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. Last Updated: 07/27/2016

Electronics Industry Potential Is Wasted

Though electronics were the foundation of this country's once impressive military and space capabilities, today the Russian computer business barely uses the domestic electronics industry. In few areas can there have been such a sad waste of money and brains. The majority of the computers built in Russia are sub-assembled. Modules bought from abroad are slotted together or assembled with a screwdriver. A few companies buy a more complex mix of components and customize circuit boards. Yet all that any of these companies has ever managed to use from the Russian electronics industry in any volume are the most basic of parts, such as the power supply unit or cables. Computer companies say that when they get into reasonably detailed discussions, the most serious problem has not usually been quality but an inability on the part of Russian factories to provide them with consistent supplies. They are offered hundreds of thousands of units when they do not require them but are then told to wait when they have an important order. The other major problem has been the speed with which the world PC market moves. Typically, PC products have a life cycle of around six months. After this time they have been superceded by something faster or cheaper. PC assembly operations carefully monitor the prices of particular computer configurations to determine how much to buy and when to sell. Russian electronics plants, however, can spend six months fulfilling a single order. The Russian electronics sector was massive and electronics plants still have potentially huge capacities. The industry carried a lot of prestige and undeniably made solid, sometimes fairly sophisticated products. Millions of U.S. dollars have been spent on plant and equipment here, much of it imported. Unfortunately the industry was betrayed by this country's leaders around 20 years ago. Rather than continuing to invest in wholly Russian research and development, the industry was instructed to reverse-engineer the dominant Western products. Thus, by the end of the 1980s, Russia emerged with very little of its own technology to share with the world's top electronics companies. Instead it had a multimillion-dollar industry geared up to manufacture poor copies of Western microprocessors or memory chips which were already dated by the time they first left the factory. Anything original was rarely more than yet another underfunded research project. Today none of this mass production is exportable, since it infringes the international patents of whichever manufacturer the product was copied from. Because the designs are dated, virtually all of the microprocessors and memory chips being produced here are useless to computer assemblers. There could, however, be a market for simpler components such as transistors and voltage regulators. Here the stumbling block is more the inability of managers in electronics enterprises to adjust to new realities. Factories still do not know how much to charge for their products. They rarely know their production costs and so find it difficult to tell a buyer what he will pay. Despite countless meetings with potential customers, managers still do not seem to comprehend fully the concept of product quality. If a component needs to be slotted onto a circuit board, the dimensions have to be exact and consistently exact. If the pins are too long or a square part is not in fact square, then it might not fit, and a part that might not fit is of no use. Yet even today, as they stare bankruptcy in the face, factory managers still adopt the attitude that if a part was good enough for a MIG 23 it should be good enough for a personal computer. There is one advantage in being geared up to produce nearly obsolete components. Periodically you have the chance to corner the world market in a product that no one else makes anymore. Mitch Sandler, president of U.S.-based Silicon Group, says these kinds of opportunities are likely to crop up here over at least the next two years. Right now, however, he is rather pessimistic: "I had a customer willing to place a 10-million-unit order and" the supplier "made me wait months for samples. When I get the samples what do I find? They are rusty." Robert Farish is the editor of Computer Business Russia: 265-4214