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The Ratings Game: Semiconductor sales to Russia banned, but that shouldn’t hurt Intel, AMD and other chip makers

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Semiconductor companies are banning sales to Russia following the company’s invasion of Ukraine, but an analyst says the companies shouldn’t feel much of an effect.

As Russian forces continued to bombard Ukraine’s capital Kyiv on Monday, the broader market sold off as sanctions grow on a global scale against Russia, including the push to exclude Russia from the SWIFT interbank messaging network and the Treasury Department’s prohibition to do business with Russia’s central bank.

The semiconductor industry joined the growing chorus of not doing business with Russia after its President Vladimir Putin ordered the invasion of Ukraine, and most chip stocks slipped Monday, with the PHLX Semiconductor Index
SOX,
-0.67%

finishing down 0.7%, versus a 0.4% gain on the tech-heavy Nasdaq Composite Index
COMP,
+0.41%
.

But analysts did not seem concerned, with Bernstein analyst Stacy Rasgon writing in a note Monday that Russia is a “de minimis direct purchaser of semiconductors by themselves,” citing a report from the Semiconductor Industry Association.

In a statement, the SIA said last week that Russia accounted for less than 0.1% of global chip sales, which came in at a record $555.9 billion in 2021, suggesting Russia accounted for less than $560 million in sales last year.

Read: Semiconductor sales top half a trillion dollars for the first time, and are expected to keep growing

In other tech categories, Russia doesn’t figure high in any area, Rasgon noted.

“Russia accounts for less than 2% of global PC shipments, ~2% of handset and smartphone shipments, ~1% of server shipments, and ~2% of automotive shipments,” Rasgon said. “Hence we would not expect sanctions and export controls on Russia to have any real material impact on the various end markets that are major drivers of semiconductor demand.”

SIA added that Russia only accounted for about $50.3 billion in the broader $4.47 trillion information communication technology market world-wide. or slightly above 0.1%.

When Russia invaded Ukraine, the U.S. Commerce Department’s Bureau of Industry and Security passed broad export controls against Russia while the Treasury Department’s Office of Foreign Assets Control imposed “unprecedented” sanctions. Intel Corp.
INTC,
-0.02%

confirmed it is complying with those restrictions, while Advanced Micro Devices Inc.
AMD,
+1.88%

is reportedly halting Russian shipments and third-party silicon wafer maker Taiwan Semiconductor Manufacturing Co.
TSM,
-3.79%

has reportedly warned Russian chip makers that they may suspend work with them.

“Intel complies with all applicable export regulations and sanctions in the countries in which it operates, including the new sanctions issued by OFAC and the regulations issued by BIS,” an Intel spokesman told MarketWatch in an emailed statement. “We are focused on ensuring business continuity and minimizing disruptions for our employees.”

Spokespersons from AMD, TSMC and the largest U.S. chip maker by market cap, Nvidia Corp.
NVDA,
+0.94%
,
have yet to respond to MarketWatch’s request for comment. AMD shares closed up 1.9% in Monday, while Intel finished down less than 0.1%, Nvidia shares rose 0.9%, and U.S.-traded shares of TSMC fell 3.8%. The SOX is up 11.8% over the past 12 months, but has dropped 13.1% year-to-date.

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