Data reveals where Russia chip sanctions will sting the most

Protocol analyzed 150,000 Russian chip import records.

Chips with Russian flags on them.

Even though Russia doesn’t import a large quantity of chips relative to other countries, a disruption such as the sanctions imposed by the U.S. and others could have outsize impacts.

Photoillustration: Robert Svebeck/Unsplash; Protocol

The impact of the global sanctions that choke off Russia’s access to semiconductors has been broadly downplayed by the industry. The narrative goes something like this: Russia isn’t heavily involved in the design or production of advanced semiconductors, so it doesn’t buy many chips, which means the sanctions announced last week in response to the invasion of Ukraine won’t have a meaningful impact.

In some ways, that’s true: Relative to other countries, Russia doesn’t spend lots of money on chip imports, according to analysts and industry association estimates. Out of an overall global chip market of roughly $550 billion, Russia consumes roughly 0.1%, or about $500 million worth of semiconductors a year. And Russia’s buying accounts for only about 2% of computer and smartphone shipments, and 1% of global server shipments, according to Bernstein analyst Stacy Rasgon.

But even though Russia doesn’t import a large quantity of chips relative to other countries, a disruption such as the sanctions imposed by the U.S. and others could have outsize impacts. Amid a severe chip shortage that has dragged on for years, a power outage in a major Taiwanese manufacturing district lasting just one-tenth of a second Tuesday was enough to trigger concern about production.

Estimated total declared value of loose chip import cargo value to Russia over five years. Data excludes chips inside other devices such as smartphones, and memory. Estimated total declared value of loose chip import cargo value to Russia over five years. Data excludes chips inside other devices such as smartphones and memory. Image: Protocol

Protocol analyzed 146,000 Russian customs records from 2017 through July of 2021 for both memory and processors provided by ImportGenius. These records include both the chip producer and the cargo’s declared dollar value, which were used to estimate market size and foreign company exposure to Russia. In some cases, products were listed with multiple producers, or company names were incorrectly or inconsistently entered by import officials. To address these challenges, Protocol used a clustering algorithm to identify businesses.

This analysis does not include most components included inside finished products like smartphones or computers. However, it does examine shipping records related to imports of chips like memory and analog components used to make other things.

The loose analog chips Russia does buy are relatively inexpensive, costing only a few dollars in some cases. But many of the chips Russia buys are older designs at the heart of a significant part of the global shortage, which has held up the production of cars and hundreds of other products.

The majority of the loose chips Russia imports are likely analog chips used for industrial equipment and motor controls.Image: Protocol

According to the data, Russia imported nearly $40 million worth of loose chips in roughly the first half of 2021, which suggests it was well on its way to roughly match annual imports of over $60 million during the years ahead of the pandemic. Government lockdown orders around the world because of COVID-19 created significant disruptions to global trade during 2020, likely accounting for the big dip in chip imports that year.

Most of the raw chips Russia imports aren’t as well known as the microprocessors and graphic chips made by the likes of Intel and Nvidia. But, they are still just as crucial to producing cars and hundreds of other consumer goods. Harvard Business School professor Willy Shih told Protocol that a significant portion of the imported chips are analog semiconductors used in industrial equipment and things such as switches and motor controls.

Infineon, which sent the largest value of loose chips to Russia, makes a range of analog products, such as power management chips and other types of sensors.Image: Protocol

Infineon, an analog chipmaker based in Germany, exports the largest dollar value of loose chips to Russia, according to the data. The company reported overall fiscal 2021 revenue of €11.1 billion ($12.4 billion), which suggests even its total Russian exports since 2017 — about $60 million — are a minor concern. Several other American companies such as Cree supply Infineon, and the company recently acquired the San Jose-based Cypress Semiconductor. Much like the others on the list, Infineon’s products include a range of power management chips and other types of sensors.

Shih said it was notable the data didn’t include big contributions from Texas Instruments and Analog Devices, two of the largest makers of chips based on older technologies, but said the Russians probably source a lot of chips through distributors in Dubai and elsewhere.

“Nobody on the list is dealing in chips like you would find in an iPhone or an Android phone,” he said. “There’s some TV manufacturing in Russia, but not a whole lot of advanced consumer devices would be my guess.”

Russia’s memory imports appear on track to return to pre-pandemic levels.Image: Protocol

Memory imports work a bit differently. The chips themselves are treated as a commodity, much like oil, complete with daily spot prices for flash storage and DRAM (dynamic random access memory). In Russia’s case, it imported roughly $50 million worth of memory chips through the first seven months of 2021, which likely set it on pace for 2019’s imports of about $75 million. Like it did with other chips, the pandemic severely damaged memory imports in 2020, the data appears to indicate. According to a Bernstein estimate, the global memory market was roughly $120 billion, as compared to $112 billion in 2019 according to Gartner.

Bernstein’s research indicated that over 80% of the combined flash storage and DRAM market is controlled by three companies: the South Korean giants SK Hynix — which recently bought Intel’s flash storage unit — and Samsung, and the Idaho-based Micron. According to the ImportGenius data, Samsung has the most exposure to Russia, and sells roughly $15 million worth of memory a year, aside from 2020.

Three companies control over 80% of the combined DRAM and flash storage markets. Of those, Samsung exports the most to Russia.Image: Protocol

Choking off Russia’s access to chips may have benefits outside of the country. The world has been unable to produce enough chips to meet the demand for several years, a problem that isn’t likely to diminish until later this year but could last longer. As noted, the chips Russia buys are among the types of analog semiconductors that are among the most difficult to buy: Removing Russia from the marketplace, then, could ease the problem elsewhere in the world.

“Right now the impact would be a positive to silicon consumers outside of Russia, in the sense that nearly every semiconductor product is currently supply constrained, and if fewer products are shipping to Russia that allows them to be allocated to others,” Mercury Research’s Dean McCarron wrote in an email. “While the volume isn't likely to make much difference, every little bit helps.”

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