Enterprise

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.”

Fintech

Judge Zia Faruqui is trying to teach you crypto, one ‘SNL’ reference at a time

His decisions on major cryptocurrency cases have quoted "The Big Lebowski," "SNL," and "Dr. Strangelove." That’s because he wants you — yes, you — to read them.

The ways Zia Faruqui (right) has weighed on cases that have come before him can give lawyers clues as to what legal frameworks will pass muster.

Photo: Carolyn Van Houten/The Washington Post via Getty Images

“Cryptocurrency and related software analytics tools are ‘The wave of the future, Dude. One hundred percent electronic.’”

That’s not a quote from "The Big Lebowski" — at least, not directly. It’s a quote from a Washington, D.C., district court memorandum opinion on the role cryptocurrency analytics tools can play in government investigations. The author is Magistrate Judge Zia Faruqui.

Keep ReadingShow less
Veronica Irwin

Veronica Irwin (@vronirwin) is a San Francisco-based reporter at Protocol covering fintech. Previously she was at the San Francisco Examiner, covering tech from a hyper-local angle. Before that, her byline was featured in SF Weekly, The Nation, Techworker, Ms. Magazine and The Frisc.

The financial technology transformation is driving competition, creating consumer choice, and shaping the future of finance. Hear from seven fintech leaders who are reshaping the future of finance, and join the inaugural Financial Technology Association Fintech Summit to learn more.

Keep ReadingShow less
FTA
The Financial Technology Association (FTA) represents industry leaders shaping the future of finance. We champion the power of technology-centered financial services and advocate for the modernization of financial regulation to support inclusion and responsible innovation.
Enterprise

AWS CEO: The cloud isn’t just about technology

As AWS preps for its annual re:Invent conference, Adam Selipsky talks product strategy, support for hybrid environments, and the value of the cloud in uncertain economic times.

Photo: Noah Berger/Getty Images for Amazon Web Services

AWS is gearing up for re:Invent, its annual cloud computing conference where announcements this year are expected to focus on its end-to-end data strategy and delivering new industry-specific services.

It will be the second re:Invent with CEO Adam Selipsky as leader of the industry’s largest cloud provider after his return last year to AWS from data visualization company Tableau Software.

Keep ReadingShow less
Donna Goodison

Donna Goodison (@dgoodison) is Protocol's senior reporter focusing on enterprise infrastructure technology, from the 'Big 3' cloud computing providers to data centers. She previously covered the public cloud at CRN after 15 years as a business reporter for the Boston Herald. Based in Massachusetts, she also has worked as a Boston Globe freelancer, business reporter at the Boston Business Journal and real estate reporter at Banker & Tradesman after toiling at weekly newspapers.

Image: Protocol

We launched Protocol in February 2020 to cover the evolving power center of tech. It is with deep sadness that just under three years later, we are winding down the publication.

As of today, we will not publish any more stories. All of our newsletters, apart from our flagship, Source Code, will no longer be sent. Source Code will be published and sent for the next few weeks, but it will also close down in December.

Keep ReadingShow less
Bennett Richardson

Bennett Richardson ( @bennettrich) is the president of Protocol. Prior to joining Protocol in 2019, Bennett was executive director of global strategic partnerships at POLITICO, where he led strategic growth efforts including POLITICO's European expansion in Brussels and POLITICO's creative agency POLITICO Focus during his six years with the company. Prior to POLITICO, Bennett was co-founder and CMO of Hinge, the mobile dating company recently acquired by Match Group. Bennett began his career in digital and social brand marketing working with major brands across tech, energy, and health care at leading marketing and communications agencies including Edelman and GMMB. Bennett is originally from Portland, Maine, and received his bachelor's degree from Colgate University.

Enterprise

Why large enterprises struggle to find suitable platforms for MLops

As companies expand their use of AI beyond running just a few machine learning models, and as larger enterprises go from deploying hundreds of models to thousands and even millions of models, ML practitioners say that they have yet to find what they need from prepackaged MLops systems.

As companies expand their use of AI beyond running just a few machine learning models, ML practitioners say that they have yet to find what they need from prepackaged MLops systems.

Photo: artpartner-images via Getty Images

On any given day, Lily AI runs hundreds of machine learning models using computer vision and natural language processing that are customized for its retail and ecommerce clients to make website product recommendations, forecast demand, and plan merchandising. But this spring when the company was in the market for a machine learning operations platform to manage its expanding model roster, it wasn’t easy to find a suitable off-the-shelf system that could handle such a large number of models in deployment while also meeting other criteria.

Some MLops platforms are not well-suited for maintaining even more than 10 machine learning models when it comes to keeping track of data, navigating their user interfaces, or reporting capabilities, Matthew Nokleby, machine learning manager for Lily AI’s product intelligence team, told Protocol earlier this year. “The duct tape starts to show,” he said.

Keep ReadingShow less
Kate Kaye

Kate Kaye is an award-winning multimedia reporter digging deep and telling print, digital and audio stories. She covers AI and data for Protocol. Her reporting on AI and tech ethics issues has been published in OneZero, Fast Company, MIT Technology Review, CityLab, Ad Age and Digiday and heard on NPR. Kate is the creator of RedTailMedia.org and is the author of "Campaign '08: A Turning Point for Digital Media," a book about how the 2008 presidential campaigns used digital media and data.

Latest Stories
Bulletins