Exclusive: Russian high tech project flounders after U.S. sanctions

MOSCOW (Reuters) – U.S. sanctions targeting Russia’s nascent high tech industry have caused a Russian microchip company significant financial woes and delayed the launch of an initiative meant to produce substitutes for Western products, the firm’s owner said.

FILE PHOTO: Russian Prime Minister Dmitry Medvedev visits a plant of Russian microchip company Angstrem-T in Zelenograd near Moscow, Russia August 3, 2016. Sputnik/Dmitry Astakhov/Pool via REUTERS

President Vladimir Putin has stressed the need to develop Russia’s domestic tech industry to make it less dependent on Western equipment. But Moscow’s efforts to manufacture Russian microchips and other high tech products have been thwarted by U.S. sanctions against a string of Russian tech companies.

Angstrem-T, which makes semi-conductors, has accumulated significant debts and is set to be taken over by state development bank VEB after failing to reimburse an 815-million-euro ($944.75 million) loan dating back to 2008, said Leonid Reiman, chairman of the company’s board of directors.

Reiman, Russia’s former minister of communications and information technologies, said the company’s inability to reimburse its debt was in part tied to U.S. restrictions on the import of dual-use technologies and its addition to U.S. Treasury sanctions in 2016.

The U.S. moves were prompted by Russia’s annexation of Ukraine’s Crimean peninsula in 2014 and its support for separatist rebels in eastern Ukraine. It has imposed further sanctions against Russia since 2016 over other issues.

Prior to the sanctions Angstrem-T purchased most of its equipment from U.S. multinational firm Advanced Micro Devices and bought a license from IBM to produce chips.

The company is heavily reliant on U.S. products, but the sanctions now bar it from doing business with U.S. firms.

“Although we initially received the (U.S.) State Department’s consent for this project and the delivery of the technology here, the sanctions caused the deadlines for its completion to be drawn out,” Reiman told Reuters.

“The factory is working, the products are being produced, but the question of procurement remains.”

FILE PHOTO: Russian Prime Minister Dmitry Medvedev visits a plant of Russian microchip company Angstrem-T in Zelenograd near Moscow, Russia August 3, 2016. Sputnik/Dmitry Astakhov/Pool via REUTERS

VEB, which Reiman said could become the majority owner of Angstrem-T by the end of the year, declined to comment.

IMPORT SUBSTITUTION

When Angstrem-T began producing its first chips in 2016 after nearly a decade of false starts and delays, Prime Minister Dmitry Medvedev depicted the initiative as a way Russia could surmount already existing U.S. sanctions.

“It’s good that we are starting to produce these ourselves,” Medvedev said at the factory’s opening, a month before Angstrem-T itself was targeted by the U.S. sanctions. “It’s a question of import substitution.”

Reiman would not disclose the magnitude of Angstrem-T’s debt. According to a Russian database that aggregates company data, the firm had 87.4 billion roubles ($1.34 billion) in debt last year. During the same period it recorded revenues of 101 million roubles.

A source in the field of microelectronics in Russia said the sanctions and repeated delays in the project had caused Angstrem-T’s products to become outdated.

The market for the 90 and 130-nanometre microchips it produces has significantly shrunk in recent years, according to the source.

A draft Russian government roadmap for the development of the microchip industry seen by Reuters says that once VEB’s takeover is complete, Angstrem-T should shift its production to the more modern 28-nanometre chips.

Such chips are used in products made by companies like Apple, Samsung and Sony.

The ministry has for several years lobbied for Russia to build a modern microchip plant, but to no avail.

Reporting by Maria Kolomychenko; Writing by Gabrielle Tétrault-Farber; Editing by Gareth Jones

3 TED Talks That Show How Blockchain Is Changing Business

You’ve almost certainly heard about blockchain–one of the popular versions of blockchain is cryptocurrency giant Bitcoin. You may even have a vague idea how it works.

But why is it so important? Why should you care? Those are tricky questions to answer. Blockchain technology is already being tested in commerce and has the potential to change the way most companies do business.  Gaining a basic understanding of how it operates–and could fit into your business–can help you break away from short-term thinking and focus on future innovation to fuel your business long-term.

There are many advantages to blockchain. It removes the middle man, like a bank or government, to complete commercial transactions, eliminates the need for you to keep your customers’ personal information, like their bank or credit card numbers. Blockchain transactions are more transparent to the general public, so they know more about the products they purchase.

I order products for my yoga studio’s retail store, such as yoga props and clothing. If blockchain technology were in play, the entire supply chain process would be transparent to me in my studio.

Right now, if I told my customers that my products are “eco-friendly,” I’d have to trust the manufacturer and the wholesaler that their claims are true. In the blockchain world, I don’t have to “trust” the supplier. Instead the entire supply chain process is transparent to me as a consumer. I know exactly how the products I sell are sourced, where they came from, what materials were used, and how they were transported.

There are many more layers to how blockchain operates and how it can benefit businesses and our economy now and in the future. It’s a lot to wrap your head around. Luckily, some recent TED Talks have focused on the issue–and they’ve simplified the concept a lot for me. Here are my three favorites:

1. Explaining Bitcoin to a fifth grader.

George Donev uses an example of a transaction between Alice, Bob, and a banana to describe Bitcoin and blockchain technology in one of the simplest and most straightforward ways. This is a good place to begin to understand blockchain’s basic concept and how it operates.

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2. How blockchain is changing money and business.  

Don Tapscott explains the trust-building features of blockchain technology and how it will impact the world of finance through several real-life examples. This is a good primer to learn how you and your business may best use blockchain.

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3. How blockchain could radically transform the economy.

One of the advantages of blockchain is that it eliminates the middleman like banks to facilitate trade and transactions. Here, Bettina Warburg talks about why this changing model of commerce can be a good thing for our future economy. This talk helps to show blockchain’s far-reaching potential for every type of business no matter its size.

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Whether you believe this is the future of transactions or not, blockchain technology is here to stay and will continue to grow as it expands into other areas of business and society. The earlier you begin understanding its uses, the quicker you can get ahead of the game.