The US takes Russia's chips off the table

Four ways U.S. chip sanctions will impact Russia

The White House said Thursday that it planned to choke off Russian access to a range of U.S. tech, including semiconductors, as part of the economic sanctions package proposed in response to the invasion of Ukraine.

We’ve seen a blueprint of how the U.S. might implement such sanctions with the Trump administration's efforts to thwart Huawei and other Chinese tech companies. But the U.S. had more to lose in dealing with China, and its aggressive batch of fresh economic punishments against Russia cover financial systems and the country’s access to tech.

How would the chip sanctions work?

• The U.S. Department of Commerce elected to follow a playbook similar to how it handled Huawei in 2019, and implemented a foreign direct product rule that bans shipping a range of U.S. tech products, or those made with U.S. equipment, software and blueprints, to Russia.
• Even though the U.S. doesn’t fabricate as many chips as it once did, American chip businesses have most of the world’s semiconductor design expertise and intellectual property.
• Choking off access to American tech cost Huawei billions in lost revenue, and forced it to turn to alternative chip suppliers that don’t have the tech needed to make the most-advanced chips.
• According to a Commerce Department fact sheet, there are a number of uses that are exempt from sanctions, such as telecom infrastructure and a “range of consumer items used by the Russian people” — referring to devices such as smartphones, among other things.

Will a chip ban be effective?

• “Russia is not a significant direct consumer of semiconductors,” Semiconductor Industry Association CEO John Neuffer said.
• The country accounted for less than 0.1% of global chip purchases, according to the Semiconductor Industry Association.
• Professor Bhaskar Chakravorti told Protocol that a large number of businesses involved in various stages of chipmaking aren’t worried about being placed on a U.S. blacklist at the moment — demand for chips continues to outstrip supply, and the U.S. would be loath to worsen the problem.
• The issue is compounded by the fact that the administration has little visibility into the semiconductor supply chain, which makes it harder for officials to catch companies violating sanctions.

How would chip sanctions against Russia impact China?

• The sanctions will push Russia further towards China as a trading partner for semiconductors.
• The problem is that for the short- to medium-term, China is struggling with foundry capacity and the ability to manufacture the most-advanced chips.
• And in the long term, Russia will not want to be so reliant on China for access to a foundational technology — right now, it just doesn’t have any viable alternatives.
• SMIC is central to China’s ambitions to grow its capacity. The chipmaker — which is still subject to U.S. sanctions from the Trump era — has reserved $5 billion for capital expenditures this year.
• Aside from supply constraints, however, there’s the problem of access to advanced chips.

Would the chip sanctions ease semiconductor supply constraints for everyone else?

• For the chip industry — and the ongoing global shortage — the paramount concern appears to be the raw materials necessary for chip production.
• The raw material gathering the most attention is neon, which is used in a part of chip fabrication called lithography, where a tool uses a narrow beam of light to draw features onto silicon wafers.
• According to a report from Techcet, Russia produces neon as a byproduct of steel manufacturing that is then refined by a specialized Ukrainian company.
• SIA downplayed the effect of any shortages, saying in a statement that the industry has a “diverse set of suppliers of key materials and gases” that the conflict between Russia and Ukraine won’t immediately disrupt.

— Max A. Cherney (email | twitter)

A MESSAGE FROM CLARI

How do you maximize Sales and Marketing performance? Point them at the same targets. Watch the latest episode of Club Revenue on Nasdaq as Bhaskar Roy, Chief Marketing Officer at Workato, reveals his remarkable tactics so that Marketing and Sales can outperform.

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Dbt is huge. So is its latest $222 million funding round.

Cloud data transformation and workflow software company dbt Labs just got a $222 million series D shot in the arm. Influential funders including existing investors Amplify Partners, Andreessen Horowitz and Sequoia, along with new investors such as Tiger Global and Salesforce Ventures and data services Databricks and Snowflake, took part in the round, which pegged dbt Labs at a $4.2 billion valuation.

Previously Fishtown Analytics, dbt Labs started dbt — “data build tool” — as an open-source tool. Today, the data transformation software is used by 25,000 people including 1,800 paying customers. It has integrations with Microsoft, AWS, Databricks, Google Cloud and Snowflake, and is used in more than 25 business intelligence, analytics and data governance applications.

Data insiders praise dbt for easing data workflows and bringing a framework for peer review, testing and operations typical in product development to data analytics. For example, George Fraser, CEO of data transformation service Fivetran, told Protocol in January that it is a top publisher of reusable code for dbt. Fivetran has also adopted dbt as the core of its transformation tooling.

Now that dbt has been christened with cash from the likes of Databricks, Salesforce and Snowflake, we can expect even wider adoption.

— Kate Kaye (email| twitter)

Upcoming at Protocol

It’s never been easier to use multiple cloud providers for modern tech infrastructure needs, but should you use multiple cloud providers? Join our panel of experts next Wednesday, March 2 at 10 a.m. PT to hear more about the arguments for and against multicloud computing and how businesses should think about their options as the market evolves.

Enterprise moves

Christoph Schell is Intel’s new EVP and chief commercial officer. Schell joins from HP where he’s worked for more than two decades; previously he worked at Philips and Procter & Gamble.

Anurag Handa joined the Open Compute Project Foundation board of directors. Handa is a vice president in Intel’s data center and AI business unit.

Joaquin Quiñonero Candela is joining LinkedIn as an AI technical fellow. Candela previously led the responsible AI team at Facebook.

Raju Gulabani joined the board of directors for Groq. Gulabani was previously vice president of the database and analytics business for AWS, and started Google Workspace before that.

Around the enterprise

Dell’s fourth-quarter revenue increased by 17% as PCs and servers proved more resilient than once expected during 2021, but the company reported a net loss it blamed on higher-than-expected taxes.

DigitalOcean saw fourth-quarter revenue up 37% and full-year revenue up 35% as demand increased for a developer-friendly and small-business-oriented take on cloud infrastructure services.

Microsoft Teams customers are seeing an increase in phishing attacks as attackers look for new ways to move beyond email links and attachments.

A MESSAGE FROM CLARI

How do you maximize Sales and Marketing performance? Point them at the same targets. Watch the latest episode of Club Revenue on Nasdaq as Bhaskar Roy, Chief Marketing Officer at Workato, reveals his remarkable tactics so that Marketing and Sales can outperform.

Learn more