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New Export Rules to Leave Russia Without Chips

Panasonic
(Image credit: Panasonic)

On Thursday the United States, United Kingdom, and European Union imposed multiple new restrictions on exports to Russia in response to its war against Ukraine. When it comes to high-tech items, the restrictions are quite sweeping and are designed to curtail development of Russia's defense industrial base, military, and intelligence sectors. In addition to military and intelligence capabilities, multiple adjacent industries (including those that serve civilians) will be affected. Meanwhile, exports of civil equipment will either remain unrestricted, or regulations will be less severe.

Huawei-Like Restrictions Applied to Russia

The new rules imposed by the U.S. Commerce Department (through its Bureau of Industry and Security (BIS)) require companies to obtain a license from the U.S. government to export semiconductors, computers, telecommunications, information security equipment, lasers, sensors, navigation equipment, avionics, marine equipment, and aircraft components to Russia. In addition, The U.S. DoC adds 49 Russian companies, which are believed to be military end users (MEUs), to the Entity List

All companies that use U.S. technologies or components to produce the said items are required to apply for an export license to the U.S. government, including Taiwan-based TSMC, which produces multiple chips for Russian entities. These applications will be reviewed with a presumption of denial.  

In fact, TSMC already said that it would comply with the new export control rules, which will leave Russia without chips that could potentially be used by its military, law enforcing, and intelligence agencies. European chip designers and producers, such as Bosch, NXP, and X-Fab also said they would comply with the new export regulations, reports Bloomberg. These companies supply chips to Russian carmaker Avtovaz, which is reportedly already looking for alternative supply. 

"TSMC complies with all applicable laws and regulations and is fully committed to complying with the new export control rules announced," TSMC said in a statement published by Reuters. "The company also has a rigorous export control system in place, including a robust assessment and review process to ensure export control restrictions are followed." 

Similar restrictions were applied to China-based Huawei a couple of years ago and needless to say, they were devastating for the company. Without chips made by TSMC or Intel, Huawei's share on the smartphone, server, and PC markets collapsed. 

TSMC produces chips for multiple companies that ship them to Russia, including AMD, Intel, and Nvidia. It is unclear whether these three companies will be able to obtain a license to ship their products to Russia at this point. It is also unknown whether companies like Dell, HP, or Lenovo that  ship their PCs and servers to Russian entities will need to apply for a license since these devices contain  

Meanwhile, Russia accounts for less than 0.1% of global chip purchases and builds very little locally (and what it builds is usually not competitive even on its own market), so economically the new export control rules are not going to hurt it.  

Another peculiarity with these restrictions is that they do not cause any immediate problems for Russia and its government. The country will most likely have enough stockpiled hardware to keep its military, law enforcing, and intelligence sectors operating. 

"Eventually they will be hurting, but maybe not for months," said William Reinsch, a trade expert at the Center for Strategic and International Studies, in a conversation with Reuters. "It is not an immediate body blow."

But There Are Exceptions

The new export restriction rules include categories that will be reviewed on a case-by-case basis, which means that a significant part of export license applications will be granted. The categories reviewed on a case-by-case basis are related to humanitarian needs, safety of flight, maritime safety, government space cooperation, civil telecommunications infrastructure, government-to-government activities, and to support limited operations of partner country companies in Russia.  

Furthermore, the U.S. will not restrict software updates to the civil end users, consumer encryption technologies (if they are not destined to government end users (GUEs) and Russian state-owned enterprises), consumer communication devices (again, not of destined to GUEs and Russian state-owned enterprises), and even items for use by the news media. 

Essentially, this means that Russians will still be able to buy Apple's iPhones, keep using Apple's MacOS and Microsoft's Windows, not to mention acquire medical equipment and even news production equipment.

Summary

While the new stringent export rules imposed by the U.S. government on exports of high-tech devices and tools to Russia can import the country's military and intelligence capabilities, they will not do so immediately. While similar restrictions severely impacted Huawei, they are not going to harm Russia significantly since it barely produces any advanced chip-based devices locally. Still, if companies like carmaker Avtovaz have to stop production because of the lack of chips, it will hit local economy, which will require the federal government to intervene (or just let the country's largest carmaker cease to exist). 

But restrictions will not harm Russia immediately as state-owned entities and commercial companies tend to stockpile components and materials they need. Furthermore, there are export license categories that will be reviewed on a case-by-case basis, not with a presumption of denial, so there will be high-tech entities in Russia that will continue to operate as usual. Also, it looks like exports of things like smartphones, cameras, microphones, and other tools like that will remain largely unregulated, so an average Russian will not feel any consequences caused by restrictions. 

At this point it is also not completely clear how the new export rules affect shipments of Arm-based consumer electronics  to Russia (Arm is a U.K.-based company and semiconductor exports to Russia were tightened by the U.K. government yesterday) and whether PC makers will need to obtain an export license to ship their products to the country.

Anton Shilov
Anton Shilov

Anton Shilov is a Freelance News Writer at Tom’s Hardware US. Over the past couple of decades, he has covered everything from CPUs and GPUs to supercomputers and from modern process technologies and latest fab tools to high-tech industry trends.

  • kerberos_20
    will it make any difference if they are so friendly with china? china got used to it for a while now
    Reply
  • escksu
    Its going to push russia to trade more with china and india.. forge even closer ties with them. China is already becoming self-sufficient by developing its own technologies... No doubt its chips arent the fastest nor the smallest, but do you need it to?? I doubt so. Military equipment doesnt use the 7nm or even 14nm chips (nasa dont use them as well). "Hardened" chips are produced on much bigger process.
    Reply
  • Blackink
    Buddying up to China was one reason Putin didn't invade Ukraine during the Olympics.
    He wants to keep some type of connection with them.
    Reply
  • Mobospex
    escksu said:
    Its going to push russia to trade more with china and india.. forge even closer ties with them. China is already becoming self-sufficient by developing its own technologies... No doubt its chips arent the fastest nor the smallest, but do you need it to?? I doubt so. Military equipment doesnt use the 7nm or even 14nm chips (nasa dont use them as well). "Hardened" chips are produced on much bigger process.
    Wrong.
    You need vast amount of computing power for modern radar, especially the beam steering low observable variant. Even more power is required to process all the data acquired.
    Also modern software defined radio is very GHz hungry.
    Spaceships aren't equiped with AESA radar so your comparison made no sense.
    Reply