Russia Invades Ukraine - How War Could Impact the Global Supply Chain
Following Russia’s invasion of the Ukraine on Feb. 24, the US announced restrictions limiting Russia’s access to Western finance by targeting its financial institutions, sovereign debt and access to technology. The United Kingdom, European Union, Germany, Canada, Japan and Australia also levied their own monetary sanctions. The ripple effect of these actions is anticipated to be felt throughout the global supply chain as materials necessary for semiconductor production are sourced in both Russia and Ukraine.
As the invasion continues, further restrictions have been imposed that specifically focus on Russia’s economy and trade. The White House, alongside the Commerce Department, have expanded the list of goods that require US licenses before suppliers can ship them to Russia and are currently denying those licenses. Updated sanctions added export blocks on technology, greatly impacting the supply chain for commodities like commercial electronics, aircraft parts, computers and semiconductors.
The sanctions are anticipated to influence the supply chain now that a full-scale invasion has occurred. The US sources 35% of its palladium from Russia, while Ukraine is responsible for nearly 70% of the world’s neon gas capacity. Palladium is a key component for sensors and memory module manufacturing, while neon gas is a necessary resource for semiconductor lithography processes. Additional raw material gases that could be affected are argon, krypton and xenon.
As countries across the globe have enacted their own version of sanctions, semiconductor manufacturers are following suit and ceasing processor sales to Russia. US chipmakers Intel and AMD are part of the group suspending all sales. Taiwan Semiconductor Manufacturing Co. (TSMC), the world’s largest contract semiconductor manufacturer, has begun contacting Russian partners to inform them that the Taiwanese sanctions are ending their trade relationship.
In the short term, inert gas supply limitations would be feltglobally if countries were unable to find alternative sources. However, thesituation is still ongoing, which meanssuppliers and factories may be unprepared for long-term disruptions to their supply chains.