EETimes: Russia's Industry Stirs

By Malcolm Penn
EE Times
(12/03/01, 10:33 a.m. EST)

In contrast to the mainstream Western economies, recent
reports from Moscow show the Russian economy expanding
by 6 percent in 2001, with faster growth than at any time
in 30 years. This is an increase over earlier forecasts of
between 5 and 5.5 percent and the official budget target
of 4 percent. Last year's 9.3 percent clip was a
post-Soviet record, fueled by high prices for oil-Russia's
main export-as well as for gas and metals exports.

With consumer spending now back to the levels seen before the August
1998 crisis, the Russian government is currently enjoying its highest level of
receipts since the 1989 collapse of the Soviet Union.

On the manufacturing front, the Russian economy is being stimulated by a
resurgence of industrial growth, with the engineering sector leading the
way. Flush with profits, many Russian manufacturers have embarked on
long-overdue expansion and modernization programs.

More important, it's estimated that foreign direct investment will have
reached $7 billion in 2001, up from $4.7 billion in 2000. In 2001, the psychologically vital $100
million single-investment benchmark will have been topped, making it more likely that Western
investors will be willing to discuss multibillion-dollar projects. The more stable political and
economic environment, coupled with the start of Russia's reforms-including tax cuts, a bill to
combat money laundering and efforts to cut red tape-is proving attractive to investors.

Government investment in the microelectronics industry has so far been modest, with only one
project having received true financial support: the Russian Academy of Science's 0.35-micron
fast-turn ASIC cluster pilot production line at the Scientific and Research Institute for Systems
Analysis (SRISA) in Moscow.

In contrast, private-sector investment has seen a major boost over the past two years,
especially at the Zelenograd-based Mikron organization. Mikron's parent company, powerful
industrial conglomerate Systema Financial Co., recently entered a credit agreement with
German Dresdner Bank. The pact is seen as a breakthrough in private investment targeting
Russia's microelectronics industry.

Mikron plans to use the money to modernize and ramp production at one of the four mothballed
submicron facilities built in the late 1980s. Finally, perhaps, the Russian electronics giant-and
the market potential of 185 million well-educated citizens-is stirring from its slumber.