How Russia – Ukraine war effect on IT industry
The current war scenario will undoubtedly affect global ICT demand in the coming months and years. This is the main conclusion reached by the consulting firm IDC after measuring the pulse of CIOs from different economic sectors worldwide.
Despite the fact that IT spending in Russia and Ukraine barely represents 1% of global and 5.5% of European IT spending, the impact of the war will affect the global economy in general and the IT sector in particular in many ways. The report has listed the main consequences that will result from this war, which are mainly economic in nature.
The most immediate consequence will be the contraction of the local IT market, which will fall by double digits this year. In addition, the increase in energy prices that is already becoming evident will force many countries to accelerate efforts to reduce their dependence on certain energy sources.
The economic sanctions imposed are making access to credit difficult for many organizations, which have been forced to suspend their investments in technology. In addition, and in the face of the scarcity of money in circulation, users are also finding it difficult to purchase technological goods. The dynamics of the supply channel will also be affected by restrictions on the export and import of materials used especially for the manufacture of semiconductors.
Another of the consequences cited in the document has to do with the human capital of IT companies. More than 100 companies have set up subsidiaries in Ukraine and many of them also have a presence in Russia. The conflict, which has already displaced thousands of developers in the Ukrainian country, has also caused the relocation of some services and forced companies to evaluate their expansion plans.
These will not be the only consequences, experts warn. Speculation and volatility in the stock markets, the risk of cyber-attacks and cyberwar, and the creation of new businesses and scientific alliances to replace the defunct ones will be some of the visible consequences in the medium and long term.
Companies are already being affected.
The crisis is already affecting the shares of technology companies that are either sourcing or selling globally amid fears that the shortage of semiconductor chips will drag on for a year. Ukraine supplies more than 90% of semiconductor-grade neon (which is used for chip manufacturing) to the United States and 35% of U.S. palladium is sourced from Russia. Threats by Vladimir Putin, Russia’s president, to curb exports to the U.S. may put the industry in check.
A Japanese industry source recalls that, although chipmakers do not feel any direct impact, “the companies that supply them with materials for semiconductor manufacturing buy gases, including neon and palladium, are from Russia and Ukraine. Availability of those materials is already tight, so any additional pressure on supplies could drive up prices. That, in turn, could drive up chip prices.”
Faced with the possibility of Russia curbing exports, the U.S. warned the chip industry to diversify its supply chain.
Against this backdrop, some key players such as ASML Holding, Samsung Electronics and Intel are evaluating alternatives to neon; while others have already started with diversification in the wake of the US-China trade war, the pandemic, Japan’s diplomatic dispute with South Korea, or, in the case of Russia and Ukraine, after Moscow decided to annex Crimea in 2014, a decision that led to a notable increase in neon prices.
SK Hynix, a manufacturer of memory chips, stated last week that, faced with the possibility of a conflict between Ukraine and Russia, it had “secured a large quantity” of chip materials, so that, for the time being, “there is no need to worry.”
In the case of Intel, the multinational believes that there is not going to be a big impact; GlobalFoundries does not see a direct risk, due to the fact that it “has sources outside Russia or Ukraine”, as does Taiwanese chipmaker United Microelectronics Corp. AE Technology has assured that, at the moment, its material supply remains stable. Unisem, a Malaysian chip manufacturer, whose customers include Apple, has expressed the same opinion. The company does not foresee any impact on chip production because the materials they need do not come from Russia or Ukraine.
The cyber war has also begun
Alongside concerns about the invasion of Ukraine, which marks the beginning of the war, there are fears that it will spill over into the cyber world.
Ukraine suffered the first major attack on a state this year (a cyberattack affected more than 70 Ukrainian central and regional government websites in January) and it looks like this one won’t be the last. ESET has warned that a “highly destructive piece of software” has already been found on computers in Ukraine, something the country’s authorities say is part of a growing wave of attacks against the country.
The firm stresses that “an attack of this type involves corrupting all the files on a system, rendering it unbootable and unusable. It is different from ransomware since there is no possibility of recovering the files and its main function is to render the attacked systems unusable without the possibility of their recovery”.
The target of this malware would be similar to the one caused by the NotPetya malware in June 2017, which affected many companies and organizations mainly in Ukraine. In fact, for years now the country has been the target of numerous cyberattacks that have affected such critical sectors as the energy sector, with several examples of cyberattacks on power generating plants, which even led to blackouts in certain regions of the country.
Nor should we forget other recent cyber-attacks on Ukraine, such as the one discovered by Microsoft last January, which was dubbed WhisperGate. On that occasion, it was also malware aimed at destroying information but posing as ransomware, as was the case with NotPetya.
Faced with this reality, several European countries, including Lithuania, the Netherlands, Poland, Estonia, Romania, and Croatia, have sent cybersecurity experts to Ukraine. This is confirmed by Reuters, which stresses that the aim is to try to defend Ukrainian institutions and critical infrastructures from cyber-attacks of probable Russian origin, which have been taking place for days.