Integrated circuits, or semiconductors, are dual-use technologies that have a wide variety of applications,from smartphones to missile systems. Successive global crises - Sino-U.S. competition, the Covid pandemic,the war in Ukraine - have highlighted their strategic nature. When it comes to Russia, the country's alreadyfragile position when it comes to hardware has been intensifying due to international sanctions that particularlytarget the national semiconductor industry. Technological sovereignty through "indigenization" ofthe semiconductor industry seems highly unlikely, and the defense sector - as an avid consumer of chips - will particularly suffer from sanctions

Nocetti, Julien

English

SSOAR - Social Science Open Access Repository 

www.ssoar.infoSanctions Calling: The Dire Prospects for Russia'sChips IndustryNocetti, JulienVeröffentlichungsversion / Published VersionZeitschriftenartikel / journal articleEmpfohlene Zitierung / Suggested Citation:Nocetti, J. (2023). Sanctions Calling: The Dire Prospects for Russia's Chips Industry. Russian Analytical Digest, 298,2-5. https://doi.org/10.3929/ethz-b-000621535Nutzungsbedingungen:Dieser Text wird unter einer CC BY-NC-ND Lizenz(Namensnennung-Nicht-kommerziell-Keine Bearbeitung) zurVerfügung gestellt. Nähere Auskünfte zu den CC-Lizenzen findenSie hier:https://creativecommons.org/licenses/by-nc-nd/4.0/deed.deTerms of use:This document is made available under a CC BY-NC-ND Licence(Attribution-Non Comercial-NoDerivatives). For more Informationsee:https://creativecommons.org/licenses/by-nc-nd/4.0Diese Version ist zitierbar unter / This version is citable under:https://nbn-resolving.org/urn:nbn:de:0168-ssoar-88679-6RUSSIAN ANALYTICAL DIGEST No. 298, 18 July 2023 2ANALYSISSanctions Calling: The Dire Prospects for Russia’s Chips IndustryJulien Nocetti (French Institute for International Relations (IFRI), Paris)DOI: 10.3929/ethz-b-000621535AbstractIntegrated circuits, or semiconductors, are dual-use technologies that have a wide variety of applications, from smartphones to missile systems. Successive global crises—Sino-U.S. competition, the Covid pandemic, the war in Ukraine—have highlighted their strategic nature. When it comes to Russia, the country’s already fragile position when it comes to hardware has been intensifying due to international sanctions that partic-ularly target the national semiconductor industry. Technological sovereignty through “indigenization” of the semiconductor industry seems highly unlikely, and the defense sector—as an avid consumer of chips—will particularly suffer from sanctions.Hardware Weaknesses: The Russian Semiconductor Industry and MarketRussia’s domestic semiconductor production is many years behind the industry standard in the West. Follow-ing the breakup of the Soviet Union, the domestic elec-tronic component industry, which largely supplied the defense, space, and nuclear industries, saw its produc-tion nosedive (Dzhalilov and Pivovarov 2017).The proportion of electronic equipment produced and consumed in Russia domestically declined to approxi-mately 12 percent; for comparison, in OECD countries, domestic production meets, on average, 70–80 percent of domestic needs (Borisov 2016). The 2000s saw Russia fall even further behind the US and China: by 2016, 80 percent of IT in Russia was reportedly imported (Tolka-chev and Teplyakov 2018), reinforcing the idea that Rus-sia had missed out on a revolution in those fields. Rus-sia accounted for just 0.44 percent of global production of chips in 2009; its share increased only slowly there-after, never surpassing 3 percent in the 2010s and fall-ing again after 2014 and the West’s imposition of sanc-tions (Volostnov 2019). In 2013, the Vice President of the Russian Union of Engineers described the national elec-tronics industry as being “in a state of advanced obso-lescence.” Russia’s leaders subsequently began to address the problem: in 2016, Putin set the goal of increasing Russian production of sophisticated civil and dual-use electronic components (Putin 2016). Nevertheless, as of 2018, these still accounted for just 27 percent of Rus-sian consumption (Volostnov 2019).Two years later, and with the technological com-petition between China and the United States having intensified, advanced semiconductors became part of a movement within Russia to catch up technologically and to make the sector “sovereign.” Producing its own components came to be understood as one of the pre-requisites for the country’s digital sovereignty (Bezru-kov 2017).In January 2020, the new Prime Minister, Mikhail Mishustin, oversaw the approval of the “Strategy for the Development of the Russian Electronics Industry until 2030” (Government of the Russian Federation 2020). The strategy sets out three stages: a first phase of import-substitution, followed by a phase of promoting Russian technology on international markets, and finally an attempt to achieve technological preeminence. This highly ambitious strategy exemplifies the global trend toward protectionism in technology, which flies in the face of geo-economic constraints such as the destabiliza-tion of supply chains, as well as technological ones such as the miniaturization of ever-more-sophisticated chips.Like China, Russia’s problem is less having a work-force with the appropriate skills and more its ability to build the necessary ecosystem and supply chains for semiconductors. Nevertheless, some moves from 2019 point to a proactive approach, such as the private Rus-sian firm Yadro’s purchase of a controlling stake in the Russian company Syntacore. Syntacore is the founder of an international consortium that is developing an open-source processor architecture (RISC-V) designed to rival world leaders such as Intel.The two main domestic producers—Baikal Elec-tronics and MCST—both suffer from weaknesses: the former cannot rely on Russian solutions, as it manufac-tures processors based on the architecture of the British-born company ARM, while the latter does not develop products suitable for the mass market. Both domestic actors were dependent on Taiwan Semiconductor Man-ufacturing Company’s (TSMC) production facilities before sanctions against Russia were introduced.Chips and Sanctions: Impact on Russian ImportsIn a quick and coordinated move following the onset of Russia’s full-scale military aggression against Ukraine, Western countries have adopted a series of measures RUSSIAN ANALYTICAL DIGEST No. 298, 18 July 2023 3designed to cut off Russia from the main global tech-nological supply chains. These have taken several forms, first and foremost controls on Western exports of cer-tain technologies, in particular dual ones (i.e., those that have both civilian and military applications). The measures target, in particular, Russia’s access to West-ern semiconductors.Knowing that Russia needed this technology for its war efforts, the United States and its European and Asian allies targeted semiconductor exports early on by impos-ing export control measures. Following the imposition of these controls and the exit of multinational firms from the Russian market, Russian imports of integrated cir-cuits declined significantly. Imports remain much lower than pre-invasion levels. However, Russia has made sig-nificant efforts to establish a network of suppliers in non-sanctioning countries from which to source semiconduc-tors for potential use in military applications.Russia thus continues to be able to source a range of integrated circuits, albeit at a much lower volume than before the war. These come primarily from China and Hong Kong (Global Trade Tracker Database 2023), which amounted in November 2022 to 55 percent of median prewar exports to Russia from all countries. (November 2022 exports from China and Hong Kong were 45 percent of 2019 imports and 33 percent of 2021 imports, respectively.) There was a report, however, of high failure rates for semiconductors from China.According to some reports, global exports to Rus-sia in 2022 included goods produced by major multina-tional manufacturers that were shipped by third parties (“Russian Import Network…” 2023). They also included exports to Russian firms that supplied the military. The main types of integrated circuits exported to Russia by Hong Kong and China since the invasion of Ukraine have been processors and controllers (Global Trade Tracker Database 2023).As with other goods, a small volume is also trans-shipped through other countries.The Sanctions’ Effect on Chips: Primarily Pressuring the Russian Defense Industry?The weaknesses of Russia’s domestic industry make Rus-sian weapons, communications, and electronic war-fare systems highly reliant on Western-manufactured microchips, which are currently restricted under the allied export regulations (Manners 2022). For instance, according to the UK-based Royal United Services Insti-tute (RUSI), the Orlan-10 UAV contains U.S.-made chips manufactured by Texas Instruments and Hon-eywell (Byrne et al. 2022). Furthermore, an investiga-tion by Conflict Armament Research has shown that satellite navigation units in several Russian missiles—such as the 3M14, 9M544, Kh-59, and Kh-101—con-tain multiple foreign-made micro-components man-ufactured between 2012 and 2020 (Conflict Armament Research 2022). The Russian Iskandr and Kalibr mis-sile systems are teeming with cutting-edge semiconduc-tors that integrate Western technologies (Byrne 2022).Russia’s newly developed radio communications systems—including the Azart portable radio station, designed to provide jamming and secure communica-tions at the tactical level—also appear to rely on many Western-produced components. According to data pro-vided by the Center for Army, Conversion, and Dis-armament Studies (CACDS), the Azart contains six components of foreign origin, including the Spartan-6 chip, which encrypts communications and is produced by the U.S. company Xilinx in Taiwan. As a dual-use item, the Spartan-6 is commercially available and can be purchased via AliExpress. Similarly, Russia’s recon-naissance, command, and communications complex Strelets-M relies on seven components of foreign origin, including a chip produced by the U.S.-based Micro-chip Technology.The dependence of Russia’s military-industrial complex on foreign-manufactured microchips can be explained by at least two factors.First, chips and chip microprocessors produced domestically by a small number of companies tend to be of inferior quality and sophistication to West-ern designs. Since the imposition of Western sanctions, Russian companies have been unable to officially pur-chase technologies from the United States and its allies participating in the sanctions regime, including the Tai-wan Semiconductor Manufacturing Company (TSMC), on which Russian chip producers heavily relied (Whe-lan 2022). Replacing these components with Chinese options in some cases requires a complete redesign of electronic equipment and the restructuring of coopera-tion chains, which may take years to complete (Kuz’min 2022). Moreover, Chinese chips often lag behind the leading Western microchip designs. While certain chips (such as the Spartan-6, the TSOP66, and the LQFP64) found in the Russian-made Azart and 9M544 precision missile can be purchased via AliExpress, dependence on such commercially available elements can make Rus-sian weapons systems less reliable and prone to failure (DefenseExpress 2022). For example, U.S. Deputy Sec-retary of the Treasury Wally Adeyemo has suggested that “nearly 40 percent of the less advanced microchips Rus-sia is receiving from China are defective” (U.S. Depart-ment of the Treasury 2023).Second, the Russian semiconductor industry cannot meet the high demand for these elements. According to late 2022 data, the country requires up to 30,000 plates of basic-level microchips per month, but only 8,000 such plates can be made domestically (Petrova and Galieva RUSSIAN ANALYTICAL DIGEST No. 298, 18 July 2023 42022). In January 2023, the government announced the launch of a new technology park in the country’s Ulia-novsk region as part of an effort to accelerate its semi-conductor production (Titov 2023). Yet given the export controls, it is difficult to gauge what the park’s produc-tion rate and the quality of its products will be.ConclusionsRussia faces a number of tremendous challenges when it comes to semiconductor production and supply. The war in Ukraine has highlighted considerable weaknesses in the country’s semiconductor supply chains, which are not fully independent, and thus not sovereign. The fact that international sanctions have particularly targeted the chips sector is no coincidence: if civilian industries have been hit, the military-industrial complex is fighting to ensure continued access to high-quality microchips for its weapons system. In this domain, sanctions-eva-sion techniques—such as the setting-up of illegal supply chains—play a role, though this is difficult to assess with precision. On the Ukrainian battlefield, the capa-bilities of the Russian armed forces will likely be jeop-ardized in the longer run. This particular issue might be relevant to gauging the actual strength of the Rus-sia–China relationship, as Moscow has been expecting substantial technological supplies and support from Bei-jing, a desire seemingly in tension with China’s relative caution regarding U.S. secondary sanctions.About the AuthorDr. Julien Nocetti is an associate fellow at the French Institute for International Relations (IFRI), a researcher at GEODE Centre (Geopolitics of the datasphere, University Paris 8), and heads the Cyber Risk Governance chair at Rennes School of Business.Bibliography• Bezrukov, A. 2017. “Mirovoe pole boia” [A Worldwide Battlefield]. Izvestia, November 9, 2017. https://iz.ru/667647/andrei-bezrukov/mirovoe-pole-boia.• Borisov, V. 2016. “Rossiiskaia elektronika v XXI veke: globalizatsiia i natsional'nye interesy” [Russian Electronics in the 21st Century: Globalization and National Interests]. Presentation at the 9th conference on the History of Technology and Museums, Moscow, December 6–8, 2016.• Byrne, J. 2022. “Silicon Lifeline: Western Electronics at the Heart of Russia’s War Machine” (London: Royal United Services Institute, August 8, 2022). https://rusi.org/explore-our-research/publications/special-resources/silicon-lifeline-western-electronics-heart-russias-war-machine.• Byrne, J., et al. 2022. “The Orlan Complex: Tracking the Supply Chains of Russia’s Most Successful UAV” (London: Royal United Services Institute, December 2022). https://rusi.org/explore-our-research/publications/ special-resources/orlan-complex-tracking-supply-chains-russias-most-successful-uav.• Kuz'min, I. 2022. “Chipy pod sanktsiiami. Sposobna li Rossiia obespechit' sebia mikroelektronnoi.” Sekret Firmy, April 12, 2022. https://secretmag.ru/technologies/chipy-pod-sankciyami-sposobna-li-rossiya-obespechit-sebya-mikroelektronikoi.htm.• Conflict Armament Research. 2022. “Component Commonalities in Advanced Russian Weapon Systems.” Sep-tember. https://storymaps.arcgis.com/stories/239f756e2e6b49a5bec78f5c5248bf3d.• Defense Express. 2022. “Na mikroskhemakh z AliExpress: ‘analogovnietna’ Sistema navedennia ‘Tornado-S’ z RF” [On Chips from AliExpress: ‘Analog Network’ Guidance System ‘Tornado-S’ from Russia]. August 03, 2022. https://defence-ua.com/weapon_and_tech/na_mikroshemah_z_ aliexpress_analogovnjetna_sistema_navedennja_tornado_s_z_rf_foto-8418.html.• Dzhalilov, T., and N. Pivovarov. 2017. “Istoriia sovetskoi elektronnoi promyshlennosti (konets 1950-kh-1960-e gody)” [History of the Soviet Electronic Industry (Late 1950s-1960s)]. Presentation at the 4th International Conference on Information Technology in Russia and the Former Soviet Union (SORUCOM), Zelenograd, October 3, 2017.• Global Trade Tracker Database. 2023.• Government of the Russian Federation. 2020. “Strategy for the Development of the Russian Electronics Industry until 2030.” January 17, 2020. http://government.ru/.• Manners, D. 2022. “Russia’s Backward Chip Industry.” Electronics Weekly, April 19, 2022. https://www.electronicsweekly.com/blogs/mannerisms/dilemmas/russias-backward-chip-industry-2022-04/ .• Petrova, V., and D. Galieva. 2022. “Chiponezavisimost' so skidkoi” [Chip Independence at a Discount]. Kommer-sant, November 15, 2022. https://www.kommersant.ru/doc/5667792.• Putin, V. 2016. “Poslanie Prezidenta Federal'nomu Sobraniiu” [Presidential Address to the Federal Assembly]. Kremlin.ru, December 1, 2016. http://kremlin.ru/events/.RUSSIAN ANALYTICAL DIGEST No. 298, 18 July 2023 5• “Russian Import Network Acquired Electronics through Companies that Supply Chinese Military and Western Manufacturers.” Kharon, January 5, 2023. https://brief.kharon.com/updates/russian-import-network-acquired-electronics-through-companies-that-supply-chinese-military-and-western-manufacturers.• Titov, S. 2023. “Chipichnyi put'” [Microchip Way]. Kommersant, January 9, 2023. https://www. kommersant.ru/doc/5759442.• Tolkachev, S., and A. Teplyakov. 2018. “Import Substitution in Russia. The Need for a System-Strategic Approach.” Problems of Economic Transition 60 (7): 545–577.• U.S. Department of the Treasury. 2023. “Remarks by Deputy Secretary of the Treasury Wally Adeyemo on Inter-national Sanctions Against Russia.” Press release, February 21, 2023. https://home.treasury.gov/news/ press-releases/jy1286.• Volostnov, A. 2019. “Microelectronics Market Overview.” Presentation at the SemiExpo 2019 Conference, Mos-cow, May 14, 2019. http://semiexpo.ru/.• Whelan, J. 2022. “Computer Chip Industry Begins Halting Deliveries to Russia in Response to U.S. Sanc-tions.” Washington Post, February 25, 2022. https://www.washingtonpost.com/technology/2022/02/25/ ukraine-russia-chips-sanctions-tsmc/.ANALYSISCan Russia’s SORM Weather the Sanctions Storm?Gavin Wilde (Carnegie Endowment for International Peace, Washington D.C.)DOI: 10.3929/ethz-b-000621535AbstractBoth Russia’s digital communications sector and its electronic surveillance system, SORM, were heavily reliant upon Western-produced technologies prior to Moscow’s war on Ukraine. Since then, Western sanc-tions and export controls have been putting necessary hardware and software increasingly out of Moscow’s reach. Russia’s repressive surveillance state thus faces uncertain prospects, as domestically or Chinese-produced tech may prove insufficient to fill the void.Fifteen years before Edward Snowden leaked details about U.S. electronic surveillance capabilities, a young Russian journalist named Vika Yegorova came into possession of a document detailing Moscow’s own efforts to monitor telephone—and, increasingly, dig-ital—networks. Over the next two decades, the veil of secrecy surrounding Russia’s “system of operational-investigative measures” (known by the acronym SORM) would lift, aided in large part by the work of investiga-tive journalists Irina Borogan and Andrei Soldatov (Sol-datov and Borogan 2015). Their findings, particularly against the backdrop of Moscow’s renewed invasion of Ukraine in 2022 and subsequent technological and eco-nomic isolation from the West, raise questions regard-ing SORM’s long-term viability.Moscow’s initial research and development (R&D) efforts for a widescale system of telephonic surveillance began in the mid-1980s, at what was then the Soviet Union’s oldest security R&D facility, located in the Mos-cow suburb of Kuchino. At that time, the KGB’s 12th Section oversaw the technical details of wiretapping and monitoring domestic telephone exchanges. Following the collapse of the Soviet Union, the KGB’s main suc-cessor agency, the Federal Security Service (FSB), ulti-mately took the helm of the program, bringing it under its own similarly named 12th Center.As analog, landline telecommunications systems were gradually replaced by digital, mobile ones in the mid-1990s, SORM capabilities evolved alongside them. For instance, by 1998, as email was becoming ubiqui-tous, Russian communications regulators proposed that all Internet service providers (ISPs) be required to install, at their own cost, SORM-enabling “black boxes”: com-ponentry allowing the FSB to snoop on their web traffic. Court orders would be required for eavesdropping on specific content, but the FSB would not be obligated to apprise third parties, including ISPs, about these orders (Soldatov 2013). The FSB would also serve as the sole 

Sanctions Calling: The Dire Prospects for Russia's Chips Industry

https://www.ssoar.info/ssoar/bitstream/document/88679/1/ssoar-russanald-2023-298-nocetti-Sanctions_Calling_The_Dire_Prospects.pdf

Sanctions Calling: The Dire Prospects for Russia's Chips Industry

Abstract

Similar works

Full text

Available Versions

SSOAR - Social Science Open Access Repository