WEBVTT - Invasion of Ukraine Could Create Tech Disruptions 0:00:00.160 --> 0:00:04.160 This is Bloomberg Business Week with Carol Masser and Bloomberg 0:00:04.240 --> 0:00:08.320 Quick Takes Tim Stinovic on Bloomberg Radio. We continue our 0:00:08.320 --> 0:00:11.400 global coverage of the Russian invasion of Ukraine, and we 0:00:11.440 --> 0:00:15.080 thought we'd wrap up our broadcast today with some thoughts 0:00:15.080 --> 0:00:20.119 on the global technological implications Baksha. Chuck Poverty is the 0:00:20.160 --> 0:00:23.200 Dean of Global Business at the Fletcher School at Tufts University, 0:00:23.239 --> 0:00:27.600 and he joins us on the phone from Boston. UM 0:00:27.760 --> 0:00:30.040 Dean Jack Poverty, it is good to have you here 0:00:30.080 --> 0:00:33.120 with Paul and myself. We've had a lot of conversations today, 0:00:33.120 --> 0:00:38.919 certainly market implications, supply chain implications, political implications, military implications. 0:00:39.320 --> 0:00:41.519 How do you think about it when it comes to 0:00:41.600 --> 0:00:45.800 the technological side of this, Yeah, absolutely, First, thank you 0:00:45.840 --> 0:00:49.760 for having me, and as we all are thinking about 0:00:49.840 --> 0:00:55.200 the implications of the invasion in the Ukraine, the natural 0:00:55.400 --> 0:00:59.960 industry to go to his energy, but of course energy 0:01:00.120 --> 0:01:02.120 is going to be affective, but there's another industry that 0:01:02.280 --> 0:01:06.160 is going to be deeply affected in that technology and UM, 0:01:06.280 --> 0:01:09.759 I fear that there are sor three fronts where technology 0:01:09.800 --> 0:01:12.400 is going to be affected. One is the Ukrainian I 0:01:12.560 --> 0:01:15.600 T sector, which is a pretty significant player in the 0:01:15.640 --> 0:01:20.560 I T space. They are the top I T destination 0:01:20.920 --> 0:01:24.399 for you know, in Eastern Europe, and there are many 0:01:24.520 --> 0:01:28.800 international companies that have got their I T work being 0:01:28.800 --> 0:01:34.760 done there by an excellent group of tech professionals in Ukraine, 0:01:34.959 --> 0:01:38.520 and many of those operations are going to get disrupted 0:01:38.600 --> 0:01:42.360 as the invasion moves further and further into the major cities, 0:01:42.360 --> 0:01:46.800 and certainly into into Kiev. And so that's the first 0:01:46.800 --> 0:01:50.480 place that I think we're going to see an immediate impact, 0:01:50.520 --> 0:01:53.880 and then there's a longer term impact, and that has 0:01:53.960 --> 0:01:58.720 to do with the semiconductor chip industry. The Biden administration 0:01:58.760 --> 0:02:04.680 is already threatened that if Putting invades Ukraine, he would 0:02:04.680 --> 0:02:08.560 put a chip blockade on Russia. And the impact of 0:02:08.760 --> 0:02:13.440 that could be a lot of uncertainty in the semiconductor sector, 0:02:13.840 --> 0:02:19.600 which is already suffering from massive supply chain bottlenecks and shortages. 0:02:19.880 --> 0:02:22.160 And what this is gonna do is it's going to 0:02:22.720 --> 0:02:26.800 create additional chaos in semiconductors, which is not good for 0:02:26.960 --> 0:02:29.840 certainly not good for Russia, it's not good for the 0:02:29.880 --> 0:02:31.959 rest of the are not good for the United States. 0:02:32.040 --> 0:02:34.920 Last year, the US last one percent of his GDP 0:02:35.320 --> 0:02:37.359 because of chip shortages, and this is going to make 0:02:37.360 --> 0:02:40.720 things worse. And the other issue regarding chips is that 0:02:41.000 --> 0:02:45.560 Ukraine is the largest supplier of a critical gas called 0:02:45.600 --> 0:02:49.320 neon that is used for semiconducted lithography and that's going 0:02:49.320 --> 0:02:53.040 to get cut off. Russia spotifive pent supplier of palladium, 0:02:53.040 --> 0:02:57.079 another very important ingredients in semiconductors. So we're looking at 0:02:58.160 --> 0:03:02.200 a pretty significant crisis is if this war goes on 0:03:02.280 --> 0:03:04.600 for a long time. And then the Toyle issue that 0:03:04.639 --> 0:03:09.960 I worried about it is cyber attacks because when putting 0:03:10.080 --> 0:03:13.080 back against the wall, the one thing that he is 0:03:13.280 --> 0:03:16.760 really probably the world leader in is in cyber weapons. 0:03:16.840 --> 0:03:20.440 And you can see the semi the cyber security firms 0:03:20.639 --> 0:03:23.760 UH stock prices of all valid which is a signal 0:03:23.880 --> 0:03:28.160 that everybody needs to prepare for cyber attacks across the board. 0:03:28.480 --> 0:03:33.760 So do you believe that US companies, global companies, international 0:03:33.760 --> 0:03:37.960 companies have and have they been prepared for this? Do 0:03:38.000 --> 0:03:39.360 you think? Or is this just so much out of 0:03:39.400 --> 0:03:42.720 left field? Yeah? This is you know, of course this 0:03:42.800 --> 0:03:46.200 has been building up for a while and companies have 0:03:46.400 --> 0:03:49.840 been preparing. But the problem is that there isn't that 0:03:50.000 --> 0:03:53.960 much wiggle room. I mean, everybody's still trying to recover 0:03:54.280 --> 0:03:58.440 from all the dislocations that were caused by COVID. So 0:03:58.560 --> 0:04:00.560 we just think about the displace meant of the I 0:04:00.720 --> 0:04:03.000 T work. I mean, where is this work going to go? 0:04:03.360 --> 0:04:06.600 We are facing a massive I T talent shortage globally, 0:04:07.120 --> 0:04:10.800 and so you wonder, you know, if the Ukrainian chech 0:04:10.880 --> 0:04:15.160 whizzes are out of commission, where is this these jobs 0:04:15.160 --> 0:04:17.560 going to be taken. In other parts of Eastern Europe 0:04:17.560 --> 0:04:21.440 are pretty saturated, places like India are are are full, 0:04:22.000 --> 0:04:25.560 you know, remote workers in different parts of the world. 0:04:25.600 --> 0:04:30.880 They already operate in circumstances that are not particularly conducive 0:04:30.920 --> 0:04:32.720 to doing a lot of high end I T work. 0:04:32.800 --> 0:04:34.880 So I worried that there isn't a lot of slack 0:04:34.960 --> 0:04:39.040 in the system and companies haven't really built contingency plans 0:04:39.040 --> 0:04:42.520 across the bold. Is there a sense that you know, 0:04:42.560 --> 0:04:44.160 I think Wall Street might be telling you today, Is 0:04:44.200 --> 0:04:46.800 it like the financial markets came back so dramatically here 0:04:46.839 --> 0:04:49.400 in the afternoon that perhaps this will be a short 0:04:49.520 --> 0:04:54.400 lived issue in terms of disruption. Um, how long does 0:04:54.440 --> 0:04:56.400 this have to go on before you get really concerned 0:04:56.400 --> 0:05:00.360 about some of these some of these issues supply chain issues. Yeah. 0:05:00.600 --> 0:05:04.120 So you know, if there is a war, UH and 0:05:04.120 --> 0:05:08.039 and as we all know, wars can UH can take 0:05:08.080 --> 0:05:11.120 different forms. I mean, right now we're seeing you know, 0:05:11.160 --> 0:05:15.159 some of the initial cities where you know, Russian armaments 0:05:15.160 --> 0:05:18.960 are moved in their primarily uh, you know, setting off 0:05:19.000 --> 0:05:22.320 explosions in the UH in the fringes of the cities 0:05:22.320 --> 0:05:26.600 and not in the commercial centers because Russia doesn't necessarily 0:05:26.600 --> 0:05:29.320 want to take those up. So it's possible that you 0:05:29.320 --> 0:05:32.920 could still continue to get work done as long as 0:05:32.960 --> 0:05:36.520 people can get to work, or you know, things settle 0:05:36.600 --> 0:05:39.960 down and there's just a siege as opposed to an 0:05:39.960 --> 0:05:44.120 all out war. So it all depends on the extent 0:05:44.240 --> 0:05:47.800 to which this gets violent, the extent to which power 0:05:47.839 --> 0:05:51.400 goes out, the extent to which lives get lost and 0:05:51.440 --> 0:05:55.440 people have to start fleeing. So this is and, as 0:05:55.480 --> 0:05:58.719 we all know, an explosive situation. You know, it's interesting 0:05:58.720 --> 0:06:00.880 and I think about here we are coming off the pandemic, 0:06:00.920 --> 0:06:02.520 and here's something that I don't think it was on 0:06:02.560 --> 0:06:06.320 everybody's worry list heading into UM dean that I do 0:06:06.440 --> 0:06:10.680 wonder UM this move to make sure that you've got 0:06:10.680 --> 0:06:15.279 domestic production of masks or semiconductors or you name it 0:06:15.760 --> 0:06:19.120 has to some extent. Do we need to kind of 0:06:19.200 --> 0:06:21.840 roll back globalization? Can we? Or we have no other 0:06:21.880 --> 0:06:24.040 choice that we kind of need to because of what 0:06:24.080 --> 0:06:25.880 we've seen over the last couple of years and then 0:06:25.960 --> 0:06:29.640 again what happened this week. Yeah, you know, of course 0:06:30.320 --> 0:06:32.960 this is going to cause everybody to start thinking about 0:06:33.040 --> 0:06:36.320 how do we reduce our exposure to some of these 0:06:36.400 --> 0:06:42.039 more volatile parts of the world. Unfortunately, the semiconductor industry 0:06:42.080 --> 0:06:46.600 we just use as an example. Uh, you know, American industry, 0:06:47.320 --> 0:06:52.200 it's manufacturing of semiconductors has gone down significantly in the 0:06:52.279 --> 0:06:55.800 last couple of decades, just down to about now. Much 0:06:55.839 --> 0:06:58.560 of America's contribution is in chip design and R and 0:06:58.640 --> 0:07:01.839 D and so, and you know, we are this talk 0:07:01.920 --> 0:07:05.600 about investing in American manufacturing. But as far as the 0:07:05.720 --> 0:07:11.160 Ukraine Russia situation is concerned, the primary contribution of Ukraine 0:07:11.240 --> 0:07:16.520 Russia is in critical gases that go into a semiconductors photography. 0:07:16.760 --> 0:07:19.280 I feel like we're not going to go to produce 0:07:19.320 --> 0:07:22.000 those gases at home. I mean, that's that's a natural resource. 0:07:22.080 --> 0:07:24.160 That's a good point, right, those are natural resources, and 0:07:24.200 --> 0:07:26.920 we may not have a choice. Um buckhar thank you 0:07:26.960 --> 0:07:30.000 so much, really appreciated, bukshar Chuk Vorty. He is the 0:07:30.000 --> 0:07:32.640 Dean of Global Business at the Fletcher School at Tufts University. 0:07:32.640 --> 0:07:35.119 On the phone from Boston. So when you wake up tomorrow, 0:07:35.160 --> 0:07:38.440 what are you be looking for? Let me push my 0:07:38.440 --> 0:07:40.920 blue button. I'm gonna be looking at oil. How less 0:07:41.120 --> 0:07:42.840 oil is gonna be trading. Yeah, and I'm gonna be 0:07:42.840 --> 0:07:45.160 watching the futures market coming off of China and into 0:07:45.160 --> 0:07:47.280 the early hours pulse. We need a pleasure to have 0:07:47.320 --> 0:07:49.280 you here. Thanks for having this fun all right, everybody, 0:07:49.280 --> 0:07:50.360 have a good and safe evening.