Taiwan’s government has been urged by business groups to evaluate the impact of a possible halt of natural resource imports from Russia on the self-governing island’s chipmakers and other manufacturers due to the Ukraine war crisis.
Taiwanese manufacturers shipped only a small portion of their computing, machinery and semiconductor products to Russia last year and will not be seriously affected if the government decides to follow America’s call to jointly sanction Russia, researchers and trade groups said.
Ukraine’s status as a major producer of neon has sparked certain concerns because the gas is used in semiconductor manufacturing. But chip companies, which were alerted to this possible chokepoint in 2014 when Russia annexed Crimea, have since largely diversified their suppliers, according to news reports.
Russia is a small market for the chip industry and its invasion of Ukraine doesn’t represent a threat to global chip supplies, America’s Semiconductor Industry Association said on Thursday.
Still, there are risks to Taiwan’s wider industry. In 2021, about 10% of Taiwan’s consumed natural gas was imported from Russia. Chinese Petroleum Corporation (CPC Corp), the largest gas and oil company in Taiwan, said it had secured enough natural gas from overseas for March and would be able to maintain a stable energy supply.
On Thursday, US President Joe Biden announced sanctions on all ten of Russia’s largest financial institutions and imposed export control measures that cover more than half of Russia’s high-tech imports.
Taiwanese Minister of Economic Affairs Wang Mei-hua said the island could potentially strictly control exports of its high-tech products to Russia in accordance with the Wassenaar Arrangement, a voluntary export control regime established in July 1996.
Taiwan Semiconductor Manufacturing Company (TSMC), the world’s largest semiconductor foundry, said it ships almost no products to Russia.
In 2021, TSMC said it exported 65% of its products to North America, 10% to mainland China, 5% to Japan and 6% to Europe, the Middle East and Africa.
Taiwan’s United Microelectronics Corporation (UMC), the second-biggest chip foundry in the world, also said it did not export any products to Russia. Both TSMC and UMC said they would follow the Taiwanese government’s rules if there were any export control measures imposed against Russia.
“While the impact of the new rules to Russia could be significant, Russia is not a significant direct consumer of semiconductors, accounting for less than 0.1% of global chip purchases,” said John Neuffer, chief executive of Semiconductor Industry Association, a Washington-based trade association and lobbying group.
“In addition, 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,” he said.
Ray Yang, a researcher at the ITRI Industrial Economics and Knowledge Center, told the United Daily News that Taiwan could form closer ties with its allies, referring to the US and Japan, if it followed them in sanctioning Russia. Yang said the impact of any Russian retaliation to export controls on Taiwanese manufacturers would be mild.
Liu Pei-chen, a researcher at Taiwan Industry Economic Services, also said Taiwanese chip makers would not be seriously affected by export controls on Russia and would probably be able to receive more orders from the US and Japan this year.
However, Liu warned that as Russia was a major supplier of palladium and nickel, North American manufacturers would be hit if Putin decided to launch countermeasures against the US. She said such a trend would create new uncertainties to the global supply chain of semiconductor products over the long run.
Ukraine is a major producer of neon, which is also used in semiconductor manufacturing. Since Russia annexed Crimea in 2014, global chip companies have diversified their suppliers of the noble gas to other places.
According to the Ministry of Finance, Taiwan’s exports to Russia in 2021 totaled US$1.32 billion, representing only 0.3% of the island’s total exports.
Exported items to Russia included $374 million of computing and storage media parts, $255 million of machinery products, $178 million of stainless steel products and screws, and $36 million of electronic parts and chips.
Taiwan imported $5 billion worth of natural resources from Russia last year, 60% of which was natural gas and 30% steel and copper.
Habor Hsu, chairman of the Taiwan Machine Tool & Accessory Builders’ Association, said on Wednesday that only 2.88% of Taiwan’s machinery products were shipped to Russia in 2021.
Hsu said the association’s members would cooperate if the Taiwanese government decided to impose export controls on Russia, which is now the fourth-largest global importer of Taiwan’s high accuracy machines.
However, he urged the government to evaluate how Taiwan would be affected if it could not import natural resources and raw materials from both Russia and Ukraine, saying any bottlenecks in the supply chain and price hikes in raw materials would hurt Taiwan’s industries.
Chang Ray-chung, a spokesman for CPC Corp, told Taiwan’s Central News Agency on February 14 that Taiwan imported 1.8 million tons of natural gas from Russia, representing about 10% of the island’s gas consumption, in 2021.
Chang said a five-year contract for importing gas from Russia’s Kuril Islands to Taiwan would expire next month and the company had not offered to renew it. He said the situation in Russia and Ukraine would only have a limited impact on Taiwan’s gas imports.
Chang said Taiwan mainly imported natural gas from Qatar and Australia, as well as Malaysia, Papua New Guinea and the US. He said long-term contracts accounted for about 75% of the total gas supply to CPC Corp, while supply from spot purchases accounted for 25%.
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