopoly. Therefore, there will be no supply anywhere that Russia can rely on," he said.

While sanctions appear to limit Russia's access to chip supplies, their actual impact cannot be fully determined. Russia's Ministry of Industry and Trade and Economic Development had no comment.

Currently, Russia still relies heavily on foreign technology to design chips, and its own chip production capacity is limited. In 2020, Russia imported about $440 million worth of semiconductor equipment, including components such as diodes and transistors, and about $1.25 billion worth of electronic integrated circuits, or "chips," according to the United Nations Commodity Trade Statistics database.

While most of these imports come from Asian countries that have not imposed sanctions on Russia, Russia is still far behind when it comes to high-end chips or domestically produced chips. Taiwan produces most of the world's cutting-edge semiconductors, with the rest in South Korea, according to the Semiconductor Industry Association, a Washington-based trade group. South Korea also dominates memory chips, while Japan is home to semiconductor materials and manufacturing tools. Both materials and tools are critical to chip fabrication.

15+ years behind

TSMC is the world's largest chip foundry. The company said it is committed to complying with the new export controls. South Korea's Samsung Electronics, the world's leading maker of memory chips and electronics, said this month that it had suspended all exports to Russia in view of the geopolitical situation and was closely monitoring the situation to decide the next action.

Western semiconductor industry executives who have studied the current state of Russia's semiconductor industry believe that Russia's chip manufacturing technology is more than 15 years behind industry leader TSMC. Currently, Mikron Group, Russia's leading chipmaker, has said it is the only local company capable of mass production of semiconductors on a 65-nanometer process. You know, 65 nanometers have been introduced into the chip industry for mass production around 2006. Mikron has yet to comment.

Also, some cutting-edge chips designed by Russia are assembled by TSMC. Russia may not be able to obtain some of these chips, although it is unclear whether they will be subject to sanctions.

Baikal microprocessors are widely used in many Russian-made computers and servers. Russia's Baikal Electronics JSC, which designed the chip, said it was made by TSMC. Some of the latest Elbrus microprocessors designed by the Russian company Moscow Center of SPARC Technologies (MCST) are also planned to be produced by TSMC, according to documents from the Russian company Moscow Center of SPARC Technologies (MCST). TSMC declined to comment. Baikal Electronics, MCST has yet to comment.

Long term impact

Analysts pointed out that although the international technology sanctions took effect immediately, it would take months or even years for Russia's strategic industries to feel the impact of the sanctions. One such area is arms sales, an important source of Russia's geopolitical influence and revenue, said Samuel Bendett, a research analyst at the Center for Naval Analysis, a defense research agency funded by the federal government in Virginia.

According to the Congressional Research Service, Russia is the world's second-largest arms exporter after the United States. Russian-made weapons, including advanced air defense systems, radars, and missiles, account for about 20 percent of global arms sales.

Semiconductors for military use are developed with special materials and circuit designs that allow them to withstand radiation while maintaining performance, according to the Defense Department. Improvements in these areas are critical to the next generation of weapons.

In addition, artificial intelligence, high-speed 5G internet services, and robotics technologies powered in part by advanced chips have become priorities for Russia in recent years as it seeks to modernize and diversify its economy. Without high-end chips, Russia's tech ambitions could be thwarted, said Kevin Wolf, a former Commerce Department official. Wolfe currently advises businesses on export controls at the US law firm Akin Gump Strauss Hauer & Feld LLP.

These tech sanctions largely exclude consumer-grade tech products. Given the cost and technical difficulty, it is unlikely that Russia will extract chips from consumer devices such as smartphones and repurpose them for weapons, according to James Lewis, senior vice president of the Center for Strategic and International Studies, a think tank in Washington.

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