Last year, the American Institute of Electrical and Electronics Engineers (IEEE) announced that the world is entering a "golden age of semiconductors." The previous three years were marked as the "semiconductor crisis," with a global shortage of chips. Against this backdrop, investors began pouring money into the sector: in 2022, investments exceeded $160 billion, significantly outpacing investments in global automotive manufacturing.
As a result, the industry has entered a new phase of growth. This growth is fueled by the development of the "Internet of Things" (IoT) – smart homes, smart offices, and building management systems (BMS); digitalization and automation in construction; restructuring in global logistics and AI-managed warehouses… all of this requires a vast array of chips, microcircuits, and sensors. The demand for electronics from the telecom sector is also on the rise.
At the same time, supply chains are changing. Historically, electronics have developed as an industry with a very high level of global division of labor. No single country has ever possessed a complete set of technologies and manufacturing capabilities concentrated within its borders. Consequently, the development, production of components, and assembly of the final product represent three separate sub-industries.
Take the modern iPhone, for example. In recent years, processors have been designed in the USA, flash memory in Japan, displays in South Korea, cameras in Japan, the 5G module in the USA, the eSIM module and gyroscope in Switzerland, the WiFi module in China, and the DisplayPort interface in the Netherlands. And this is just the design phase. Production involves companies from Taiwan, South Korea, Japan, Thailand, Vietnam, the Philippines, Malaysia, and Indonesia. Assembly takes place in China, India, and soon Vietnam will join as well.
A similar situation exists with other manufacturers. Behind every modern brand filled with electronics are dozens of companies from various countries around the world.
Currently, these chains are changing. The trade war between the USA and China, which began under Donald Trump, the war in Ukraine, sanctions against Russia, and escalating conflicts in the Middle East and Southeast Asia (China-Taiwan) are affecting the interactions between companies.
Perhaps Kazakhstan has a window of opportunity in the electronics market? This thought may sound strange; we do not associate ourselves with high technologies. However, many other countries have successfully established production of components for global industry giants.
Small but mighty
Have you heard about Kazakhstani electronics? It exists. At the end of last year, there were about 80 enterprises producing electronics in Kazakhstan. Approximately 2,000 people were employed at these enterprises.
This is quite small. For comparison, over a million Kazakhs work in the oil industry. But there is a foundation to build upon. And there are strong players with a long history. For example, the company " SOLO LLP" was founded back in 1991. It produces radiation, sanitary, and environmental monitoring systems for the nuclear sector, mining companies, and hazardous processing industries. The company has maintained a strong presence across the entire post-Soviet space since the 1990s. The electronic component base is mostly foreign – but, as we have seen, this is quite normal for the industry. Many produce components; one assembles.
There are also other examples. The company " Gamma Technologies" is a Kazakh leader in the development and production of cryptographic information protection tools. Since 2013, the certification center "Gamma Technologies Public Key Infrastructure" has been operating with state accreditation. The company's clients include the National Bank, the Prosecutor General's Office, the National Guard, the Supreme Court, the Ministry of Finance of Kazakhstan, as well as the largest commercial banks in Kazakhstan.
There are also companies targeting the mass market. In 2012, Eltex opened a production line in the Alatau SEZ in Almaty. The career of " Eltex Alatau" as an independent unit took off immediately. Today, among its clients are state companies in Kazakhstan, the largest mobile and internet operators in Kazakhstan, Uzbekistan, and Kyrgyzstan, as well as major manufacturing enterprises across Central Asia.
By the way, according to the results of 2023, the shipment volume in the "Manufacture of computers, electronic and optical equipment" sector doubled compared to 2022 (Bureau of National Statistics of the Ministry of National Economy of Kazakhstan). This is related to mass purchases from the quasi-public sector, which led to an increase in the assembly volumes of this product. The factory named after S.M. Kirov has primarily ramped up production, assembling equipment under the ZIKComputers brand. The developments and components are foreign – our product. Just like with the likes of Apple.
Within the Eurasian market, our electronics industry, of course, pales in comparison to our neighbors. In Belarus, microelectronics production was established back in Soviet times. In 1962, the Design Bureau of Precision Electronic Engineering was created in Minsk, which laid the foundation for the establishment of the Planar NPO in 1971. It is commonly believed that " Planar " is the only representative of the Soviet electronics industry that successfully survived the 1990s. As a result, today there is a whole cluster of microelectronics enterprises in Minsk ("Planar," "Integral," "Minsk Research Institute of Radio Materials," etc.), where both fundamental development and production of components, as well as assembly of finished products take place.
In Russia, there is no developed domestic production of component bases; however, there are many large players in the development and assembly sectors. For instance, the company Eltex is the largest developer and manufacturer of network equipment in the CIS. Yes, they established production in the Alatau SEZ. As for the parent company, it is a diversified scientific and production structure based in Novosibirsk, with its own educational center; the workforce of Eltex exceeds 1,500 people. Almost as many as the entire Kazakhstani electronics sector.
Another example is the company " Papillon ," which creates comprehensive biometric and forensic systems (facial recognition, gesture recognition, and fingerprint recognition) for security forces and businesses. The company was founded in 1991 in Miass (Chelyabinsk region). Today, equipment and algorithms from "Papillon" are in operation in 43 countries worldwide.
There are also other examples. The Elbrus processor was developed in Russia based on foreign solutions. The processor's capabilities are quite limited; attempts to integrate Elbrus chips into laptops have ended unsuccessfully. However, in specialized computing technology, such as telecom, they find their niche.
And there are quite a few such examples. More than 3,000 companies operate in this field.
Someone's problems – someone's opportunities
Can our electronics industry somehow make a mark alongside these giants? Most likely, yes. Economic sanctions have hit both the export of Russian products and the supply of imported components for production within Russia. Formally, electronics production in Russia is growing, but this growth is largely supported by non-competitive state procurements and attempts to somehow substitute the halted supplies. Components are brought in through "gray" schemes; however, such schemes are logistically complex, expensive, and have limited capacity.
The situation is complicated by the peculiarities of protectionism in the northern neighbor. Under sanctions, they have focused on supporting domestic production. However, as mentioned earlier, electronics, by definition, is global. Any electronic product, regardless of the country of manufacture, will primarily consist of imported components and developments. Misunderstanding this leads to confusion. For instance, last summer, a scandal erupted in Russia over the production of the "Erika" radio stations. "Erika" has been produced for nearly 30 years, is constantly being modernized, and is a well-known brand in the market. However, one independent expert claimed that it is essentially a Chinese radio station, not a Russian product, since it contains Chinese components. But there are currently no quality analogues at low cost produced in Russia. The expert's conclusions led to the detention of the company's CEO, Vasily Musin, essentially for using a Chinese component. The production