Export rules target Russian chip supply

The new rules play the long game.

intel stacking transistors
Image via Intel

Following Russia’s invasion of Ukraine on Thursday, the United States and several other countries including Japan, Australia, the United Kingdom, Canada, and New Zealand have begun imposing new export controls to cripple Russia’s access to chips and other technology.

The U.S. Department of Commerce via its Bureau of Industry and Security (BIS) introduced new export controls that are specifically targeted to cut Russia’s access to technology and other products it may need to maintain its military functionality. More specifically, these export rules target the country’s defense, aerospace, and maritime operations. Key items under restriction are semiconductors, computers, telecommunications, information security equipment, lasers, and sensors.

Under these new export rules, companies that produce items using sensitive components of U.S.-origin must apply for an application to export. Despite the controls rapid rollout, some companies have already announced their compliance with the new export rule. A major player in the semiconductor market and supplier of AMD and Nvidia, TSMC, was noted by Tom’s Hardware as being among one of the first major names to comply.

“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 given to 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.”

It isn’t just TSMC that has readily agreed to cooperate with U.S. export rules. European chipmakers Bosch, NXP, and X-Fab will all cooperate with the new controls, reports Bloomberg. German-based X-Fab and Dutch-housed NXP do not see the export controls as a threat to their respective businesses given that they can use the additional capacity to meet demand from other regions, according to the report. This outlook can likely be attributed to Russia only accounting for 0.1 percent of the world’s global chip business, according to John Neuffer, president and chief executive officer of the Semiconductor Industry Association.

While these controls won’t immediately wound Russia, they’re likely to have an impact in the long run. It will potentially take months for Russia to feel the effects of the export rules.

William Reinsch, a trade expert at the Center for Strategic and International Studies and a former Commerce Department export official, tempered expectations on the initial effects of the export rules while speaking with Reuters.

“Eventually they will be hurting, but maybe not for months,” Reinsach told Reuters. “It’s not an immediate body blow.”

The U.S. has imposed rules similar to these in the past, with the Chinese telecommunications company Huawei serving as a prime example in 2020. Under the Biden Administration, the U.S. effectively cut Huawei’s access to semiconductors, resulting in a $30 billion loss for the company in its smartphone sector.

Results may not show for some time, but the controls are in effect and companies are cooperating with the U.S. Partner countries that are interested in or have expressed interest in implementing similar rules are exempt from certain U.S. rules. These countries currently include Australia, Austria, Belgium, Bulgaria, Canada, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Japan, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, New Zealand, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden, and the United Kingdom.