Chip with Russian flag.
Photoillustration: Robert Svebeck/Unsplash; Protocol

Where Russia gets its chips

Protocol Enterprise

Hello and welcome to Protocol Enterprise! Today: a Protocol analysis breaks down the impact of sanctions on the Russian chip market, the Ukraine war hits home for a metal fabrication plant in Ohio and the latest job moves from enterprise tech’s best and brightest.

Spin up

Increased regulations on digital businesses are causing problems for smaller companies that don’t have the staff or expertise to manage the load. According to a new survey of managed-services providers conducted by Kaseya, 74% of their customers say they’re struggling to meet those compliance regulations, which is just one reason why compliance SaaS startups have seen significant investment in the last few years.

Russia sanctions take a bite out of chip industry

The impact of the global sanctions that choke off Russia’s access to semiconductors has been broadly downplayed by the industry. In some ways, that’s valid: Out of an overall global chip market of roughly $550 billion, Russia consumes about 0.1%, or about $500 million worth of semiconductors a year.

But even $500 million worth of semiconductors is … a lot of chips, especially cheap ones used in products such as cars and home appliances. 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.

Protocol analyzed 146,000 Russian customs records from 2017 through July of 2021 for both memory and processors provided by ImportGenius.

  • 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.
  • According to the data, Russia imported nearly $40 million worth of loose chips in around 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.
  • This analysis does not include most components included inside finished products like smartphones or computers, but examines shipping records related to imports of chips like memory and analog components used to make other things.
  • 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, 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.
  • Much like the others on the list, Infineon’s products include a range of power management chips and other types of sensors.
  • Memory is treated as a commodity, much like oil, complete with daily spot prices for flash storage and DRAM (dynamic random access memory).
  • Russia 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.
  • 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.

For countries outside of Russia, the sanctions might help ease the shortage — at least a bit. “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 told Protocol.


— Max A. Cherney (email | twitter)

A MESSAGE FROM HASHICORP

At HashiCorp, we believe infrastructure enables innovation. We help teams operate that infrastructure in the cloud. Organizations rely on our solutions to provision, secure, connect, and run their business-critical applications. Our products provide multi-cloud infrastructure automation, and underpin some of the most important applications for the world’s largest enterprises.

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Ukraine conflict puts an Ohio manufacturer — and its data — on alert

When Jeff Karan received a “Shields Up” warning email from the U.S. Cybersecurity and Infrastructure Security Agency last week, the director of Enterprise Technologies at G&W Products in Fairfield, Ohio, was already well prepared for potential cyberattacks. But the email showed the military contractor how a war brewing in Ukraine can be felt even inside a small business 5,000 miles away.

The Feb. 22 CISA alert was prompted by expectations of disruptive cyber activity in retaliation for sanctions imposed on Russia by the U.S. and its allies in response to Russia’s invasion of Ukraine.

G&W’s manufacturing equipment and devices are internally networked and also connected to the internet. It uses cloud-based enterprise resource planning software from Plex Systems to manage and analyze HR, accounting, materials inventory and more.

Although connections between that platform and its partners are encrypted, Cathy Pitt, chief security officer at Plex Systems, said government contractors, particularly defense contractors, shouldn’t have top-secret data stored inside their analytics platforms.

Even missteps inside a small manufacturer like G&W could affect multiple connected companies and systems, said Michael Sentonas, CTO of global cybersecurity company CrowdStrike.

“They’ve got suppliers, they’re attached to other systems. It spreads from their partners down the line,” he said.

— Kate Kaye (email | twitter)

Enterprise moves

Over the past week, both Splunk and the Open Compute Foundation appointed new CEOs, Zoom set its workflow strategy in motion with a board appointment, and long-time industry execs from Intel, Microsoft and Signal Sciences made new moves.

Gary Steele is the new CEO of Splunk. Steele has held leadership roles at Sybase, Sun Microsystems and Hewlett-Packard.

Rebecca Weekly is the new VP of Hardware Systems at Cloudflare. Weekly was formerly a VP at Intel and a board member at the Open Compute Project.

George Tchaparian is the new CEO of the Open Compute Project. Tchaparian was previously the CEO of Edgecore Networks Corporation and held management roles at HP.

Bobby Yerramilli-Rao joined the GlobalFoundries board of directors. Yerramilli-Rao is currently the chief strategy officer for Microsoft.

ServiceNow CEO Bill McDermott joined the Zoom board of directors. Last week Zoom CEO Eric Yuan said he views the move as an opportunity to learn more about workflow integration from ServiceNow.

Zane Lackey is now an enterprise investor at a16Z, leaving his role as co-founder and chief security officer of Signal Sciences.

Rupal Hollenbeck joined Check Point as chief commercial officer. Hollenbeck previously held marketing roles at Cerebras Systems, Oracle and Intel.

— Aisha Counts (email | twitter)

Around the enterprise

Intel confirmed that it would stop shipping chips to Russia and Belarus, but as our investigation above showed, most of the chips purchased by Russia and Russian companies were inexpensive components that Intel doesn’t sell.

Snowflake had another rough day on Wall Street after reporting earnings Wednesday that exceeded investor expectations but failed to project endless amounts of triple-digit percentage growth.

Automation software has been another hot SaaS sector, but Hyperscience ran into problems last month according to The Information, laying off 25% of its staff.

Graphcore announced a new AI processor that promises to deliver systems with “ultra-intelligence,” whatever that means.

A MESSAGE FROM HASHICORP

At HashiCorp, we believe infrastructure enables innovation. We help teams operate that infrastructure in the cloud. Organizations rely on our solutions to provision, secure, connect, and run their business-critical applications. Our products provide multi-cloud infrastructure automation, and underpin some of the most important applications for the world’s largest enterprises.

Learn more

Thanks for reading — see you tomorrow!

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