Analysis of the impact of the Ukraine crisis on Taiwan’s semiconductor industry

As the war between Russia and Ukraine continues to escalate, some have questioned whether the Taiwan semiconductor powerhouse will be affected. However, since Russia is not a major market for Taiwan’s foundry industry, TrendForce notes that the direct impact of sanctions on Russia on Taiwan’s foundries is likely to remain limited. However, the war can potentially lead to a drop in terminal equipment sales, leading to a drop in demand for components and, as a result, reduced wafer inputs at foundries.

TrendForce predicts that the conflict will have a significant impact on the smartphone industry. Take, for example, the ranking of smartphone brands by market share in Russia and Ukraine last year; The top three brands in these countries were Samsung, Xiaomi and Apple, whose combined annual sales for 2021 were around 45 million units.

However, since the beginning of the war, exchange rates have fluctuated, and the ruble has depreciated. This depreciation is clearly reflected in retail sales of Apple products in Russia, where the price of the iPhone 13 Pro 128GB has increased by almost 50%. Such price increases are likely to prompt consumers to reallocate an increasing amount of money that they would normally spend on electronic items to other necessities of life. Russian and Ukrainian chip demand is therefore expected to contract rapidly, which in turn will lead IC design companies to reduce their wafer input to foundries.

If Taiwan’s foundries stop supplying chips to Russia, will Chinese companies benefit from diverted orders?

Although Russia is not a major market for Taiwanese foundries, certain chips used in the country’s military and networking applications under the Elbrus brand are manufactured by TSMC. However, the Washington Post has reported that TSMC is no longer manufacturing and shipping Elbrus products, and rumors have spread that Chinese semiconductor companies could benefit from this development.

TrendForce believes that while Chinese foundries are capable of running the 1Xnm and more mature process nodes required for Elbrus chip production, it would likely take at least a year to complete the necessary redesign and verification processes. Therefore, Russia will find it difficult to immediately redirect orders for Elbrus chips to Chinese foundries, and the Chinese semiconductor industry will not be able to take advantage of this situation in the short term.

The escalation of warfare places significant strains on transportation, logistics and supply chains

In view of the ongoing conflict, various parties have imposed a variety of sanctions against Russia, and the shipping industry, for its part, has both direct and indirect effects on the stability and security of the company. Logistical disruptions and skyrocketing prices are just some of the issues that have emerged from the conflict, putting undue strain on global supply chains.

For a semiconductor manufacturing stronghold like Taiwan, it’s natural to assume that domestic semiconductor companies might get a shock to hoard components. However, research by TrendForce shows that not only do most of these companies currently have healthy inventories, but also that Russia and Ukraine are not the only sources of semiconductor materials for Taiwan. In fact, Taiwanese companies have also sourced materials from China. The Russia-Ukraine war has not led to any unusual inventory behavior or production bottlenecks at Taiwanese semiconductor companies.

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