American markets have a distinct advantage when it comes to making chips for high-tech devices.
The search for sanctions that could force Russia to reconsider its recent invasion of neighboring Ukraine ratcheted up on Thursday.
Authorities are now looking at more blue chip companies and the products they make to become fair game for American officials looking to crimp supplies.
Tech will be a major part of that effort, with everything from semiconductors (already in short supply globally) and international payment systems sitting firmly in the crosshairs of global regulators looking to pinch Russia’s economy.
Chipmakers Already Preparing for Pullback
American markets have a distinct advantage when it comes to making chips for high-tech devices.
Home to behemoths like (AMD) – Get Advanced Micro Devices, Inc. Report, (INTC) – Get Intel Corporation Report and (NVDA) – Get NVIDIA Corporation Report, it is also the birthplace of nearly ubiquitous social media networks like (TWTR) – Get Twitter, Inc. Report and Facebook (MVRS) – Get Meta Report both of which have been used often and heavily to showcase other international unrest, including the Arab Spring.
Internationally, chipmakers include (SSNLF) , (SMIC) and (TSMC) , all of which are based in Taiwan or China.
That distribution highlights another pitfall of global sanctions for Russia: Taiwan is currently an ally of the U.S., while Chinese/Russian ties have remained strong for decades.
So which chips make it to the Russian market, and then to the country’s consumers, could soon pivot based on international trading fault lines.
What Else Could Be Affected?
Less than a week into Russia’s military action, there are already signs that domestic manufacturers are beginning to look elsewhere for components to make their products.
On Tuesday, Russian carmaker Avtovaz, which (RNSDF) owns in a 69/32 partnership with Rostec, a state-owned enterprise, said that it would begin sourcing its own manufacturing chips elsewhere.
The company sold $3.23 billion worth of cars in 2021, 90% of them in Russia, so its need to find easily accessible parts quickly is clear.
Beyond that, chips are needed for phones, appliances, commercial goods, consumer electronics and even children’s toys.
Business Is Pulling Out of Ukraine Too
Russia isn’t the only country involved in the conflict to be feeling the sting of corporate decisions.
Multiple international companies have yanked their operations out of Ukraine this week, with freighting firm (DSV) shuttering its operations there and shipping giant Maersk saying it won’t be sailing in or out of the company anytime before March.
Other companies followed suit, including brewer Carlsberg, which Reuters reports quenches the thirst of about a third of Ukraine’s market, also closed up shop.
Are There Blueprints For What We Can Expect Now?
While it is impossible to know which, if any, of these sanctions or corporate moves affect Russia, market watchers do have a clue in how the United States has handled major global conflicts in the past.
The most recent case is its ongoing trade war with China, which resulted in halting shipments from telecom behemoth Huawei (HWT.UL) and an aggressive stance taken on tariffs and payment systems like the Society for Worldwide Interbank Financial Telecommunication.
Known as SWIFT, an exclusion from that network would immediately freeze cross-border payments for Russia, potentially taking the sanctions up a level.
