Towards the server “Aurora” – Newspaper Kommersant No. 200 (7401) of 10/27/2022

Rostelecom plans to release a wide range of smartphones and tablets, including consumer ones, based on the Russian Aurora OS by 2030, hoping to become the market leader. But other participants doubt that manufacturers and distributors will support the project as long as imported Android and iOS devices are sold in the country. Rostelecom is already proposing to limit the supply of foreign equipment and ensure the distribution of domestic phones to “socially vulnerable groups of the population.” The idea is supported by the Ministry of Industry and Trade, but the Ministry of Digital Development talks about the difficulty of its implementation “under budgetary constraints.”

“Kommersant” got acquainted with the presentation of the “Top-level strategy for the development of the national mobile ecosystem based on the Aurora operating system”. The document says that Rostelecom plans to develop and release three lines of smartphones and tablets for business, the public sector and citizens. The devices will run on Aurora with pre-installed Russian applications. According to Kommersant’s interlocutor, who is familiar with the course of the discussion, the concept was developed in August and has already been presented to the Ministry of Digital Development and the Ministry of Industry and Trade.

The Ministry of Industry and Trade confirmed to Kommersant that they considered the project “in terms of assessing the production capabilities of domestic manufacturers of mobile devices.”

The ministry asked manufacturers about the possibility of producing and supplying smartphones at Aurora in 2022–2030 at the end of September (Kommersant has the letters). The Ministry of Digital Development is also “familiar with the proposals”, but notes the difficulty of their implementation “in the context of existing serious budgetary constraints.” Rostelecom only stated that they consider it important to develop the national mobile ecosystem.

The presentation contains several scenarios for the development of the project. With a “negative” Rostelecom intends to produce 1.5 million devices by 2030 (government orders for phones and tablets by law enforcement agencies will become demand drivers), and with a “maximum” – 65.9 million. But this option will require large-scale state support: a gradual ban on the use Russian software on foreign mobile operating systems, the introduction of quotas for the import of equipment from abroad (including the prohibition of parallel imports), subsidies and other measures to support manufacturers of Russian equipment. The cost of the project is not specified in the presentation, but it is said that funding can be secured through concessions with authorities or distributors (for the public).

To promote technology among ordinary citizens, it is proposed, in particular, to deploy a new federal project “Social Phone”, which implies “the issuance of domestic smartphones to socially vulnerable segments of the population.”

Without this condition, “entering the consumer segment will be impossible,” the document admits. Demand, the developers believe, will be provided both by users of push-button phones and “digital agnostics” (according to the authors of the document, 14.6 million people), and owners of foreign smartphones (95.3 million people).

The potential size of the market for mobile ecosystem devices in Russia is estimated in the document at 138 million gadgets (for what period, the presentation does not specify), of which about 80% will be for citizens, 17% for the corporate sector and about 4% for the public sector.

According to the analytical center of the GS Group holding, for the first half of 2022, the total fleet of Samsung smartphones in the hands of Russian citizens amounted to 48 million units (38% of smartphones in Russia), Apple – 19 million (15%), Xiaomi – 27 million (more than 20 %). Based on these figures, the total number of smartphones in use in the country may be more than 120 million (excluding push-button phones), that is, Rostelecom intends to completely replace the entire fleet of devices. But it is unlikely that it will be possible to do this quickly: in January-June, the total sales of devices in the Russian Federation fell by 26%, to 15 million units.

In the future, the developers promise to scale the ecosystem to the BRICS countries (India, China, South Africa, Brazil), and then enter the markets of Turkey, Algeria, etc.

Rostelecom itself is going to become the sole operator of the ecosystem. Distributors, judging by the concept, will be telecom operators, Russian Post, etc. Among the potential manufacturers are GS Group, Aquarius, Marvel Distribution and others. The Ministry of Industry and Trade says that vendors have confirmed their readiness to release the required number of devices. Aquarius President Vladimir Stepanov calls the Rostelecom project “promising and timely.” It “looks like a priority and aimed at ensuring the safety of Russian users,” agrees F + tech managing partner (part of Marvel Distribution) Alexey Melnikov.

However, unofficial sources of Kommersant, both in the government and in the electronics market, doubt the prospects of the project. One of the officials explains that the Ministry of Industry and Trade insists on “decisive actions” to introduce the ecosystem and limit the import of smartphones, while the Ministry of Digital Development considers such radical steps justified only in the public sector.

On behalf of the president, it was planned to start transferring 1.4 million officials to mobile devices on Aurora back in 2019, spending 160 billion rubles on this. for four years. But the government demanded that Rostelecom confirm the reliability of the OS (see “Kommersant” dated April 16, 2020). In particular, law enforcement agencies had questions about the possibility of transferring encryption keys from cryptographic protection tools abroad (the OS was originally developed on the basis of open source by the Finnish Jolla Oy, founded by former Nokia employees).

So far, the only large-scale project of Rostelecom using Aurora has been the supply of 312,000 tablets for the population census at the end of 2021. After the completion of the project, the Ministry of Digital Transformation was supposed to transfer the devices to other government agencies: the Ministry of Internal Affairs was considered, but the ministry was not satisfied with the configuration of the devices (see “Kommersant” dated February 22). As a result, the Ministry of Sports became interested in tablets (see “Kommersant” of June 9).

A top manager of one of the electronics manufacturers emphasizes that smartphones will be created mainly on Chinese components until Russian processors appear: “It is possible to produce 65 million devices by 2030 only by multiplying the capacity of Russian enterprises, which now do not exceed 1 million devices per year. In addition, he believes that in order for the ecosystem to become a priority in the country, changes in legislation will be required. And finally, the interlocutor of Kommersant emphasizes, “as long as Android and iOS devices remain in Russia, none of the manufacturers and distributors will dare to invest in the project.”

Kommersant’s source in the electronics supply segment notes that Rostelecom’s plans are too ambitious – in order to produce 65 million smartphones by 2030, about 10 million pieces need to be produced annually, which is actually comparable to the volume of supplies of Samsung or Huawei to Russia before the pandemic:

“Achieving such an indicator will not be easy, even with administrative resources.”

At the same time, the restriction of imports, in his opinion, will not help, only strengthening the gray market, especially the direct flow of unofficial supplies from China through Kazakhstan and other countries of Central Asia.

Marvel Distribution argues that the mechanism can be effective if applied adequately: “Quoting is quite a viable and widespread global practice. In our case, the size of the quota should be determined by the degree of OS development. If it will, for example, lag twice behind Harmony from Huawei, then the real share of the OS on the market will not exceed 5-7%. Getting more consumers to use it will only be possible through really tough measures.”

“Hardware should be of comparable quality with foreign models and not very expensive, and the OS should provide advantages, such as access to applications and services that are not available on foreign devices,” adds a Kommersant source on the market. He notes that the removal of Russian applications from the Google and Apple stores plays in favor of the Rostelecom project. But Kommersant’s interlocutor doubts that this practice will become widespread, noting the return of VK applications to the AppStore.

Timofey Kornev, Nikita Korolev, Yulia Silence