Semiconductors have become a crucial technology for any country. National security directly depends on the availability of semiconductors, since without them a wide range of equipment is impossible to operate: from the simplest household appliances to the most complex weapons systems.
Semiconductor manufacturing is extremely complex and requires the supply of many state-of-the-art technologies. In a situation of growing political tension between the U.S. and China, both countries began to create two independent semiconductor manufacturing systems. The creation of such a system required significant financial resources and state support. In August, the CHIPS and Science Act was adopted in the U.S., which aims to strengthen semiconductor manufacturing in the United States. Four private companies, Micron, TSMC, Intel and IBM plan to invest $180 billion in semiconductor manufacturing in the U.S. alone.
At the same time, China announced its intention to invest more than $143 billion to create its own semiconductor manufacturing ecosystem. The Chinese leader in the field of semiconductor manufacturing, SMIC, is trying to catch up with the world leaders. But for now, these are just dreams that will be extremely difficult for China to realize. The United States imposes sanctions and takes other measures to prevent China from developing its own production of top semiconductors. Now Chinese companies continue to lag far behind the leading manufacturers, forcing China to continue importing $414 billion worth of chips per year.
While the Kremlin is well aware of the importance of semiconductors, Russia remains on the sidelines of the chip race. For a long time, Russia tried to develop and produce its own semiconductors, but to no avail. Some developers and manufacturers have failed or gone bankrupt. The companies that remain develop chips such as Baikal and Elbrus. But even before the start of the war in Ukraine and the introduction of tough technological sanctions, Russian chips relied heavily on Western architecture, imported components and foreign manufacturers, and at the same time, they still lagged behind the world leaders by about 15 or 20 years. Russian government agencies and private companies often refused to use domestic semiconductors due to their low quality and obsolescence.
The sanctions imposed by the West after Russia’s military intervention in Ukraine have further complicated the situation. Chips are dual-use technology, on which the operation of the Russian military machine directly depends. Therefore, after the start of the war, sanctions were immediately imposed on the supply of chips to Russia and its local manufacturers.
The most painful sanctions were against Russian chip manufacturers. Manufacturers were left without access to equipment and intellectual property. In such a situation, it has become almost impossible to launch new semiconductor production in Russia. However, the Russian government has announced plans to revive the chip design and manufacturing industry. But Russia plans to spend only $44 billion for these purposes instead of the required hundreds of billions through 2030. And these funds will be extremely difficult to allocate under the conditions of severe economic pressure from the West. So neither in the short term nor in the medium term will Russia be able to provide itself with its own chips.
The import of chips to Russia also suffered from sanctions. Immediately after Russia’s military invasion of Ukraine, leading Western chip suppliers AMD and Intel stopped supplying their chips to the country. Taiwan refused to supply already produced Elbrus and Baikal chips to Russia. In July, the U.S. Department of Commerce informed about a 90 percent reduction in semiconductor exports to Russia. Due to the lack of chips in Russia, the production of cars was suspended at that time.
But this constituted only a temporary drop in supplies. The Kremlin managed to solve the problem in a few months. According to Russian customs, through intermediaries in friendly countries, Russia began to import a record volume of chips by the fall.
Russia began to buy Chinese-made chips, but they could not completely replace their Western counterparts. China has not yet been able to establish its own production of top-end chips. And even those modern chips that can be produced, China is in no hurry to deliver to Russia. For example, China refused to export its Loongson chips to Russia, referring to the fact that the technology is recognized as strategically important and is used in the Chinese army.
Thus, Russia cannot refuse modern chips that were designed and manufactured by the U.S. and its allies. Deliveries of Western chips go to Russia through numerous intermediaries from third countries, mainly from China and Turkey. During the nine months of the war, despite the sanctions, Russia bought $777 million worth of Western microelectronics. From April 1 to Oct. 31, Russia bought at least $457 million worth of Intel chips. As a result, Western chips are found in newly produced Russian drones and other weapons systems.
Secondary sanctions imposed by Western countries do not work and this allows Russia to keep running. Many countries are still ready to help Russia. It was expected that China would provide support, but there are other countries through which Western dual-use technologies continue to be imported to Russia. Even U.S. NATO ally Turkey is helping to circumvent sanctions. Sanction-violating supply chains have been detected, but still exist.
The Russian military machine and economy continue to operate on Western chips, and the Kremlin has no alternative options. The lack of chips could have been one of the important factors in stopping the Russian invasion of Ukraine, but this did not happen. Russia continues to receive chips from Western countries and installs them in its drones and cruise missiles, which are then used to bombard Ukraine. The war in Ukraine will one day end, but it looks like it won’t be because Russia has run out of technology to supply its army.
Alena Popova is the Public Policy fellow at Wilson Center. She is a Russian opposition politician and founder of the Ethics and Technology think tank. She specializes in researching the impact of emerging technologies on autocratic and democratic governance models. The opinions reflected are those of the author.