Opinion: Chip sanctions against Russia could boost China
Semiconductors and information technology could become part of a range of sanctions imposed on Russia following its recognition of two breakaway republics in eastern Ukraine.
Russia has reportedly ordered “peace-keeping” forces to go into the self-declared Donetsk and Luhansk People’s Republics, although this is being interpreted by some as the start of an invasion of Ukraine.
Japan’s Prime Minister Fumio Kishida condemned Russia’s recognition of the independence of areas controlled by pro-Russian militias in eastern Ukraine. He added that Japan would coordinate its response with the US and others, including sanctions. The export sanctions are expected to apply to products that use advanced technologies such as semiconductors, artificial intelligence and robotics.
Sanctions from the US, UK and the European Union are likely to focus on financial dealings and energy supply but with politicians saying they are the first tranche of a lengthy list of measures that could be introduced.
Information technology in general, and semiconductors in particular, could be a natural subject for longer-term sanctions. Semiconductor components have an increasing strategic global significance. This has been underlined partly by the supply chain shortages experienced during the pandemic and partly as they have been the focus of US-China trade tensions in recent years.
Japan makes certain specialized chips such as automotive chips and image sensors used in automotive and industrial applications. It also makes specialized scientific and manufacturing equipment.
However, Russia’s own strong position in energy resources and the mining and supply of metals used in advanced manufacturing – and the established position of China in semiconductors – may limit the impact of that aspect of any sanctions package.
China is currently calling for calm over Ukraine and is unlikely to join US calls for sanctions. Indeed, the fast-developing Chinese semiconductor industry could be a beneficiary of the situation by supplying Russia with semiconductors if western companies will not.
Although China cannot itself manufacture digital semiconductors at the leading-edge. It has largely been prevented from moving to the leading-edge by sanctions imposed by the US over the last three years. However, China can make and supply the majority of Russia’s analog, mixed-signal and power devices, and microcontroller needs for industrial, communications, automotive and military needs.
China’s leading chip manufacturer and foundry Semiconductor Manufacturing International Corp. managed to record a 39 percent increase in revenues in 2021, despite being on the US trade blacklist.
The globalized nature of the semiconductor business could mean any disruptions resulting from sanctions could have knock-on consequences around the world with supply chains coming under renewed pressure.
There are US, South Korean and Taiwanese companies manufacturing substantial amounts of chips in China. These include Micron, Samsung, SK Hynix and TSMC. These companies may be called on to ensure that their Chinese output, often intended for use in China, is not also being sent to Russia.
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