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V12: Tech embargo of Russia and Dept. of Commerce Chip shortage findings

The escalating situation on the Russian-Ukrainian border has led both sides to threaten further actions. The US is weighing measures to block Russian access to US technology. The White House has already approached the US chip industry to be ready for potential Russian export bans. What would this mean for the Russian economy and chip producers in the US?


Russia is technologically dependent on China, and China is dependent on integrated circuits from S Korea, Taiwan, Japan and the US. The US can target the China-Russia tech relationship through secondary measures such as the Foreign direct product rule. In this case, US-allied companies couldn’t sell chips to Chinese customers in the knowledge that they were being assembled into devices and sold to Russian entities. The US would block chip sales to China unless Chinese firms could verify to US authorities that they are not selling on to Russia.


While it would do minimal harm to US-allied chip producers, blocking Russian chip imports would make Russia even more dependent on China for technology. And blocking Russia access to electronics through China would be difficult to enforce.


On January 25th, the US Department of Commerce released its results from the semiconductor supply chains request for information. The results found that: the main bottleneck identified is the need for additional fab capacity.


For the semiconductor products that present the greatest challenge to acquire, the median inventory for consumers has fallen from 40 days in 2019 to less than 5 days in 2021. These inventories are even smaller in key industries. This means a disruption overseas, which might shut down a semiconductor plant for 2-3 weeks, has the potential to disable a manufacturing facility and furlough workers in the United States if that facility only has 3-5 days of inventory.


The specific kinds of products the DoC identified as having significant semiconductor supply and demand mismatches are used by critical industries, including medical devices, broadband, and autos. Particularly at older nodes.


Full document at the link below.


Zen on Tech Newsletter V12 - Jan 2022
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