Russian electronics market: trends and opportunities

Today, new market players can entrench in several segments at once. This is facilitated by state support, a strong engineering school, achievements of Russian scientists in the field of robotics and other factors

The Russian electronics market has constantly undergone stress tests since 2020. First, due to the coronavirus pandemic, the volume of product supplies from Southeast Asian countries decreased significantly. Then domestic companies had to radically reconsider their pool of partners due to sanctions pressure.

Current hotspots

Suspension of activities of suppliers of electronic systems and components. Since February-March 2022, deliveries and operational activities in Russia have been suspended by a number of the largest companies from Europe, the USA and Asia, engaged in the development of various electronic systems and components. In addition to difficulties with purchasing new products, Russian customers encountered difficulties in updating software, routine maintenance and repairs. The main reason for this step is the risk of administrative pressure from the states where the supplier company is registered, including due to the possible dual use of components.

Semiconductor shortage. Sales in the global semiconductor market last year amounted to almost $596 billion. However, according to Gartner experts, the growth rate at the end of 2022 was only about 7%, which is almost half as much as previously predicted. The main reason for this trend is a further increase in the cost of semiconductor production due to a combination of several factors: the increase in the cost of construction of enterprises (turnkey construction of one workshop - about $10 billion) and equipment (the price of a lithograph - about $150 million), an increase in the complexity of production, as well as consequences of the decline in semiconductor production due to lockdowns in 2020-2021. It is worth noting that almost 80% of all semiconductors are produced by Taiwanese and American companies.

At the same time, due to sanctions restrictions, supplies of chips from Taiwan and the United States to the Russian market are now impossible. Now a number of Russian consumers are faced with a choice - either try to purchase the necessary semiconductors through third countries (which carries significant risks for their counterparties), or look for alternatives made in China.

Difficulties with parallel import. Last year, after the introduction of sanctions against Russia, parallel imports were positioned as a panacea for them. But when implementing such a mechanism in practice, Russian companies encountered several problems. The most obvious of them is the rise in price of the final product due to difficulties with logistics, as well as the need to pay for the risks of counterparties. The second, no less serious problem is that a number of suppliers are interested not so much in cash as in the possibility of receiving the necessary components in return for those supplied. So far, the range of what Russian suppliers can offer is not so large.

Growth points

Government support. Government support. Three years ago, in 2020, a key document was approved that determined the development of the domestic electronics market - the Strategy for the Development of the Electronics Industry of the Russian Federation for the period until 2030. Two years later, in addition to it, a national project was approved concerning the development of electronics and providing for the allocation of more than 3 trillion rubles for these purposes. According to these documents, by 2030 it is planned to complete the formation of a product portfolio of Russian technologies. It is worth noting that at the first stages it is planned to launch measures to reengineer foreign technologies and launch production in Russia. New market players, including those from China, India, Malaysia and Turkey, can take advantage of this. In addition, the construction of new Russian enterprises will require the supply of equipment, including from the above countries, which also gives manufacturers a chance to occupy a niche in the Russian market.

Digitalization of Russian industry. One of the key national goals of the Russian Federation (Decree of the President of the Russian Federation dated July 21, 2020 No. 474) is the digitalization of key sectors of the economy, including industry. The main trends in the digitalization of industry in the world and in Russia include the use of Big Data technologies and machine analysis, the introduction of cloud platforms, cybersecurity systems, as well as the introduction of information modeling. At the same time, digitalization is relevant for all industries – from the food industry to heavy or space engineering. Therefore, the demand for a wide range of different software products, components and ready-made systems will only grow, which opens up a wide range of opportunities for new players: from simply entering the Russian market to creating joint ventures.

Supply or joint development of semiconductors. In conditions where the supply of Taiwanese and American chips is impossible, the issue of finding an alternative becomes especially acute. In this case, two ways are possible. The first involves the supply of semiconductors produced in countries that have not joined the sanctions (for example, China and Malaysia). The second provides for long-term cooperation between Russian and foreign market participants aimed at creating domestic production facilities. Moreover, the state is ready to provide support for its part: for example, in March 2023, the Russian Ministry of Industry and Trade allocated more than 2 billion rubles for the development of Russian materials for chips. The expertise of companies from China and Malaysia could speed up such projects.

Robotics. Delloite provides data that for almost two-thirds of the companies studied, robotization of business and production processes is an important factor in increasing operational efficiency. This applies to various sectors of the economy: from industry, where robotization can significantly speed up production operations, to the service sector. It is worth noting that Russian companies have made significant progress in the latter direction. Thus, an unmanned taxi from Yandex operates not only in Innopolis (Republic of Tatarstan), but also in the Moscow Yasenevo district, and delivery robots are widely used in the capital. The warehouses of the largest marketplaces are already using robotic loaders. The latest achievements of Russian scientists and engineers in the field of robotics should not be discounted. Therefore, the Russian market may be of interest both for manufacturers of various components for robots and for engineering companies.

The value of participating in ExpoElectronica

At the moment, an extremely interesting combination of several conditions has developed on the Russian electronics market. Firstly, a number of large suppliers from Europe, Asia and the USA have left it, which gives new players (including from China, Malaysia, Turkey, India) the opportunity to gain a foothold in several segments at once. Secondly, the state and Russian companies are interested in attracting advanced technological competencies and solutions. Thirdly, a strong engineering school has been formed in Russia, whose representatives are ready to take part in the implementation of large-scale projects.

The platform for uniting the interests of all the above parties is the ExpoElectronica exhibition. In April 2023, it was visited by 21,063 specialists from 74 regions of Russia and 23 countries. Visitors to the exhibition represented 11,492 companies from various sectors of the economy. Interestingly, 93% of visitors influence purchasing decisions, and 59% are owners, top managers and industry leaders of companies. Thanks to this, exhibitrs can directly negotiate with decision makers on its sidelines and agree on effective long-term cooperation.