Source: Content compiled from Bloomberg

Since the United States and its allies imposed sanctions on Russia in the wake of the conflict in Ukraine, Western officials have been frustrated by Moscow's continued ability to obtain American technology to support its war effort. Russian weapons seized from battlefields in the region are stuffed with chips from American chip companies such as Intel Corp. and Analog Devices Inc., much to the dismay of officials in Washington, Brussels and Kiev. A lingering question: Why did the trade controls fail?

A collection of records obtained by Bloomberg News reveals new details about this unexpectedly resilient supply chain from Silicon Valley to Moscow. They show the many steps Russian military suppliers take to source parts from U.S. chipmaker Texas Instruments Inc. without the Dallas-based company's knowledge. They also identify Russian distributors responsible for handling thousands of shipments to the country's military contractors, including several companies subject to U.S. sanctions. They help produce drones, glide bombs, precision communications systems and the Iskander missiles Moscow uses to bomb Ukrainian cities.

The procurement process is surprisingly simple. Some Russian distributors have integrated information from Texas Instruments' online store, the TI store, into their sales platforms, allowing customers to see semiconductor inventory and prices before making a request, according to documents seen by Bloomberg News and government officials familiar with the matter. From Moscow or St. Petersburg, they can buy TI components with a few clicks of the mouse, placing orders for delivery through companies outside Russia.

In one case reviewed by Bloomberg News, a large Russian distributor handled more than 4,000 orders for hundreds of thousands of TI products worth about $6 million through August this year. Nearly $4 million of those orders ended up for Russian military companies, according to supply records, while the rest were likely for civilian use. The items were transferred through other countries and regions before arriving in Russia.

The U.S. government has warned the country's chipmakers that they need to do more to prevent their technology from falling into the hands of the Russian military. Senator Richard Blumenthal said at a September hearing that the companies "objectively and consciously failed to prevent Russia from benefiting from their technology." Texas Instruments was one of four companies testifying and was criticized for "lax controls," according to a report released at the time.

This chip supply chain shows how a group of shadowy middlemen and shell companies have helped the Russian military-industrial complex continue to buy American technology despite years of war and Western sanctions. These relatively simple chips are at the heart of Russia's ability to produce weapons.

"Any export of high-tech chips and microelectronics to Russia, whether directly or through a third party, carries the risk that the technology could end up being used in weapons," said Thomas Withington, an associate fellow at the Royal United Services Institute, a London-based think tank. "The United States and its allies must continually monitor their microelectronics exports, especially to third parties."

TI said in a statement that it invests significant time and resources to stop products from entering Russia and is continually improving its policies and procedures to combat illegal diversion. The company said that on average, TI reviews more than 4 million orders each year and cancels thousands of orders of concern.

"Let me be very clear: TI strongly opposes the use of our chips in Russian military equipment. Any shipment of TI products to Russia is illegal and unauthorized," Shannon Thompson, the company's assistant general counsel, said at a Senate Permanent Subcommittee on Investigations hearing in September. "We work hard to prevent the illegal diversion of our parts to Russia. We take this very seriously at every level of our company." Three other companies also said they were doing their best to stop the flow of technology.

This report is based on internal company documents, import and export data collected from multiple sources and interviews with government officials familiar with Russia's purchases of technology from abroad. The documents reviewed by Bloomberg include a sales presentation prepared by a leading Russian distributor for its customers. The slides explain how customers can search and place requests for goods directly on the distributor's portal, as well as find up-to-date information on product availability, etc., on the platform.

The starting point for many of the illegal technology orders was websites, including two called getchips.ru and altchips.ru. The websites are inaccessible from many Western countries, including the United States and Europe, but Bloomberg has confirmed that both are accessible from within Russia. The portal's massive catalogue, which can only be viewed after a business registers, contains millions of products, including those manufactured by TI, according to the documents.

According to evidence provided to Bloomberg by European government officials, a sample of TI goods queried on the Russian service matched precise information found simultaneously on a price comparison website based outside of Russia, which receives information directly from TI's online store. Officials concluded with "high confidence" that the Russian portal collected the information through an application programming interface (API), a technical coordinate that allows software programs to communicate and share data with each other. Other alternatives, such as scraping the information from another website, are possible, but less likely given the volume of data involved and its timeliness, officials said.

Russia gets rights to Texas Instruments parts

Russian companies, including entities with known ties to the military industry, used Russian distributors to order hundreds of thousands of TI parts, with many of those orders then placed through intermediaries to TI's online store.

TI provides an API for its online store that allows partners to view pricing, inventory, ordering and product information. In some cases, authorized users of TI's API, such as certain price comparison services, blend that information with other data sources and offer their own separate APIs.

TI said in a statement that it does not provide API connections to any Russian company or website, and that based on its analysis, the two Russian portals do not have direct access to its API. The company said that in order to gain access to TI's API, companies must first pass its screening process. The statement added that the company prohibits any Russian internet address from accessing TI's website or any information coming directly from the company, including through API connections. The company said its product information is widely posted on the websites of distributors, information aggregators and other companies.

According to a person familiar with the matter who spoke on condition of anonymity, the two Russian portals are copying content from the website of a Western company that does not appear to have direct access to TI's API. The person said there appears to be a connection between the three sites but declined to name the Western company.

It is not possible to determine how the Russian distributors are pulling information into their sites, and Bloomberg has not been able to independently verify how TI's product information is integrated into the Russian portals. A slide in the Russian sales presentation shows that the searchable information is obtained through the API, but does not mention TI by name, although orders cannot be placed directly through the API and must be placed through a dedicated tab in the portal. Separately, Bloomberg confirmed that TI's corporate website, TI.com, is accessible from within Russia via a VPN, a digital connection that allows location and internet address data to be hidden.

Bloomberg also obtained and reviewed the Russian distributor's enterprise resource planning system (ERP), a software database that companies use to manage sales, supply chain operations and procurement. The information included invoices, purchase order numbers and shipment tracking data that details the routes that products take to Russia.

Materials reviewed by Bloomberg show that many of the goods purchased from the TI store are ultimately shipped to Russia from third countries, although they do not disclose every intermediate step in the supply chain or who placed an order with the TI store. This means that some orders may have been fulfilled through distributors, resellers or old inventory previously ordered and stored in warehouses.

Of the thousands of orders tracked in Russian internal records, the status of 287 orders was marked as "canceled," indicating that some customers either changed their minds or the distributors were unable to fulfill them. The documents show that Russian distributors marked up TI's prices across the board by 40%. European government officials said this was to cover and handle the entire delivery and payment process.

It is difficult for Texas Instruments (TI) to track the final destination of its chips because it sells large quantities of components at relatively low costs, in stark contrast to chipmakers such as Nvidia Corp. or Intel. Distributors can also purchase and hold parts for months or even years, raising the possibility that some of the TI chips used by the Russian military may have been purchased before Western sanctions were imposed.

Following Russia's invasion of Ukraine in February 2022, the U.S. and EU imposed export controls on dozens of goods, electronics, and technologies, including a detailed list of "high priority items" found in Russian weapons or needed to make them. Many TI products that ended up in Russia were subject to these controls.

It is illegal to directly or intentionally export such restricted goods to Russia, but shipments to most other countries are not explicitly prohibited. Many shipments cross multiple jurisdictions before reaching Russia, making inspections complicated and liability unclear. Not all TI components are banned, and some mundane components sell for less than a dollar.

Texas Instruments is the second-largest producer of foreign-made parts found in Russian weapons

U.S. companies need to comply with export control regulations and need to be careful and manage their exposure in accordance with U.S. laws and regulations, said Kim Donovan, a former Treasury official now at the Atlantic Council think tank.

"A key aspect of compliance is managing a company's exposure and the risk of its products falling into the wrong hands," Donovan said. She added that U.S. companies need to do due diligence and know their customers, and the Commerce and Justice departments have been sharing detailed information to help companies understand what to watch out for and what the law requires them to do.

Western chipmakers have been criticized because their products continue to appear in Russian weapons. TI's chips, for example, have been found in the country's air-launched Kinzhal missiles and an attack drone called the Lancet-3. The company accounted for about 14% of the parts recovered by Ukrainian authorities after attacks in the country.

"Both the government and the companies are doing a lot, but it's not enough," said Vladyslav Vlasiuk, Ukraine's sanctions policy specialist. "We want to see our partners be more decisive."

TI said it stopped selling directly to Russia long before Western sanctions demanded it, and said in a statement to Bloomberg that it prohibits customers and distributors from reselling its chips to Russia. The company acknowledged that some TI technology has been used in weapons manufacturing, but added that it continuously upgrades screening measures to minimize the risk of its products falling into Russian hands.

While all four chipmakers have been scrutinized in the U.S. Senate investigation this year, TI was criticized for not taking two steps that most other tech companies take in sanctions reviews. First, while companies such as Intel and Analog Devices use risk management databases early in the sales process to block potential illicit buyers, TI deploys such programs "later in the customer screening process, or sometimes not at all," according to the report by the Permanent Subcommittee on Investigations chaired by Blumenthal. In addition, Texas Instruments appears to allow companies to buy chips from its website without disclosing the end users of those products — while most other chipmakers require such end-user details to avoid selling products to suppliers that resell goods to places like Russia, Iran or North Korea.

Texas Instruments denied that its distribution procedures were systemically flawed. 

In a statement, the company said its global trade compliance program is robust and developed in accordance with Commerce Department guidelines, and that it uses commercially available third-party risk management databases as part of a multi-layered screening process to monitor the sale and shipment of its chips. The company added that it would investigate and take action if it finds evidence of product diversion.

The United States and the European Union issued additional guidance on the implementation of sanctions against Russia, urging companies and banks to strengthen due diligence on supply chains and financial transactions. The guidance lists a series of recommendations that companies and their partners should take to reduce risks, including warnings about possible violations. These violations include sudden surges in orders from specific customers, the use of shell companies, suspicious customer addresses and withholding information about end users.

Several such markers appear to appear on the supply route. Order logs reviewed by Bloomberg show a clear surge in purchases shipped to Russia. Three companies at the heart of the chip route are registered in Hong Kong, where these addresses are often used as a cover for actual locations of operations. Bloomberg was unable to assess whether the companies involved used additional intermediaries or took steps to mask their identities or locations, which could hide potential red flags for the companies.

Sales through this supply channel are only a small fraction of the restricted technology Russia is able to source from abroad. Bloomberg previously reported that last year, Russia imported more than $1 billion worth of U.S. and European chips from companies such as Intel, Advanced Micro Devices and Infineon Technologies.

Intel, AMD, Infineon and Analog Devices said they fully complied with sanctions requirements, stopped operations in Russia when the war broke out, and have policies in place to monitor compliance. They also work to combat illegal transfers of goods. However, European government officials are concerned that there are other channels involving similar distributors and companies.

"Western manufacturers could definitely do a better job of conducting due diligence to prevent battlefield items from flowing into Ukraine," said Maria Shagina, senior fellow for economic sanctions, standards and strategy at the International Institute for Strategic Studies. "This requires a holistic approach to risk management: moving from check-the-box, pro forma compliance to comprehensive and investigative compliance."

Since the invasion began, Ukrainian investigators have recovered and catalogued more than 4,000 Western components for Russian weapons, with Texas Instruments as one of the main sources. Russia has launched some of its largest attacks on Ukrainian infrastructure and other targets this year.

Invoices and other documents seen by Bloomberg make clear that Texas Instruments' products are vital to the war effort. While Moscow has been able to produce some parts procured from the West before sanctions were imposed, or replace them with alternatives made in countries such as China, it still relies on many foreign-made technologies.

In one case reviewed by Bloomberg, a Russian military-industrial complex submitted a detailed procurement request to the Defense Department. Among the dozens of items it sought from different manufacturers was a single-supply voltage converter made by Texas Instruments. The product, which costs about 10 cents, is used in battery-powered devices so that components with different voltages can communicate with each other.

The item is essential for the production of radio modems and there are no locally produced alternatives in Russia, the potential buyers wrote in the three-page document. TI's products are the best choice to guarantee the modems work at "specified durability and reliability levels," the document said.

The most popular TI products include flip-flop chips, which are used to protect devices from current flowing in the wrong direction when they go to sleep, and step-down power supply modules, which are often used in communications equipment, according to data from Russian distributors' ERP systems.

Once the Russian government approves such purchases, TI equipment is ordered through at least one middleman and shipped to at least one intermediary country. The middlemen involved include Sure Technology, Chipower Electronics and Horsway Tech, according to documents reviewed by Bloomberg.

The three companies acted as shippers, shipping electronic components, including some TI products, to Russian buyers, according to data compiled by trade tracking services ImportGenius and NBD. The companies' names appear on thousands of trade documents from Russian customs. The trade activity continued at least until April, when the latest data is available. TI said it had banned the three companies from ordering any parts months before Bloomberg contacted it about the report.

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