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| Home > News & events > 2007 feature stories > Sitronics builds Russia’s hi-tech sector | ||||||||||
Sitronics builds Russia’s hi-tech sector |
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One of the great mysteries of the Russian economy is why the country isn’t more prominent in the world of technology. After all, it’s well-known that the USSR had peerless scientists who put the first man into space. Russia today has some of the world’s best mathematicians, physicians and computer programmers. So why isn’t Russian innovation more apparent in the global high-tech sector? The reasons for Russia’s lack of visibility in international high-tech are complex but, for starters, many talented scientists left the country after the collapse of the Soviet Union because the Russian technology sector performed so woefully in the 1990s. They could earn a lot more in warmer and richer countries around the world. The Russian government is now putting a lot of effort and money into turning this situation round, reducing the country’s dependency on hydrocarbons for economic growth, and closing Russia’s technology gap with the west. These goals are also at the heart of the EBRD’s new Russia investment strategy and the reason why the Bank recently bought a 3.67 per cent stake in Russian IT leader Sitronics for $80 million. Jewel in the crown Sitronics is the jewel of Russia’s technology industry and acknowledged leader in the national market. The company has headquarters in Moscow and its microelectronics operations in a nearby city as well as in far-off Siberia, but it is a truly global company. Their offices and factories are in 25 countries stretching from the Czech Republic to Greece. Sitronics’ main shareholder is Sistema, the largest Russian financial-industrial group outside the natural resources sector; two-thirds of Sistema is owned by founder and Board Chairman Vladimir Yevtushenkov. The company’s microelectronics main office is in Zelenograd, an hour’s drive from Moscow. Zelenograd has been labelled ‘Russia’s Silicon Valley’ because of its cluster of technology firms. At the centre of Zelenograd is MIKRON. Owned by Sitronics, this microelectronics company was set up in 1961 and was a leader in research for the next two decades before losing ground internationally. Today, it can make microchips of 0.8 micron - size, a journeyman chip that sells well in south - east Asia, but Sitronics wants to make smaller, faster chips to rival those of their global competitors. Thus it has signed a partnership agreement with STMicroelectronics, one of the world’s leading semiconductor manufacturers, to co-operate in designing and marketing 0.18 micron chips. Evgeni Utkin, Sitronics’ CEO, says: “The partnership with STMicroelectronics will enable us to create a vertically integrated production chain and to become the only Russian manufacturer of world-class microelectronic components.” Making smaller chips The company now plans a big investment programme to catch up with the west. It is now constructing a new ‘clean room’ in its Zelenograd plant, using STM technology. The company will be able to manufacture 0.18 micron chips by the end of 2007. The upgrade involves a $160 million investment. This is partly coming from the EBRD, and partly from the Russian government which has bought close to 10 per cent of the company. Overall the Russian government plans to invest $865 million to boost the country’s microelectronics industry. Sitronics Miccroelectronic Solutions has several other companies within its holding structure. For example, Smart Cards, a joint venture with Germany’s Giesecke & Devrient for example, supplies SIM cards to MTS, the country’s largest mobile phone system. Sitronics is increasingly a global company, with links to the world’s other top IT firms. It recently signed a deal with internet networking giant CISCO to become partners in the former Soviet Union, the Middle East and Africa. They plan to combine CISCO’s internet protocol products with Sitronics’ local know-how in markets such as Kazakhstan and Ukraine. Launching an IPO To help finance its ambitious expansion plans, Sitronics floated an initial public offering (IPO) on the Moscow and London Stock Exchanges in February 2007. This deal, worth $402 million, was the first Russian high-tech IPO and the second-largest technology IPO on the London exchange. It established a benchmark for venture funds and other investors sizing up the attractiveness of Russia’s high-tech sector. Says Mr Utkin: “Having the EBRD as a shareholder highlights our positioning as a European and not just a regional company, our successful performance, and the fact that our treatment of minority shareholders meets international standards.” Sitronics’ success is enviable but does it presage a wider boom in technology in Russia? Mr Utkin says the answer is yes. “The most important thing here is the business environment, the creative atmosphere.” He says clusters of tech expertise, similar to California’s Palo Alto, are emerging, and he mentions one street in the Siberian city of Tomsk where four science universities are located. Mr Utkin himself seems to be a lover of this creative vibe. He’s obviously a big jazz fan. He has musical notes on his tie, jazz playing in the background in his Moscow office and he owns a jazz recording studio in Kiev. “Music is like business,” he says. “The old style of business was like classical music. You had a composer who was the most important figure. He came up with the business plan. Then you had the conductor, who followed the composer’s plan, and the orchestra, or staff, who obeyed the conductor. With the jazz method of business, everyone has a role to play, there’s improvisation, there’s a team approach, and there’s audience, or customer feedback. I believe in the jazz school of management.”
By Julian Evans, freelance writer
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