Electronics assembled abroad – Kommersant

The number of Russian companies producing telecom equipment and electronics is declining: over the past year, approximately 10% of vendors have moved assembly to China, Vietnam and Turkey, and many small manufacturers have merged with large ones. The main reasons, say market participants, were sanctions pressure and additional checks of components supplied to the Russian Federation.

Executive Director of the Association of Developers and Manufacturers of Electronics Ivan Pokrovsky told Kommersant that over the past 12 months, about 10% of companies that develop and manufacture telecom equipment, computers, industrial and other electronics in contract manufacturing in Russia or had their own assembly lines, moved production to other countries. According to him, earlier equipment for 3,000 organizations was produced in the territory of the Russian Federation. The migration of Russian developers of electronic equipment to foreign contract manufacturing has intensified, the president of Zelax (a domestic manufacturer of telecom equipment) Sergey Sukhman confirms the trend. Basically, companies are moving production to China, Vietnam, India and Turkey, says Mr. Pokrovsky.

There are several factors in favor of moving production abroad, experts say. “This is both the workload of Russian production facilities and sanctions restrictions on the supply of foreign components to the Russian Federation,” says Mr. Sukhman. Mr. Pokrovsky also recalls the checks of imported components in the Russian Federation: “Permission to import microcircuits containing cryptography requires a lengthy check at the FSB licensing center, and permission to import finished products under your own brand is easy to obtain through the registration of notifications.”

In addition, it has become very expensive to produce in Russia: for example, during the period of various sanctions and restrictions from the West, the cost of foreign equipment for the production of printed circuit boards in the Russian Federation increased by 40% (see Kommersant on February 14). Problems with the availability of capital amid rising production costs have forced some small companies to join large vendors, says Alexander Sivolobov, deputy head of the Skoltech-based NTI Competence Center for Wireless Communication Technologies. “In Russia now, the main goal of the industry is survival, and consolidation is becoming the best strategy,” he says.

More and more Russian companies will transfer their production abroad, because “it is easier to supply finished products to the Russian Federation, even from a foreign legal entity, than foreign components,” sums up Sergey Ovchinnikov, director of Norsi-Trans.

Whether products manufactured at foreign sites under contracts with Russian companies will be included in the register of domestic equipment of the Ministry of Industry and Trade is still not completely clear, Mr. Sukhman notes. “On the example of radio electronics, we see that companies with products from foreign components easily enter the register of the Ministry of Industry and Trade, while really Russian companies face bureaucratic difficulties,” says Maxim Koposov, director of Promobit (server and storage manufacturer Bitblaze).

The Ministry of Industry and Trade told Kommersant: “With the introduction of sanctions on the supply of electronic products to our country, Russian manufacturers have deepened the localization of telecom and network equipment and increased the volume of product supplies.” The ministry noted that in 2023, compared to 2022, the number of telecom equipment included in the unified register of Russian radio-electronic products has significantly increased.

Timofey Kornev