The Russian invasion of Ukraine is poised to have a “long-term” impact on the chip industry by compounding the mounting risks from inflation, according to Taiwanese memory chipmaker and key Apple and Samsung supplier Winbond Electronics.

Winbond chairman and CEO Arthur Chiao Yu-cheng told Nikkei Asia that business is booming for chipmakers thanks to a pandemic-fueled surge in electronics demand, but uncertainty looms on the horizon.

“So far, this year has been good. But under the influence of inflation, how long will it last? It is a big question mark,” the chairman said, adding that the Russian invasion of Ukraine could bring further uncertainties.

“We are already seeing energy prices in Europe go up significantly, and that will affect consumers’ spending power there. I don’t expect any of these [inflationary pressures] reverting immediately, even if the invasion ends soon,” said Chiao. “This is likely going to have a long-term impact.”

A point to watch, Chiao said, is how governments and central banks deal with inflation if there is an economic slowdown. “Governments around the world have been printing money and adopting quantitative easing measures to stimulate their economies. This has worked over the past few years, but with looming inflation concerns, all those stimulus measures in the past might not work this time.”

Chiao’s remarks come as the chip industry is in the midst of a super cycle, a period of prolonged expansion driven by robust demand. At the same time, COVID-19 disruptions have brought wide-ranging rises in the cost of everything from logistics to raw materials. The sudden outbreak of the Russian invasion of Ukraine has sparked huge fluctuations in energy and materials markets, further adding to inflationary pressure.

Like most of its industry peers, Winbond—which also supplies Panasonic, Sony, Foxconn, and Siemens—generated record earnings for 2021. Its revenue jumped 64% to TWD 99.57 billion (USD 3.51 billion), while net profit surged 887% from the previous year. Winbond’s revenue for the first two months of 2022 increased nearly 30% on the year.

Winbond is the world’s leading provider by market share for NOR flash memory chips, which are mainly used to store source codes in a wide range of electronic devices. It is also an important maker of specialty DRAMs, another type of memory chip.

Chiao said constant uncertainty has been a new reality for the tech industry since the start of the pandemic. “Over the past two years, we’ve learned a great lesson about constant uncertainties and disruptions. By early 2020, everyone was forecasting gloomy demand, and no one dared to place orders. But it turned out in the second half of 2020 that the demand wasn’t too bad, which led to a great shortage. Frankly, no one expected that to happen.”

The best way to steer a company through such uncertainties is to pin down long-term growth areas that are unlikely to change, even if there is short-term turmoil in the market, Chiao said.

Winbond has thus targeted three growth areas: electric vehicles, smart agriculture—two areas that deal with global warming—and cybersecurity. The chairman said his company will increase investment in these areas “as the direction [of these trends] will not change due to geopolitical tensions or market downturns.”

As part of efforts to catch the EV boom, Winbond’s microcontroller chip unit Nuvoton in 2020 bought Panasonic’s semiconductor business, which specializes in image sensors and power semiconductors.

Another way to navigate uncertainties, Chiao said, is to avoid being too aggressive or too conservative. “You have to prepare for unexpected incidents and never say something is absolutely certain, and, in addition, never be too surprised if anything unexpected happens,” he said. “If you stay in the middle, you will have room to adjust quickly according to the situation.”

Like most of its peers, Winbond has embarked on a major expansion push to help alleviate the chip crunch. Its capital expenditure budget for 2022 is TWD 45.8 billion (USD 1.62 billion), 387% higher than its spending last year. The company in 2018 pledged to spend more than TWD 330 billion over the next ten to 15 years to expand its manufacturing capacity to the southern Taiwanese city of Kaohsiung. The first phase of that plant will be ready for mass production within this year.

The company announced plans to hire 700 engineers this year in Taiwan, where it already has a workforce of more than 5,000, and also aims to expand its R&D teams in Japan, Israel, and the U.S. over the next two years, Chiao said. Winbond has more than 7,000 employees globally.

The center of Winbond’s chip production will remain in Taiwan, Chiao said, with its overseas expansion mainly geared toward R&D.

Spreading out chip production is a challenge, the chairman explained, while chip design and R&D can be done anywhere in the world.

The chairman said he is neither pessimistic nor optimistic about the market outlook for 2022 but rather cautious.

“The past two years are a prime example of how there are always cycles. After the market goes up, it will likely go down. But that’s OK. People need to be prepared and have cushions for the downturn. Then they will be able to catch the next uptrend.”

This article first appeared on Nikkei Asia. It has been republished here as part of 36Kr’s ongoing partnership with Nikkei.