US chip stocks undeterred by export ban to Russia

Crackdown on Moscow won't hurt American semiconductor industry, SIA says


If US chip makers are feeling the stress of semiconductor import sanctions on Russia, it isn't showing yet.

The PHLX semiconductor index, a weighted index of 30 top semiconductor stocks, has gone up by 2.46 per cent since Russia invaded Ukraine on February 24. That is in line with the tech-heavy Nasdaq composite index, which has gone up 2.46 per cent during the same period. The Dow Jones Industrial Average declined by 0.24 per cent during that time.

We note that the big players are mostly steady this week so far: AMD finished Monday up 1.88 per cent; Intel flat; Nvidia up 0.94 per cent; and Texas Instruments down 0.49 per cent. Though PHLX dropped on the day Russia entered Ukraine, it quickly recovered.

The US government on Friday blocked key technology exports, including semiconductors, to Russia after the invasion of Ukraine.

Chip makers are complying with the US export controls, with AMD, Intel, TSMC, and GlobalFoundries, at least, suspending shipments of products to Russia, The Washington Post reported. Dell, HP, and Lenovo have also stopped shipping products to the country.

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Analysts have said the export controls are unprecedented, affecting business processes, and companies are better off halting exports until they can sort out compliance. Proceeding with shipments risks violating President Biden's crackdown.

"It's going to be a mess, it may take time, and it's going to be complicated," Darshak Dholakia, an international trade lawyer with Dechert LLP, told The Register.

He added: "It's gonna take a while for, I think, the restrictions to actually take effect."

Russia has a very small chip market, accounting for less than 0.1 per cent of global chip purchases, according to the World Semiconductor Trade Statistics' numbers cited by the Semiconductor Industry Association (SIA). That means export controls aren't going to hit bottom lines; it is not a driver for sales. Russia's economy is also going through the wringer due to not only earlier sanctions but also this latest round.

The new export rules are being analyzed, and they won't have much of an impact on the American chip industry, an SIA spokesman said in an email.

Some analysts warned supplies of neon gas and palladium, useful for the chip fabrication and electronics industries, could be hit following the occupation of Ukraine. "The semiconductor industry has a diverse set of suppliers of key materials and gases, so we do not believe there are immediate supply disruption risks related to Russia and Ukraine," the SIA spokesman told us.

Chip stocks have been a darling of investors with demand for semiconductors outstripping supply. The PHLX semiconductor index momentarily broke the 4,000 barrier in December and January, up from 1,200 before the pandemic.

Research firm IC Insights is projecting semiconductor sales to record $680.6bn this year, with a market correction possibly coming in 2024. ®


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