Semiconductors have become a key technology for any country. National security directly depends on the availability of semiconductors, since without them a wide range of devices cannot function: from the simplest household appliances to the most complex weapons systems.
Semiconductor manufacturing is extremely complex and requires many state-of-the-art technologies. Amid rising political tensions between the U.S. and China, the two countries have begun establishing two separate semiconductor manufacturing systems. Building such a system requires substantial financial resources and state support. In August, the United States passed the Chip and Science Act, 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 US alone.
At the same time, China announced its intention to invest more than $143 billion in building its own semiconductor manufacturing ecosystem. SMIC, the leader in semiconductor manufacturing in China, is trying to catch up with the world leader. But for now, these are just dreams, and it is extremely difficult for China to realize them. The United States has imposed sanctions and taken other measures to prevent China from developing its own top semiconductor production. Now, Chinese companies continue to lag far behind leading manufacturers, forcing China to continue to import chips worth $414 billion a year.
Although the Kremlin is well aware of the importance of semiconductors, Russia remains on the fringes of the chip race. For a long time, Russia has tried to develop and produce semiconductors on its own, but to no avail. Some developers and manufacturers have gone out of business or gone bankrupt. The remaining companies developed chips, such as Baikal and Elbrus. But even before the Ukraine war and draconian technology sanctions, Russian chips relied heavily on Western architecture, imported components and foreign manufacturers, while still lagging behind the world leaders by about 15 or 20 years. Russian government agencies and private companies often reject domestic semiconductors because they are low-quality and outdated.
The situation was further complicated by sanctions imposed by the West following Russia’s military intervention in Ukraine. The chip is a dual-use technology, and the operation of Russian military machines directly depends on it. Therefore, as soon as the war started, sanctions were imposed on the supply of chips to Russia and its local manufacturers.
The most painful sanctions are targeting Russian chipmakers. Manufacturers do not have access to equipment and intellectual property. Under such circumstances, it is almost impossible for Russia to start new semiconductor production. However, the Russian government has announced plans to revive chip design and manufacturing. But Russia plans to spend only $44 billion for these purposes, not the hundreds of billions it needs by 2030. And under severe economic pressure from the West, these funds will be extremely difficult to distribute. So whether in the short or medium term, Russia cannot provide itself with its own bargaining chips.
Russian imports of chips have also been sanctioned. Immediately after Russia’s military invasion of Ukraine, leading Western chip suppliers AMD and Intel stopped supplying chips to the country. Taiwan refuses to supply Russia with already produced Elbrus and Baikal chips. In July, the U.S. Department of Commerce reported that semiconductor exports to Russia had dropped by 90%. Due to a shortage of chips in Russia, production of the car was discontinued at the time.
But this is only a temporary drop in supply. The Kremlin managed to resolve the issue within a few months. Through intermediaries in friendly countries, Russia began importing record quantities of chips by autumn, according to Russian customs.
Russia started buying chips made in China, but it was not a complete replacement for its Western counterparts. China has not yet been able to establish its own high-end chip production. Even those modern chips that can be produced, China is not in a hurry to deliver to Russia. For example, China has refused to export its Loongson chips to Russia, referring to the technology being considered strategically important and used in the Chinese military.
Therefore, Russia cannot reject modern chips designed and manufactured by the United States and its allies. Western chips are shipped to Russia through numerous middlemen in third-party countries, mainly China and Turkey. During the nine-month war, Russia bought $777 million worth of Western microelectronics despite sanctions. From April 1 to October 31, Russia bought at least $457 million worth of Intel chips. As a result, Western chips have been found in newly produced Russian drones and other weapons systems.
The ineffectiveness of secondary sanctions by Western countries has allowed Russia to continue to operate. Many countries are still ready to help Russia. China is expected to provide support, but there are other countries that continue to import Western dual-use technology to Russia through other countries. Even Turkey, a NATO ally of the United States, is helping to circumvent sanctions. Sanction-violating supply chains have been identified, but still exist.
Russia’s military machine and economy continue to run on Western chips, and the Kremlin has no choice. The lack of chips could have been a significant factor in stopping Russia from invading Ukraine, but that didn’t happen. Russia continues to receive chips from Western countries and install them in its drones and cruise missiles, which are then used to bomb Ukraine. The war in Ukraine will end someday, but it doesn’t look like it will because Russia has run out of technology to supply its military.
Alena Popova is a public policy fellow at the Wilson Center. She is a Russian opposition politician and founder of an ethics and technology think tank. She specializes in the impact of emerging technologies on authoritarian and democratic models of governance. The opinions reflected are those of the authors.