Technological Darwinism

Trying to deduce general trends by looking at the most important business events of 2022 is not easy. Summing up the paragraph about the lack of chips, you understand that there are no modern machine tools in the country, and this is even more important. While looking for statistics on the production of high-tech equipment, you come across the news that AvtoVAZ still produces cars without ABS, and so on ad infinitum. But behind this heap of news, there is still a trend: Russian business is much better at surviving in the face of hostilities than the state.

The past year, with the weekly updating of sanctions lists, the withdrawal of foreign companies, and the financial and technological blockade, clearly showed that the state policy of import substitution (with the exception of a number of projects in the banking sector, for example, the NSPK), which back in 2014 was supposed to be a response to the conflict between the Russian Federation and the West and , according to Head of Roskosmos Yuri Borisov, cost the budget over these eight years 3.5 trillion rubles., Works, to put it mildly, not as successfully as it should.

“The import substitution program has largely failed,” Kirill Kabanov, chairman of the National Anti-Corruption Committee, wrote on his Telegram channel on May 19. “In addition to the bravura reports of the sectoral departments, there is nothing. Our people see this both in consumer goods and in many other areas,” Senator Andrei Klishas immediately added fuel to the fire in his channel. According to a recent research HSE “Strategic import substitution: investment opportunities and priorities in the context of the global crisis”, the results of the implementation of the import substitution policy are disappointing. The share of imported products in the machine tool segment reaches 90%, in electronics – 85%, in software – 68%, in pharmaceuticals – 64.9%.

It’s hard to disagree: no matter what segment you take, you find holes everywhere. For example, all these years the state has been consistently increasing the salvage tax on cars, compensating it only for Russian car factories. Since 2020, not even all Russian manufacturers have begun to receive it, but only those who already have a high localization: this approach was intended to stimulate foreign concerns to invest in import substitution.

But the result was disappointing: after the sanctions, all factories of foreign concerns in Russia stopped, and AvtoVAZ forced produce cars without ABS.

The situation in microelectronics looks even more dramatic. Since 2014, the country, despite multi-page government strategies and global concepts, has not mastered the production of advanced materials and the production (or at least reengineering) of high-tech equipment. “What we are putting into operation (we are talking about foreign technological lines.— “b”), as a rule, two or three generations behind the leading foreign designs. And domestic equipment has not been produced at all for thirty years, ”— said in April, RIA Novosti, Professor of the Department of Semiconductor Electronics and Semiconductor Physics of the National University of Science and Technology MISiS, Doctor of Technical Sciences Petr Lagov.

Not all is well with the software, even if it exists. So, at a meeting of the working group on the bill on compulsory licensing in the State Duma on December 16, the head of the Electronic Engineering Association, Alexei Alekseev, emphasized that there are Russian analogues with the American Autodesk Inventor, but you have to transfer the archives literally manually. “My entire design department should be locked up for this job. It is difficult for me to estimate whether it will take six months, a year, a year and a half to transfer and what the percentage of errors will be.”

The problems that opened up and appeared after the start of the Russian-Ukrainian conflict seemed to be the same meteorite that would destroy all the dinosaurs from the Russian economy. But the so-called “impact hypothesis” is no longer considered mainstream, even outside of academia. Dinosaurs did not die out overnight, nor did it happen to Russian industry. But just as dinosaurs gave way to much smaller and brighter mammalian ancestors, so the Russian authorities finally backed down, shifting the risks of survival onto the business itself.

Back in the summer, industrial competence centers (ICC) and development competence centers (CCR) began to grow like mushrooms, developers and anchor customers themselves decided which software should be replaced in the first place, how much money and time it would take. Projects were approved by industry experts and representatives of investment funds. Regulators, for the most part, acted as observers. So if in five years the announced projects fail, then the anchor customers and developers will face problems. Some will have to adapt to unusual Russian solutions and remake their infrastructure because of them, others will have to try to sell these solutions not only to the forced, but also to all other consumers.

For example, the recently updated “road maps” for the development of communication networks suggest that companies will take not only state money for projects, but also invest in them from 50% of their own funds. If in two years Cisco, Ericsson, Huawei and Nokia return to Russia, in the quality of whose equipment telecom operators are much more confident than in Russian base stations that do not yet exist, the risks fall on domestic developers. In October, the Ministry of Transport prepared a draft resolution, which offered to allow repair of foreign civil aircraft using non-original spare parts, since the launch of its own production of spare parts and certification will take a significant amount of time. In fact, the government offered aviators to be solely responsible for the installation and quality of components.

This shift in policy looks like an admission that the clumsy Russian state, with its massive road maps whose key indicators can be constantly adjusted to reality, regulations that pass coordination over several years turned out to be much less adapted to the global crisis than the small but flexible and nimble Russian business against its background. As soon as Ericsson and Nokia curtailed their development centers, their Russian competitors immediately began to hire key specialists from these structures in their companies, while preventing the outflow of personnel abroad. When SAP and Oracle stopped technical support of clients in the Russian Federation, their niche occupied Russian integrators, T1 and Sitronics.

The refusal of foreign vendors to officially sell computer equipment to Russian companies immediately allowed Russian electronics distributors to increase revenue, which, they say, quickly learned to import Turkish servers and Kazakh data storage systems in a roundabout way. As soon as IKEA stopped the work of its stores, Yandex.Market, seeing the anomalous interest of citizens in Scandinavian stools, immediately bought out the remaining 20 million goods for further sale, and IKEA’s Russian competitors steel expand own assortment and launch new formats. Even AvtoVAZ was able to adjust supply of airbags for Lada Granta.

By shifting all the risks to business, the state may have made the best decision available in the current crisis. The question is whether it will resist the temptation to intervene when the situation begins to change for the worse (or even better – anything can happen) side. Or, for example, when one of the especially strong players wants to use the administrative resource to get special advantages. Next year, as reserves, resources and simply forces are exhausted, we will see what the adaptability of Russian business is really worth and how much the state is able to support or oppress it.

Nikita Korolev, Yuri Litvinenko