If Russia and Ukraine go to war, can the US sanctions against Russia sacrifice chips to hit the pain point?

If Russia and Ukraine go to war, can the US sanctions against Russia sacrifice chips to hit the pain point? After Russia officially opened fire on Ukraine on Thursday (February 24), Western countries such as Europe and the United States may expand economic sanctions on Russia to increase pressure. It is reported that the next wave of sanctions from the United States may join countries such as Japan, Taiwan and Singapore to ban the export of semiconductor products such as chips to Russia.

If Russia and Ukraine go to war, can the US sanctions against Russia sacrifice chips to hit the pain point?

In this regard, some observers said that there is still a shortage of chips in the world. Therefore, the ban will have little impact on semiconductor exporting countries, but the Russian consumer electronics market may bear the brunt of the impact of price increases or supply cuts.

However, some other people also said that economic sanctions are two-sided, especially Russia, which is a major exporter of raw materials, if it imposes counter-sanctions against the United States to restrict the export of energy such as crude oil or precious metals such as neon gas or palladium required for the upstream process of semiconductors, it will also That could hurt the U.S. semiconductor supply chain and push up high-end inflation.

The first wave of sanctions imposed on Russia by European and American countries has just come into effect. Russia on Thursday (February 24) attacked several Ukrainian cities, including the capital Kyiv, with missiles.

The Russian-Ukrainian war has begun, and European and American countries may continue to increase economic pressure on Russia after the first round of sanctions. The U.S. is rumoured to be planning to join Japan, Taiwan and Singapore in the next wave of chip bans against Russia. The United States on Tuesday (February 22) has resorted to the first wave of sanctions, targeting two Russian banks and Russian sovereign bonds, as well as freezing the assets of some senior Russian government officials in the United States.

The U.S. alliance with Sunstar Taiwan imposes chip sanctions

on Russia. The Taiwan government has not made an official announcement on Thursday whether it will join the chip sanctions initiated by the United States in the future. “Taiwan, as a member of the international community, is willing to participate in all efforts that contribute to the peaceful settlement of disputes,” he said.

Qiu Dasheng, a researcher at the Taiwan Economic Research Institute in Taipei, said in an interview with Voice of America that if Taiwan follows the United States and prohibits the export of semiconductor products such as chips to Russia, it will not have a big impact on the domestic semiconductor industry, because the global supply of chips is still in short supply. In addition, Russia is only the 35th largest country in Taiwan’s semiconductor exports. As long as orders from other countries such as the United States continue to place orders, it will make up for the impact of sanctions on Russia’s lack of chip exports.

According to statistics from Taiwan’s Ministry of Finance, Taiwan’s annual exports of electronic components to Russia in recent years have only been about 30 million US dollars, and the annual export value of computer and information and communication products is less than 400 million US dollars, accounting for only 30% of the overall export ratio of such products. Digits.

Although Russia does not rely on foreign countries for military chips and semiconductor technology, more than 90% of the domestic consumer electronics market or chip supply relies on imports. Therefore, Qiu Dasheng said that if the United States formally imposes a chip ban, it will have a certain impact on Russia. Including the temporary shortage or price increase of consumer electronics products, even if Russia transfers orders to China, China may not be able to fully meet Russia’s needs.

Qiu Dasheng said: “Russia imports these semiconductors from Taiwan, mainly for use in its own consumer electronics products. In the future, the prices of these things (electronic products) it needs domestically will increase, or there will be no supply. Of course there will be some However, Russia is a major exporter of raw materials, and the current warming situation in Russia and Ukraine has pushed up international crude oil prices.

and energy prices such as natural gas. According to the forecast of the consulting firm RSM quoted by the US financial network Market Watch (Market Watch), Brent crude oil may rise by 14% from the current price to US$110 per barrel in the near future. The U.S. inflation rate could jump from the current 7.5% to 10%, and this energy shock could cost the U.S. gross domestic product (GDP) by 1% in the coming year.

Qiu Dasheng also said that the price of raw materials such as energy may rise with the situation in Russia and Ukraine, leading to rising manufacturing costs, which is the so-called “stagnant inflation”. Such inflation, not driven by rising demand, would discourage central banks from raising interest rates too quickly, he said, and would create more uncertainty about the post-coronavirus economic recovery. As for whether the U.S. has policy space to further respond to soaring inflation, it will be another challenge for a Biden administration.

In particular, Russia controls the key gas neon gas and precious metals palladium and nickel used in the global semiconductor process. Therefore, if Russia launches counter-sanctions against the United States and prohibits the export of these raw materials, the semiconductor supply chain of the United States may also suffer.

In response, Stephen Ezell, vice president of the Information Technology and Innovation Foundation (ITIF), a Washington-based non-governmental organization, said in an emailed written response to VOA’s interview that more than 90 percent of U.S. The supply of semiconductor-grade neon gas comes from Ukraine, and about 35% of the supply of palladium metal comes from Russia. Therefore, the Russian-Ukrainian war may lead to supply chain disruptions, hinder production capacity, and push up prices. But he said: “This will only create a few obstacles and will not cause a crisis, because there are other alternative sources of neon and palladium, and semiconductor producers have long been looking for diversified supply channels.

” It will not cause the US chip supply chain

to break . As early as the end of January, Bai Guan already hinted to the US semiconductor industry that the Biden administration is considering imposing chip sanctions on Russia, which invaded Ukraine, and asked the US industry to find a way to deal with the inventory or supply chain in advance. The Biden administration believes that Russia will pay a “high price” for this, because the sanctions are similar to the ban on China’s Huawei in the Trump administration era. Not only American-made semiconductor products, but foreign-made semiconductor products that use American technology will be subject to sanctions. Export to sanctioned countries is prohibited.

However, Ezer said frankly that since the outbreak of the new crown epidemic, the global semiconductor supply chain has fallen into a serious shortage, and the chain has also been broken. bottleneck.

Ezer said that if the United States can successfully ally with other semiconductor exporters to impose an export ban on Russia, it will be the most comprehensive, consistent and extensive export ban in history, and the target of sanctions may also extend to Russia’s oil, gas, military and Telecom industry.

However, a big challenge is that Russia is not as highly dependent on US semiconductor products and technologies as China’s Huawei and mobile phone industries, because Russia’s economy is relatively closed to the country, and its dependence on foreign countries is not high. In addition, Russia has already stockpiled semiconductors and other inventories. For a long time, therefore, even if the Biden administration imposes sanctions on semiconductor exports, it may take a long time to see results.

Qiu Dasheng of the Taiwan Economic Research Institute is more optimistic about possible counter-sanctions by Russia. He believes that Russia’s economy is very dependent on the export of these raw materials. Therefore, Russia should think twice and is unlikely to actively ban the export of neon gas, palladium, nickel and other precious metals, and “shoot itself in the foot” to hurt itself. economic lifeline.

While the United States is expected to gain the support of its allies to jointly impose semiconductor sanctions on Russia, Bhaskar Chakravorti, director of the Institute for Global Economics at Tufts University’s School of Law and Foreign Relations, said: ) wrote an article in the journal Foreign Policy in mid-February, urging the United States not to play the card of chip sanctions.

American scholar: Do not issue chip sanctions

card Sanctions are not necessarily effective. He cited five reasons. First, the division of labor in the semiconductor manufacturing process is too complicated. Therefore, as long as the supply chain of private companies is not transparent, it is difficult for the Biden administration to completely track it. Second, the Biden administration also lacks “toothed” penalties for private semiconductor companies that violate the ban. Third, 70% of the computer and mobile phone imports in the Russian market come from China.

Therefore, as long as the Biden administration comes out with the ban, it will cause Russia to further transfer orders to China. Instead, it will strengthen the alliance between China and Russia, and intensify the relationship between the United States and China. The friction between China and the United States is also powerless to prevent China from exporting semiconductor products to Russia.

Fourth, U.S.-made semiconductor parts may still flow into the Russian military through small intermediaries in other countries that want to do business with Russia. Finally, as long as U.S.-China-Russian tensions reach a tipping point over the semiconductor ban, China could be forced to use force against Taiwan to seize capacity from chip giant TSMC. He said that the chip shortage already cost 1% of U.S. GDP last year, and it may not be worth it if the global chip supply chain is hit again.

While European and American countries have imposed sanctions on Russia, China has not heard the news.

Chinese Foreign Ministry spokeswoman Hua Chunying reiterated at a regular press conference on Wednesday (February 23) that China has always believed that sanctions will not help solve the problem, but also questioned the effectiveness of U.S. sanctions against Russia.

Hua Chunying said: “Since 2011, the United States has imposed sanctions on Russia more than 100 times. However, have the US sanctions solved the problem? … I hope relevant parties will seriously consider whether they should try to solve the problem through dialogue and consultation. ”

Dai Bingran, deputy director of the Institute of World Economics at the School of Economics at Fudan University in Shanghai, also said in an interview with VOA that under the trend of globalization, the global economy is highly interconnected, and any sanctions are not only ineffective, but also harmful to the United States, Russia, and even the world. The economy is not good. However, he admitted that the United States can only respond with sanctions, because even if NATO allows Ukraine to join, the United States cannot send troops hastily.

Dai Bingran said: “Even if it (NATO) agrees to Ukraine’s entry, you say, can the United States send troops to Ukraine? When sending troops to Ukraine, the pit may be deeper than Iraq and Afghanistan. If the US military can enter Ukraine, you can still come out. The second one, even if you don’t go in and get the weapons to Ukraine, these weapons may be given to the Russians, because it is a guerrilla war, and the weapons are going to (yes) fall into the hands of the Russians, you say, this is dangerous not dangerous?”

Sunbal Razzaq

Sunbal Razzaq is the founder & CEO of Sunshine Tips.

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