In response to Russian President Vladimir Putin’s invasion of Ukraine, U.S. President Joe Biden late Thursday unveiled a second tranche of sanctions against Russia’s business interests. These contain a complete embargo on selling semiconductors to Russia — chips that power cell phones, cars and missiles.
They’re a massive expansion of the U.S. government’s powers to control high-tech exports, including those coming from other countries. The sanctions include an expansion of the Foreign Direct Product Rule. The rule allows Washington to impose export controls on products made outside of the U.S., so long as they contain some U.S.-based components or technologies or were created in part through the use of U.S. software or other tools. The rule had previously been deployed most aggressively against Huawei, noted Politico.
Under the new embargo, any chip developed with American technology is prohibited from sale to Russia. Although the U.S. has only a relatively small base of semiconductor manufacturing, American companies are leaders in the field of semiconductor design and chip patents, according to Fortune. Many foreign manufacturers rely on U.S. intellectual property to design their own chips.
The White House hinted it would target Russia’s semiconductor supply in response to a Ukrainian invasion in the weeks prior to the Russian attack but has never deployed such a broad measure before, Fortune noted.
While the embargo could be devastating for Russia, most global suppliers might hardly notice the cost of compliance. According to the CEO of the U.S. Semiconductor Industry Association (SIA), John Neuffer, “Russia is not a significant direct consumer of semiconductors.”
“The U.S. semiconductor industry is fully committed to complying with the new export control rules,” said Neuffer in a statement. He added that Russia accounts for less than a tenth of a percent of global chip purchases, and that its high-tech market only totaled around $25 billion in 2019.
By Leslie Stimson, Inside Towers Washington Bureau Chief
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