A Massachusetts-based producer of optical components for electric vehicles, medical and other applications announced Thursday its Russian facilities are continuing to operate despite global sanctions imposed because of the Ukraine war but warned of possible future sales disruptions.
The announcement by IPG Photonics comes amid a flurry of actions by U.S. tech companies to stop sending products to Russia because of its invasion of Ukraine. Chip giants AMD, Intel, TSMC, and GlobalFoundries have suspended shipments of components to Russia. The list of tech companies taking similar steps includes Oracle, SAP, Dell, HP, Lenovo, Amazon, Apple, Airbus, Boeing, Disney, Google, Ford, and Nike, along with financial services, entertainment, and oil firms.
Meanwhile, inside Ukraine, many technology workers have relocated to the tech hub of Lviv in the western part of the country closer to NATO partner countries such as Poland, according to the Wall Street Journal.
Based in Oxford, Massachusetts, IPG employs nearly 2,000 workers in Russia where it operates major production and R&D facilities. That number is about one-third its total workforce.
The company calls itself the world leader in fiber laser technology for use in industrial applications but has been seeking profitable growth opportunities for its products in EVs, renewable energy and ultrafast lasers, according to a recent earnings report. Revenues were nearly $1.5 billion in 2021, up 22% from 2020. Shares of IPG have plunged in recent days amid a 45% decline over the past year. Shares were trading at $117 early Thursday on Nasdaq.
Sanctions will increase lead times and shipping costs for components and lasers to and from the Russian operations, the company previously said. However, IPG already has several months of critical inventory in Russia to support sales.
“In the event that sanctions or other developments resulting from the ongoing Russia-Ukraine war substantially limit IPG’s ability to export optical or other components to or from Russia, the company’s sales may be materially impacted,” the company said in a statement.
The company is executing contingency plans including increasing manufacturing capacity and inventories of critical components in Germany and the U.S. and finding third-party suppliers to reduce reliance on Russian operations. Reduced reliance on Russian components can start in a few months with a substantial reduction in risk in six to nine months.
The company’s cash balance in Russia is less than 1% of total current cash and Russian operations are self-funding. IPG has suspended further capital investment in Russia other than for maintenance and non-material items. The company has no operations in Ukraine.
The IPG facilities in Russia supply components to Germany and the U.S. used in production of products while providing finished product to China and the U.S. Last year, IPG’s Russian operations supplied about $100 million of finished product for the Chinese market while sales to Russian customers were $30 million.
Russia invaded Ukraine one week ago resulting in a range of economic and trade sanctions on Russia. The U.S. has restricted exports of U.S. technologies to Russia targeting mainly defense, aerospace and maritime sectors to deprive its military from western technology while also issuing broad restrictions on products including chips and computers. The measures affect exports to Russia from outside the U.S. if they are made using U.S. technology.