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White House tells chip industry to be ready for potential Russia export curbs

FILE PHOTO: U.S. President Biden holds a semiconductor chip

By Alexandra Alper and Karen Freifeld

WASHINGTON (Reuters) - The White House told the U.S. chip industry to be prepared for new restrictions on exports to Russia if Moscow attacks Ukraine, sources said, including potentially blocking the country's access to global electronic supplies.

The warning followed inquiries by the industry after reports by Reuters and the New York Times on potential curbs.

In a phone call on Friday, White House National Security Council officials Peter Harrell and Tarun Chhabra told executives from the Semiconductor Industry Association, a chip lobbying group, to be ready for unprecedented actions against Russia if it invades Ukraine.

"The NSC relayed in blunt and stark terms the gravity of the situation they are currently grappling with in Ukraine, noting that this is an extraordinary situation and potentially the worst cross border invasion to take place since WWII," an SIA director wrote to members following the call, according to an email seen by Reuters. "The NSC indicated that the administration is actively considering any and all options."

According to the email, SIA had sought clarity about the probability of a range of measures, including financial sanctions, broadening export restrictions to Russia to be like those for Iran and North Korea, and applying to Russia a 2020 rule that vastly expanded the government's powers to block shipments of foreign made goods to China's Huawei.

One person on the SIA call with its members said getting ready could include checking on employees in Moscow to make sure they have good IT protection and preparations to shut down exports to Russia at a moment's notice.

Expanding the scope of the so-called Foreign Direct Product Rule to Russia, in a way that mirrors a Trump-era move against Chinese telecoms giant Huawei, could allow the Biden administration to stop shipments of chips, computers, consumer electronics, telecommunications equipment, and other items made anywhere in the world if they were produced using U.S. technology.

"We have been very clear that if Russia further invades Ukraine, the United States is looking at a range of options – with allies and partners – to deliver severe costs to the Russian economy," a White House spokeswoman said, while declining to confirm the phone call.

"Any details in this regard that make their way to the public only demonstrate the extensive detail and seriousness with which we are discussing and are prepared to impose significant measures in coordination with our allies and partners."

SIA held a conference call with dozens of members on Tuesday to detail the conversation with the NSC, the sources said.

"We could be in uncharted waters with such a potentially broad export control measure. We are still trying to assess what the ripple effect may be to global supply chains,” SIA government affairs official Jimmy Goodrich said in a statement.

It is not the only industry group that has been in touch with the White House. SEMI, the global industry association representing the electronics manufacturing and design supply chain, also raised the topic on a call with NSC officials on Tuesday, saying it was concerned about the potential impact on U.S. technology, according to a person familiar with the matter.

Biden is seeking to deter Russian President Vladimir Putin from invading Ukraine after Russia massed tens of thousands of Russian troops in and near its neighbor. Russia denies planning a new military offensive but has made several demands and said it could take unspecified military action unless the West agrees to them.

(Reporting by Alexandra Alper and Karen Freifeld; Editing by Chris Sanders and Philippa Fletcher)