Економіка

Microelectronics produced in the United States and allied countries are crucial components of Russian weapons systems used in the Ukraine invasion, according to a report by Britain’s Royal United Services Institute.

The RUSI report, Silicon Lifeline: Western Electronics as the Heart of Russia’s War Machine, says more than 450 foreign-made components have been found in Russian weapons recovered in Ukraine. The report’s authors say Moscow acquired critical technology from companies in the United States, Europe and Asia in the years before the invasion.

Ukraine says Russia fired more than 3,650 missiles and guided rockets into its territory in first five months of the war. Most of the weapons rely highly on Western-made microelectronic technologies, according to report co-author Gary Somerville, a research fellow at RUSI’s Open-Source Intelligence and Analysis Research Group.

“It doesn’t appear that they actually have the ability to reproduce – at least to the same level of sophistication and at scale – a lot of these critical microelectronics. These are the ones that would be absolutely essential for, for example precision-guided munitions which have very sophisticated processing units,” Somerville told VOA.

That includes Russia’s Iskander 9M727 cruise missile, one of its most advanced weapons. RUSI researchers recovered some missiles in the field inside Ukraine and inspect the microelectronics inside.

They found several Western-sourced components, including digital signal processors, flash memory modules and static RAM modules made by U.S.-based companies including Texas Instruments, Advanced Micro Devices and Cypress Semiconductor, along ethernet cabling that originated from American, Dutch and German companies.

Russia’s Kh-101 cruise missiles, some of which targeted the Ukrainian capital Kyiv, were found to contain 31 foreign components.

Common chips

All the microelectronics companies cited in the report said they comply with trade sanctions and they have stopped selling components to Russia. There is no suggestion in the report that the companies broke any export control laws.

“How is Russia possibly getting hold of this stuff? When we actually looked through a lot of these components, they are quite prosaic and in many ways ubiquitous, they can be found in any sort of electronics really – microwaves, dishwashers,” Somerville said.

Such microelectronics were freely available to Russia before its invasion of Ukraine.

However, RUSI also identified at least 81 components classified as “dual-use” by the U.S. Commerce Department and subject to U.S. export controls.

They include a high-performance CMOS static RAM microchip originally made by U.S.-based Cypress Semiconductor, found inside a handheld navigational system used by Russia’s special forces to pinpoint their position and estimate coordinates for precision artillery and air strikes.

“The component is a high-speed, ultra-low-power memory chip148 that is classified as a dual-use good for export purposes,” according to the RUSI report.

Two-thirds of the foreign components found in Russian weapons systems were manufactured by U.S.-based companies. Japan was the second-biggest supplier.

Export bans

Many of the microelectronics found in the weapons were decades old and, following Russia’s invasion of Ukraine in February, many states have banned the export of such components to Russia.

Somerville pointed to Russia’s history of using elaborate methods to procure technology, Somerville said.

“It’s through the use of a number of front companies that, on the surface when you conduct a due diligence check, appear to be legitimate — but in reality are actually, or can be somewhat affiliated with, large Russian companies that are actually members of the military-industrial complex,” he said.

The report details how Russia also uses false end-user certificates and transshipment companies based in third countries, including several in Hong Kong, to obscure the final destination.

It cites Russian customs records showing that in March 2021, one company imported $600,000 worth of electronics manufactured by Texas Instruments through a Hong Kong-based distributor. Seven months later, the same company imported another $1.1 million worth of microelectronics made by Xilinx, according to RUSI.

U.S. and allied sanctions imposed on Russian weapons manufacturers and companies supplying them with components must be tightened, Somerville said.

“What the sanctions and effective enforcement of these sanctions can do is raise the costs on Russia to acquire these particular microelectronics,” he said.

The report’s authors say Russia is now scrambling to procure microelectronics in bulk, and that its military could be permanently weakened if the supply can be cut off.

Some of the information in this report was provided by Reuters.
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China’s global dominance in the solar industry is a supply chain and national security risk, according to some industry observers, and one of the reasons that the United States has been trying to boost domestic solar manufacturing capacity.

U.S. President Joe Biden Tuesday signed into law the sweeping Inflation Reduction Act, which includes tax incentives for the development of a more robust solar industry. The White House aims to triple domestic solar manufacturing by 2024.

The law responds to longstanding calls by some in the solar industry for U.S. action to boost domestic manufacturing and to level the playing field between the United States and China. Many U.S. firms complain that China can manufacture solar panels and other hardware more cheaply than they can.

China has been expanding solar panel production and innovation that has helped drive down global manufacturing costs, according to a July International Energy Agency (IEA) report.

Another industry observer, the National Renewable Energy Laboratory, said it saw prices drop sharply over a 10-year period starting in 2010.

However, the risks of a global dependence on China have become apparent during the pandemic. The high cost of shipping from China has led to price increases. The price of polysilicon, the material used to make solar cells, quadrupled in the last year because an oversupply caused manufacturers to slow down production, which then led to a shortage when demand for the product increased. Forty percent of the global polysilicon manufacturing comes from China’s Xinjiang region.

“This level of concentration in any global supply chain would represent a considerable vulnerability; solar PV (photovoltaics) is no exception,” stated the IEA report’s executive summary.

China dominates manufacturing

China is involved in manufacturing more than 80% of solar components, according to the IEA.

“If we don’t have the supply chain here in the U.S., we look at it as a national security concern,” said Mamun Rashid, chief executive officer of California-based Auxin Solar, one of the few U.S. manufacturers of solar panels.

“If you have a renewable energy grid and it is powered by solar and the solar equipment is being deployed and you don’t have the ability to supply it yourself at any moment, the faucet can be turned off,” explained Rashid.

Beijing dismissed the concerns and accused the U.S. of thinly veiled protectionism that will harm Chinese businesses.

“China urges the U.S. to stop hobbling Chinese enterprises, quit the erroneous practice of disrupting the supply chain and industrial chain, and create favorable conditions for China-U.S. cooperation on clean energy and climate change,” Chinese embassy spokesperson Liu Pengyu told VOA.

This year, a succession of actions in Washington has directly or indirectly impacted the solar industry in China and the U.S.

In February, the U.S. extended tariffs on solar products containing crystalline silicon from China. Additionally, the Uyghur Forced Labor Prevention Act, banning products including solar components from China’s Xinjiang region, went into effect in June.

China has been criticized over its treatment of its Muslim Uyghur minority and others in Xinjiang province by rights organizations and Western governments. The U.S. accuses Beijing of forced labor practices among its Uyghur minority in the Xinjiang region, which China has denied, saying its employment programs have helped improve the financial situation for Uyghurs.

China reacts to US action

China has taken issue with Uyghur-related legislation enacted by Washington.

“Having implemented the so-called ‘Uyghur Forced Labor Prevention Act’ on the pretext of ‘forced Labor’ in Xinjiang, the U.S. is illegally suppressing and unilaterally sanctioning China’s PV industry without justification,” Liu said in an emailed response to VOA.

“This is seriously against the law of the market and WTO (World Trade Organization) rules and detrimental to the international trade order and the stability of global PV industrial and supply chains and global climate response,” the Chinese embassy’s Liu told VOA, adding, “The U.S. needs to immediately stop spreading lies and stop enforcing this malicious legislation.”

Trade law investigation

Separately, while the Inflation Reduction Act provides tax credits to further develop the U.S. solar industry, Rashid is pushing for the U.S. to enforce its trade laws.

“You’re dealing with China. It’s not a free market economy. You can never out-subsidize China, so that won’t be enough,” said Rashid.

Auxin Solar’s concerns about the pricing of Chinese products prompted a U.S. Department of Commerce investigation earlier this year into whether some solar panels coming to the U.S. from Cambodia, Malaysia, Thailand and Vietnam were actually Chinese products and that Beijing was attempting to dodge U.S. anti-dumping tariffs.

Many U.S. solar projects were halted, fearing the impact of retroactive tariffs. In response, Biden announced a two-year tariff freeze on solar components from the four Southeast Asian countries.

“When you have product that’s selling in the market that’s lower than (what) your bill of materials cost, something is wrong there. The U.S. worker hasn’t even had a chance to enter the race and they’ve lost the race,” Rashid said.

In a press release, U.S. Commerce officials said their findings will be applied when the two-year period ends in 2024.

In the coming years, “based on current manufacturing capacity under construction,” the IEA predicts China will account for some 95% of solar components made for the global supply chain.

Steven Gute contributed to this report.
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In the past year, there has seen a dramatic transformation in the way customers pay for their purchases in Banuri, a village in the Himachal Pradesh state of North India. Whether at a small grocery store or a street cart, instead of handing over cash, they use a simple system that involves scanning a code on a smartphone to make an online payment.

“Even if someone buys only half a kilogram of vegetables, he can pay digitally. We do the smallest of transactions,” said Nishant Sharma, a vegetable vendor in Banuri as he hands over a cauliflower to a customer that costs 75 cents. “It is much easier than handling cash.”

In recent years, a government initiative called “Digital India” has helped millions plug into new digital technologies as internet access expands to distant areas. One of them is a payments system that is transforming the way retail business is transacted in vast rural areas and small towns, where more than two thirds of India’s 1.4 billion people live.

Much like glitzy city stores, street vendors to small shops are making the switch to digital payments. But instead of credit or debit cards, they use India’s Unified Payment Interface popularly known as UPI. It is a payment system that involves no merchant fees and can be used for the smallest of transactions to make instant transfers across bank accounts. It was developed under the initiative of India’s Central Bank.

“It is the ease of the technology and overall reduction in transaction cost that has made this system popular. It takes place with the click of a button, it is cost-effective, and easy to manage,” said economist N.R. Bhanumurthy, Vice Chancellor at D.R. Ambedkar School of Economics University in Bengaluru. “It is certainly a huge transformation from what we did in the past and has changed the way we do business.”

Its expansion has also been helped by a massive push in recent years to bring more people into the banking system. More than 80% of adults now have bank accounts, compared to just one-third of adults some years ago. Affordable smartphones that cost as little as $50 are in the hands of about 750 million people. The COVID-19 pandemic, when cash transactions were discouraged, also prompted many to switch to digital payments.

“The Digital India Movement can bring about revolutionary changes in India and the lives of the common man,” Prime Minister Narendra Modi said at an Independence Day address on Monday. According to the Indian leader, 40% of the real-time digital transactions made in the world now take place in India.

Whether in big towns, cities, or small villages, India’s retail sector is dominated by millions of small stores and shops, who for decades only did business in cash.

The speed and scale with which they are embracing the new payment system is evident in Banuri village. The owner of a chemist shop, Akhilesh Sharma, said about 70% of his customers pay online. It has eased his life.

“Whenever I open PhonePe or Google Pay app, all the transactions are done in my business account,” said Sharma. “In cash, I have to count the money at the end of the day, and it is a little long process. Then I have to go to bank and deposit the cash.”

Economists say digital payments boost business by facilitating transactions. Small town and village residents, especially younger customers, are also discovering the benefits of going cashless.

“I don’t have to worry about carrying money,” said Vikas Sharma, a resident of Palampur. “Earlier when I went to a crowded place, I worried about getting my wallet stolen. Now all I need is my phone.”

Digital transactions are just one of the benefits that the internet has brought people living in outlying areas. For older people such as a retired government employee, Romesh Dogra, the biggest benefit is connecting via video calls with his three daughters who live outside his district.

“I get energized daily when I talk to my grandchildren,” said Dogra, a retired official. “I can watch them growing up. Life has become good.”

There are still gaps to plug in — internet speeds can pose a challenge, especially in villages and small towns. And while the numbers of people with access to the internet have doubled to nearly 700 million in the last five years, millions are still not connected. But with rapid progress, it may not take long for India’s digital footprint to expand.
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In India, an initiative to bring internet access across the country has helped millions plug into new digital technologies. One of them is a payments system that is transforming the way business is being done in the vast rural areas of the country. Anjana Pasricha has a report.
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