Sanctions have crippled Baikal’s production and packaging capabilities

Why it matters: Global sanctions against Russian companies have worked in at least one respect: Baikal Electronics can no longer supply enough chips to meet the country’s needs, and half of the chips it produces are defective. Russia is working to build up its domestic capabilities, but it is unclear whether it can catch up.

Baikal Electronics, one of Russia’s major processor developers, has been struggling in the wake of sanctions imposed by the US and UK governments following Russia’s invasion of Ukraine in February 2022. Until then, the company ordered the production of chips, including their packaging, from TSMC.

The Taiwan-based chipmaker promptly stopped shipping processors that year because of the sanctions. The sanctions also blocked the Russian company from licensing Arm technology. Baikal, which switched from the Baikal-T series MIPS instruction set architecture to Arm years ago, used the technology in its Baikal-M, -S, and -L series chips.

The supply restrictions forced the company to turn inward to produce packaged and tested silicon. Russian business news outlet Vedomosti recently revealed that about half of the processors packaged in Russia are defective. A source told the paper that the failures are due to equipment that is not configured correctly and not having enough properly trained technicians for the chip packaging.