Internet giant Russia risks running out of vital technology within a year

russia internet giant risks running out

(Bloomberg) — Russia’s ubiquitous tech company, which has created products ranging from the country’s dominant search engine to the country’s largest ride-hail service, faces an impending hardware shortage as US sanctions punish President Vladimir Putin for failing to do so. invading Ukraine.

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Yandex NV may be short of semiconductors needed for the servers it uses to power its company within a year to 18 months due to import restrictions, said two people with direct knowledge of the problem, who asked not to be identified. to speak candidly. Sanctions on dual-use technology, which are used both militarily and commercially, have hit the self-driving vehicle unit especially hard, they said.

A Yandex spokesperson did not immediately respond to requests for comment.

Yandex has plunged into crisis since Putin started the war on Feb. 24, caught between the Kremlin’s increasingly strict internet censorship and a backlash in its key foreign markets. The company’s international partnerships are crumbling, two board members have resigned and its number two executive, Tigran Khudaverdyan, was forced to resign after he was sanctioned by the European Union. The company’s market value has fallen from a record $31 billion in November to $6.8 billion after the invasion began.

The EU said it was targeted by Khudaverdyan for attending a meeting in the Kremlin on the day of the invasion and for the actions of Yandex’s news aggregator. The company has been criticized for suppressing independent news as it fights against Russian law that prohibits referring to the war as anything other than a “special military operation” under penalty of fines and prison terms of up to 15 years.

The costs of ignoring the Kremlin’s orders are high. Russia banned Meta Platforms Inc’s Facebook and Instagram services. and labeled their activities “extremist” after they refused to remove content. Google from Alphabet Inc. has brought personnel from Russia in preparation for a possible shutdown in the country.

Reduce exposure

The potential lack of servers could affect everything from Yandex’s cloud operations and search engine to the Yandex Music streaming service and the Yandex Market online store. This year, these companies may consolidate their position among the domestic leaders in their segments during the coming slump, which Bloomberg Economics forecasts will shave about 9% of Russia’s GDP this year.

Yandex is again trying to act as a partnership to reduce the exposure to sanctions for its employees, although the details of the new structure have not been fully worked out, according to the people. It is also in talks with the state-controlled UK, which operates Russia’s largest social network, to sell its news division and the company’s Zen social media platform, they said.

Another option is to divest the technology-intensive self-driving unit, they said.

Yandex Self-Driving Group’s autonomous vehicles have traveled more than 16 million miles, with the taxi fleet gaining a foothold in the US and its robots delivering food to a handful of US college campuses. It ended US operations in March, including a partnership with Grubhub.

Russia may be able to turn to China, a major producer of microchips, for semiconductors and other tech hardware as part of efforts to mitigate the impact of sanctions. So far, however, China has shown little willingness to evade international sanctions, even as it criticizes the measures as damaging to trade relations with its key diplomatic partner.

Enforce sanctions

US Commerce Secretary Gina Raimondo pledged earlier this month to vigorously enforce export controls on Russia and said the US would be wary of Chinese semiconductor companies attempting to evade sanctions, though she said there were no restrictions so far. when there is no evidence that there is.

Amid widespread rejection of Russian companies by investors in the wake of the invasion, Yandex shares in the US have been frozen since early March. Russia’s economy ministry is working on a way to cancel certificates of foreign-traded companies, the Interfax news service reported Tuesday, citing a person familiar with the bill who did not identify it.

The company has hired advisers to help negotiate with bondholders after the US stock was suspended, allowing investors to request full repayment. It said it does not have the money to repay the $1.25 billion bond, which is intended to be exchanged for common stock.

Brain drain is another potentially complicating factor, as Russian tech workers increasingly want to move abroad to escape the country’s deeper economic isolation.

Between 70,000 and 100,000 IT specialists could emigrate in April, Interfax reported last week, citing an estimate by the Russian Electronic Communications Association. The group said this is on top of an initial wave of 50,000 to 70,000 programmers who have already left the country.

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