Elementa President Ilya Ivantsov on dreams and realities of Russian microelectronics
Having adapted to large-scale sanctions in two years, Russian microelectronics manufacturers began to build equally ambitious development and expansion plans. Ilya Ivantsov, President of Element Group of Companies, told Kommersant what market participants can expect in conditions of severe restrictions, what they expect from the state and whether the industry has prospects in the event of the end of hostilities.
— How have the microelectronics development and production industries in Russia changed over the past two years?
— Recently, just two weeks ago, statistics on the global and regional microelectronics markets were released. By the end of 2023, the entire global industry and individual regions showed either a decrease or zero growth. In Russia, the situation is reversed. Yes, right now we don't have detailed open statistics, but if you look at the available data — and this is, for example, the volume of production in Russia of computers, electronic and optical components — they are growing by 30% per year. A similar trend is typical for the entire industry. The comparison of these two facts suggests that Russian microelectronics has become one of the fastest growing in the world.
— But only at the expense of a very low base.
— That's another question. Everyone started to grow from something at some point. Personally, I think we are at the beginning of the road. It is difficult to guess, but I am convinced that growth will continue in the coming years. There is a necessary base for this. For example, enterprises, including those operating in our circuit, finished last year with record revenue figures for 15-20 years. We see that the industry is on the rise.
— At the annual meeting of the Association of Russian Electronics Developers and Manufacturers in February, semiconductor manufacturers also talked about a significant increase in output. But, judging by their speeches, the dynamics are provided by the state defense order. Sooner or later, military operations will end, orders will decrease. Will manufacturers be able to continue growing?
— They can. Because all the support measures previously taken by the state have led to the fact that hundreds of products are being developed right now. And I'm talking about components for the civilian market.
A simple example: there is a fairly capacious market for intelligent metering devices, about 4 million devices per year. The entire current regulatory framework assumes that they must be domestic, that is, filled with a Russian component base, starting with microcontrollers and ending with interface chips. Here's a civilian market for you.
Major industry programs on civil aviation, unmanned aerial vehicles, and rail transport are being launched. They will be able to create a pulling demand for Russian components.
— The "fatherland" of electronics, including meters, is determined by the very flexible 719th resolution on the point system. Is it possible to be sure that the same counters on Chinese components will not be recognized as domestic?
— I look at this situation as a two-way road. In order for the state to unambiguously guarantee the demand for domestic components and not compromise, the industry must guarantee the supply of a certain range of products in sufficient volume.
In other words, if we can guarantee the supply of millions of microcontrollers necessary for the production of domestic meters, I am sure the state will consistently apply a policy in which only domestic solutions with a Russian component base on board will be able to enter the market.
— When will the moment come when manufacturers will not need protectionism to successfully work with the civilian market?
— There is still a certain way to go for this. The market will develop and evolve due to support. It is important that this development takes place as quickly as possible.
International expansion is needed. I will not list promising markets, but there are many more than it might seem at first glance.
Yes, the work is not easy, it will require serious efforts. But if we master the serial production of technologically advanced products, we can take our place.
— Over the past year and a half, you can see the distinct interest of non-core companies in microelectronics. One of the largest banks, for example, has assembled its design center and is designing high-performance chips based on the RISC-V architecture, and a number of integrators are directly talking about interest in investments. Why such interest?
— One of the reasons is that large companies, including those mentioned, began to understand that the development of microelectronics is a long—term story that needs to be dealt with. Without guarantees of providing a component base, it will be impossible to be sure of the stable development of these large companies. We look at such expressions of interest as a positive signal. Today, the market opportunities in the segment are so wide that there is enough space for everyone.
— Some microelectronics manufacturers say that the mechanisms of state support for the segment are still incomplete, the industry lacks large and irrevocable money. How do you assess the situation?
— We believe that the existing set of measures is sufficient for advanced development. Design centers can receive funds under existing subsidy programs that close the entire value chain in products.
With regard to production, both we and the government understand that the time has come for capital-intensive projects with long payback periods. A cluster investment platform has been developed and is being implemented to support them. It involves the allocation of long-term concessional financing, including to manufacturers of microelectronics. In general, the industry needs long, 15-20-year loans at a minimum interest rate.
— Is this long and cheap money already in government programs?
— We expect that the state programs will be filled with financing.
— The second factor in the development of the industry, in addition to cheap money, is guaranteed demand. How can it be secured?
— There are several large state programs involving the creation of different types of electronics. Their goals are formulated in the horizon up to 2030-2035. It is necessary that the required number of devices should be clearly defined, which should be produced annually. Each such device can be decomposed down to microchips and transistors. End-to-end "provyazka" will create a guaranteed long-term demand for products.
Next, there may be several approaches. For those products that the industry can already produce, there are long—term contracts for three to five years. For new developments, such a tool as the "contract of the future thing" can be used. The mechanism is already provided for in the Concept of Technological Development for the period up to 2030.
— In fact, this means contacting a potential customer with the words "give us money for something that doesn't exist yet, and take a chance with us."
— But we are talking about a model for creating long-term demand. This approach is good because on its basis, the customer and the manufacturer have mutual obligations. The customer understands that if a product of a certain quality and at a certain price is delivered, it will have to be bought in a certain volume. The industry has an understanding of what the product should be.
— Which customers will be willing to share the risks? Will it be necessary to apply administrative mechanisms to them?
— You asked what has changed since 2022.
The partners have a sincere interest in working with us. Now all companies are convinced that there will be no stability in business if the situation with microelectronics does not stabilize.
And there was also a sense of industry elbow: everyone understands that challenges can only be overcome together. If we take both factors and add to them some "tuning" of the regulatory framework, then we will be able to solve the problem of ensuring long-term demand for Russian components.
— Russian microelectronics is decades behind global leaders, and the gap is growing. What technologies should the industry develop in order to run not after competitors, but against them?
— There are several areas that we consider promising. First of all, these are photonics and optoelectronics. On the one hand, we still have good technological groundwork here. On the other hand, advanced topological standards are not needed for the production of products: our enterprises will have enough current technological level to produce a waveguide for a photonic integrated circuit. Yes, photonic integrated circuits are a set of components, the integration process is quite complicated. But technologically, this area is accessible.
The second direction is 2.5D and 3D packaging, integration of several chips on one substrate. It is no coincidence that Chinese and American companies are interested in this area. I believe that our developments in this area will be enough to start mass production of products in the near future.
— In October 2023, at the Microelectronics forum, you spoke about the need to create a national fund for the development of microelectronics, where large Russian companies and foreign investors could invest. Has the idea developed in any way?
— We continue to work on this topic, but until a certain point the project will remain in radio silence mode. I will only say that the work is underway.
— Such projects have been paying off for decades. Who will fill the fund in the unstable political and economic situation in Russia?
— In our opinion, companies interested in a number of microelectronics projects to take place, since the sustainability of their business on the horizon of 10-15 years depends on it. There are companies that are ready to play for a long time and show interest in investing in the industry, and their number is growing. The fund will allow businesses to solve problems that are currently unaffordable alone. And the further the industry evolves, the more capital-intensive these tasks will become.
— Will administrative influence be needed to encourage companies to invest?
— I think not. This should be a voluntary decision, not a reconciliation.
— There may not be enough Russian money to fill the fund. How to persuade partners from friendly countries?
— We really believe that the foundation should be an international project. Sooner or later, foreign investors will enter it.
Almost no country has enough resources for the independent development of microelectronics.
Therefore, a project involving international cooperation is needed. I am sure that the Russian Federation will take a leading position in it.
- why?
— Because we have a base from which to continue development. That's how it happened historically.
— What do you mean by base?
— I'm talking about Russian microelectronics. We have three things: design, chip manufacturing technology, and an understanding of how manufacturing itself is created.
— For the construction of the "clean room" of the Angstrom-T plant, it was necessary to involve German contractors — M+W Germany GmbH. Have they learned to carry out such work in the Russian Federation without foreign specialists?
— From the point of view of attracting contractors, we do not exclude international cooperation. At the same time, we see that we are able to mobilize sufficient resources not only for the construction of enterprises, but also for their design. And this is also a non-trivial task.
— In the spring of 2023, Element established the Nanotronics company to develop and produce equipment for the production of microelectronics. Is the project developing?
— It's too early to talk about the details. From a strategic point of view, we must ensure that both our existing and future production facilities are sustainable. This is impossible without equipment. Here there is a simple choice: either to find a reliable partner, or to implement the project on your own, developing your own competencies. Now, at the moment, there are no partners. Therefore, we decided to go the second way.
At the first stage, the company will address internal tasks: the development and production of installations to expand the existing capacities of the enterprises included in the "Element". In the future, we hope to build a successful business by exporting our installations abroad.
— What kind of installations are we talking about?
— No comment.
— How much money will be needed for the project?
— I can't say that yet. The project is just starting, and we are at the very beginning of the journey.
— In January, the Tatarstan authorities announced that Element plans to develop a microelectronic cluster in Innopolis. It was about the topology of 55 nm. What kind of project is this?
— Now the creation of a microelectronic cluster in the region is really being comprehended. I cannot say yet what it will be filled with.
— In September 2022, the authorities of Yakutia announced the implementation of an "Element" project for the production of supercapacitors. What stage is he at?
— There is a project, it is being implemented on the basis of the Northeastern Federal University. Now there is a laboratory that is engaged in the development of a graphene-based material. It is needed for the production of supercapacitors. As soon as certain parameters are reached — we believe that this will happen this year — the creation of production will begin. First, a medium-sized series, and in three years we will enter a major series.
— In 2023, the court granted VEB's claim.Russia to Angstrom for €1.3 billion. How will the plant repay the debt?
— We have a minority stake, we are not engaged in operational management, so I cannot tell you the details. I can only note that the whole situation that has developed due to debt is holding back the development of the enterprise. We hope that it will be resolved.
— How will the "Element" develop the "Micron"?
— In a number of directions. The first is the consistent expansion of production capacities for the production of microelectronics on two—hundred-millimeter plates. Given that the company is now loaded for years ahead, this is a necessary step.
The second is the development of technological options to expand the range of components.
The third is the use of Micron as a testing ground for equipment and materials: the factory should become a center for the introduction of new technologies. And finally, the experience of Micron, whose team has the skills to launch mass production of microelectronics, should be used to create new industries in the country. The implementation of these projects is impossible without the involvement of the unique competencies of our Research Institute of Molecular Electronics.
— Vedomosti, citing sources, wrote that Element could conduct an IPO to attract 10-15 billion rubles for the investment program. Is the company really considering going public?
— The company is actively developing, we have many ambitious projects. This includes the expansion of production, the development of a modern electronic component base and technologies in the field of microelectronics. Therefore, we are considering all possible financing options, and an IPO is one of them. Technically, we will be ready in the first half of 2024.