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www.kommersant.ru
Processors in isolation
How the Russian authorities will restart the electronics industry
Growing sanctions restrictions in response to military operations in Ukraine have exposed systemic problems in domestic microelectronics. Chip makers were cut off from Taiwanese factories, Western technology and components. Hundreds of thousands of already paid processors are at risk of simply not reaching, and the only domestic plant capable of producing civilian electronics may be left without materials. The authorities habitually talk about import substitution. But in order to implement it in microelectronics, a country in conditions of technological and economic isolation needs to go through a path in a few years, which took decades for Taiwan, which did not have such problems.
Without chips and semiconductors
Already on February 25, the day after Russia launched a special operation in Ukraine, the Bureau of Export Control (BIS) of the US Department of Commerce announced export restrictions that would affect semiconductors, computers, telecom equipment, lasers, sensors and information security equipment. The world's largest semiconductor manufacturer, Taiwan's TSMC, which manufactures Baikals, Elbrus and Skifs, almost immediately stopped deliveries to Russia, The Washington Post reported on February 26, citing a source. On the same day, Taiwan's President Tsai Ing-wen tweeted that the country was "joining the economic sanctions against Russia."
Less than a week later, on March 4, BIS switched to point restrictions. It published a list that included the largest Russian players: Baikal Electronics JSC (Baikal processors), MCST JSC (Elbrus processors), STC Modul (Neuro-B computers), ITC Elvis ( mobile processors "Skif"). Now foreign companies using American technologies are required to ask BIS for permission to cooperate with these enterprises, the default policy is to opt-out. In fact, this means that Russian design centers can no longer place orders with Korean and Taiwanese factories.
On March 15, the European Union published a list that includes processor manufacturers. European companies will be prohibited from providing Russian entities included in the list with any technological services related to the production of dual-use goods, issuing grants, loans, credits, as well as providing other financial assistance. But soon the sanctions will expand: on April 5, the head of the European Commission, Ursula von der Leyen, said that the EU would ban the export of semiconductors, machinery and transport equipment to Russia.
However, it is impossible to give a clear answer to the question of whether the cooperation between design centers of the Russian Federation and foreign factories will continue. Top managers of Russian companies and officials refuse to clarify this both publicly and unofficially. The only thing they are sure of is that right now there are no negotiations on placing chips in Taiwanese factories. “Perhaps the situation will change in a few months,” hopes a top manager of the electronics manufacturer.
“We are studying the published documents and developing a plan for further action. So far, we have not received an official notice of termination of the contract from TSMC,” Baikal Electronics told CNews. Not only new, but also already made orders are in question. On February 21, Baikal Electronics told Kommersant that they paid TSMC for about 200,000 processors, 150,000 chips are already ready, but they have to be packaged, another 50,000 chips should be in production.
The most obvious step for design centers now is to find an alternative factory abroad that is ready to produce Russian processors and redesign them for a new manufacturer. “But the process may take two or three years, during which time it is important not to lose specialists. The logical way out would be to start developing processors based on 130-90 nm topologies, their production can theoretically be arranged at Mikron. These can be computers for medical equipment or the Internet of things, ”a Kommersant source in the IT market believes.
Meanwhile, Mikron, like most players, has been experiencing difficulties with the supply of materials since the start of the pandemic. And right now, the plant needs to at least set up and scale up the issuance of bank and transport cards, ensure the production of semiconductors for equipment needed by Russian oilfield services companies at its facilities. Back in August 2021, Mikron CEO Gulnara Khasyanova, in an interview with Stimulus magazine, said that market conditions allowed the manufacturer to raise prices, “but all materials and components became more expensive, and there were interruptions in deliveries in a number of positions, for example, with the supply of silicon ". Mikron refused to answer Kommersant's question about how things are now with the supply of materials and production. Probably,
The situation is also complicated by the fact that Russian enterprises have lost the opportunity to buy equipment (photolithography, etching plants, etc.) of European, American and Japanese production (ASML, Applied Materials, Canon) due to sanctions, adds a partner in the Deloitte risk management department in the CIS Sergey Kudryashov.
Without purpose and strategy
Experts interviewed by Kommersant believe that the situation was the result of a long absence of a coherent state policy in the industry, which would provide for the gradual creation of an independent and self-sufficient production system.
“Until 2020, there was no comprehensive state program that answered the questions of how much to produce microelectronics, for what purposes and from what materials,” explains Sergey Kudryashov. An interlocutor of Kommersant in a Russian manufacturer says that the industry has repeatedly turned to the state for financial support for the construction of new and modernization of existing enterprises, as well as the localization of the production of materials and equipment, but state policy was aimed at subsidizing design centers: “Now Russian design centers left with nothing, without access to foreign production and IP blocks (finished parts of processors that Russian developers buy from foreign companies . - Kommersant ), they will develop processors literally on the table.
Pavel Mashevich, Director for Innovative Development of the MIET Center for Collective Use, partly agrees with this. According to him, until 2020, when the Strategy for the Development of the Electronic Industry of the Russian Federation was approved, the state policy for the development of the industry was focused mainly on financing design centers, and not on creating a relatively independent electronics ecosystem, which includes the production of materials, development and production production equipment and support for promising personnel.
“I think that in the late 1990s and early 2000s, the state did not have enough resources to support the industry comprehensively, it was important to understand what we can save. Then it was decided to support design centers that were engaged in the design of microprocessors,” says Mr. Mashevich. According to him, the goal was to preserve the scientific school and train personnel.
Work on a comprehensive strategy for the development of the electronics industry, says Pavel Mashevich, began in 2008 - then Yury Borisov was appointed Deputy Minister of the Ministry of Industry and Trade: "Funding of development work began, they started talking about the need to build their own factories, financial flows went into microelectronics." But factories capable of producing semiconductors for civilian electronics never appeared. Taken 18 years ago, in fact, the only attempt to launch the production of Angstrem-T failed .
The authorities returned to the idea of launching semiconductor factories in Russia only in January 2020 - these plans were outlined in the “Strategy for the Development of the Electronic Industry of the Russian Federation until 2030”, published on the government website. The “Goals” column describes plans to create “silicon factories operating in the “foundry” mode (foundry service - the possibility of mass production of semiconductor components and devices) for the production of digital integrated circuits with topological standards of 28 nm, 14–12 nm, 7–5 nm ". These plans could be concretized in the national project in the field of radio electronics, work on which the authorities began a few weeks before the start of hostilities in Ukraine.
Dominator Island
However, even before the sanctions, the idea looked extremely bold: the state, together with the industry, decided to follow a path that took decades for the global semiconductor market leader, Taiwan. The share of only one TSMC in the market is about 52%, while the closest competitor, the South Korean Samsung, has only 17.1%. The share of the entire Taiwan in the world production of semiconductors is 63%.
These results were largely due to years of government efforts and a number of expatriates of Chinese origin who left communist China for the United States, where they received education and work experience in large companies in order to help Taiwan create a new industry many years later.
Historically, the island of Taiwan, where the authorities had already carried out large-scale reforms to develop industry in the 1960s, was very dependent on the supply of fuel and other resources. The oil crisis hit the industry hard in 1973, and the government decided to diversify the economy into the production of semiconductors, which were then in growing demand thanks to consumer electronics. On the basis of the Industrial Technology Research Institute (ITRI), specially created in 1973, it was decided to launch the production of semiconductors in the country using RCA technologies.
It took almost four years to build the first enterprise. As part of the first stage of the state program, a total of $10 million was spent on starting production from the government of the country and RCA. The first plant began operating in 1977 under the auspices of ITRI. Three years later, the government created the United Microelectronics Corporation (UMC), with an initial investment of $12.5 million. In the early 1980s, the second phase of the program was launched with an investment of about $22 million.
In 1987, another company, Taiwan Semiconductor Manufacturing Company (TSMC), was founded with the help of the state. The Dutch electronics manufacturer Philips Electronics NV entered the capital with a 28% share, became the second shareholder after the government and provided technologies and equipment for the production of 1.5 micron semiconductor nodes - at that time it was about two generations older than the top market offerings .
In the late 1980s, against the background of the rapid growth of South Korean electronics manufacturers Samsung, Hyundai and Goldstar (now LG), the government of Taiwan launched the third stage of the semiconductor industry development program with an investment of $72 million. The turnover and share of the Taiwanese semiconductor industry grew. In 1995, total sales were estimated at only $3.3 billion, which was only 2.5% of the world's total. A year later, they reached almost $5 billion (3% of the world volume), by 2000 they had grown to $17 billion (6%). Thus, it took Taiwan about 30 years to create semiconductor production almost from scratch and take a solid position in the world market.
Lagging behind and catching up
With a delay of about 40 years, mainland China decided to follow the path of Taiwan. The Made in China 2025 import substitution program, adopted back in 2015, included initiatives to urgently create new capacities for the production of semiconductors in China. The catalyst, as in the case of the Russian Federation, was the US sanctions imposed in 2017-2019. Chinese smartphone makers — mainly Huawei and ZTE — have found themselves cut off from their usual semiconductor supply chains. According to the plan, the share of components made in China in Chinese goods should reach 70% by 2025. The total amount of public investment in the Made in China 2025 program has already reached $1.4 trillion.
Forcing the program led to the fact that the Chinese authorities began to actively attract third-party specialists. According to Western and Taiwanese media, more than 3,000 Taiwanese engineers and developers have recently left for China - about a ninth of their total number in Taiwan itself.
However, Russia, officials and market participants interviewed by Kommersant unanimously admit, will not be able to repeat the experience of China in a short time. To do this, it will be necessary to rework all plans for the development of the industry. “The current regulatory framework just needs to be thrown into the trash and a new one should be written,” emphasizes the interlocutor of Kommersant in the government. According to Kommersant's sources, 22 working groups are currently working on a preliminary concept for a new national project to develop the industry. Its implementation is estimated at 0.6-1 trillion rubles.
Moreover, experts believe that, regardless of the amount of government influence, it will not be easy to achieve the task of developing the Russian microelectronic industry. “For objective reasons, it is impossible to complete the task of complex development of the industry in a short time, from materials and equipment to factories and final products,” says Valery Dshkhunyan, ex-director of Ruselectronics, candidate of technical sciences. It is necessary to establish cooperation with those countries and companies that in the near future will be able to supply materials for production, he notes. “If we talk about machine tool building, then here we need to follow the path of China and partially engage in the reproduction of foreign technological ideas using the post-Soviet scientific school,” the expert adds. We can't repeat the mistakes we made when we developed products just to get money. Kommersant's interlocutor insists on the electronics market: “It is necessary to form a state request for the microelectronic industry and act strictly in accordance with it, foreseeing in advance which products are needed and which are not. It is also necessary to move away from the policy of supporting design centers and direct money to the creation of production facilities. Design centers will grow around them on their own.” In his opinion, the technological and economic isolation of the country can contribute to the process if it leads to a serious decrease in prices for metals, oil and gas: a microelectronic factory is an energy-intensive production. This advantage is theoretically capable of attracting potential partners, such as Chinese ones.
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