Column by Nikita Korolev about investment prospects for microelectronics

Having survived the first shake-up of sanctions and a sharp rise in demand, the Russian microelectronics market seems to be entering a new stage. It attracted the interest of portfolio investors.

Ivan Pokrovsky, executive director of the Association of Electronics Developers and Manufacturers, said that “a number of investment funds” who are interested in entering as investors in projects for the development of semiconductor factories turned to them for advice. He added that the funds are also interested in investing in projects to develop microcircuits, create libraries of IP blocks, etc. Mr. Pokrovsky did not disclose the names of the funds.

My other interlocutors, from analysts of management companies to the manufacturers and developers themselves, also say that investors’ attention to companies in the field of microelectronics is now “very high.” Element even claims that Russian microelectronics is at the start of accelerated growth, “which means the best moment has come to invest in it.”

This is certainly a completely new world for the industry. Until 2022, Russian semiconductor manufacturers, mostly enterprises that survived the collapse of the USSR, complained of both underfunding by the state and low interest from private investors. The former preferred to support microelectronics developers rather than manufacturers; for the latter, the segment was not interesting, including due to the fact that there were no problems with the supply of chips to Russia and did not seem to be foreseen.

Now the situation has changed: although the parallel import of foreign components is stable, real technological sovereignty, the movement towards which is declared by the authorities, will gradually require more and more not imported, but Russian components. Therefore, the “cautious interest” of private investors in the segment seems logical.

The actions of investment funds studying the prospects for investing in microelectronics may also be relevant for another, less market-based reason, which is suggested by global experience. The fact is that Asian semiconductor manufacturers, including the now famous SMIC and TSMC, at one time developed not only due to government investments, but also funds from private investors, whom officials were able to “persistently persuade” to invest in then completely new and far from obvious projects.

It is possible that the Russian authorities, who are seriously inclined (what can we hide, they are simply forced) to restart the sector in Russia, will switch to this practice. And the funds, look, everything is already ready.