Electronic goods were omitted from the financial plan.
Financing Suspension for Domestic Electronics Producers:
The Russian government has abruptly halted its subsidized loan program for domestic electronics manufacturers, as reported by top officials in the industry. This halt comes after the initiative, introduced in 2022 as a response to sanctions, was designed to provide financial assistance for purchasing electronic components.
The Ministry of Digital Development, during a conversation with Kommersant, confirmed that there are no plans to provide funding for this year's subsidized loans. The reason for this sudden freeze, according to industry insiders, is the exorbitant interest rates set by the Central Bank. If this trend continues, it may result in a significant reduction of investments for expanding production capacities, they warn.
Origin and Expiration of the Program:
Decree No.407, enacted in the spring of 2022, enabled electronics and telecom equipment producers to obtain loans at reduced rates from 13 banking institutions, including VTB and Sberbank. The Ministry of Digital Development would then subsidize the interest rate, amounting to 1-5% per annum. In 2022, approximately 100 billion rubles were disbursed under this initiative, with a maximum loan limit of 140 billion rubles for 2023.
However, in November 2023, banks switched borrowers operating under the decree to market rates due to the exhaustion of program limits following the Central Bank's key rate hike. The Ministry of Digital Development had initially planned to reinstate the decree using the "exit tax" on foreign companies (as reported by Kommersant on March 5, 2024). However, since June 2023, the Central Bank has kept the key rate at 21%, the first stable level in three years.
Market Reactions and Concerns:
In September 2024, at the "Microelectronics-2024" forum, Prime Minister Mikhail Mishustin highlighted the need for comprehensive investment in electronic machinery, ultrapure materials, and electronic components. Despite this, many equipment manufacturers have received limited support in recent times. A source close to one of the electronics manufacturers revealed that, last year, they received only 15 billion rubles but only late in December.
Oleg Izumrudov, director of the Consortium of Russian Developers of Data Storage Systems, cites the high Central Bank interest rates as the main reason behind the halt in loan financing. A source in one of the telecommunications equipment producers agrees, stating that the suspended funds could lead to reduced investment in developing new equipment.
Future of the Industry:
Maxim Koposov, director of Promobit, admits that only a small number of Russian electronics producers could afford the preferential loans from the Ministry of Digital Development. Small producers of computing equipment cannot afford the minimum loan amounts, so the subsidies were mostly utilized by large companies like Yadro, Aquarius, and ICL.
Koposov adds that even large electronics producers are struggling financially, making the subsidies indispensable. Without these subsidies, many large computing equipment manufacturers might resort to selling company shares or seeking alternative financing methods. Alexander Ponikin, director of project activities at Yadro, agrees, assuming that the level of support in 2025 will not be lower than in 2024. He also states that the absence of timely financing could slow down the pace of investment in expanding production capacity and developing technological sovereignty.
Russia Proposes a Complete Ban on Foreign Electronics Sales in State Procurements:
Given the challenges faced by the domestic electronics industry, the government is considering stricter measures to support local manufacturers. One such proposal is a complete ban on the sale of foreign electronics in state procurements. The success of these measures will depend on the government's ability to maintain consistent support and the sector's capacity to innovate and adapt to changing market conditions.
The sudden halt in subsidized loans for domestic electronics manufacturers, as confirmed by the Ministry of Digital Development, is causing concern within the industry, given the high interest rates set by the Central Bank. This financial barrier may significantly reduce investments for expanding production capacities and developing technological sovereignty, as warned by industry insiders.
The unavailability of funding for this year's subsidized loans, coupled with the high interest rates, could drive large computing equipment manufacturers to sell company shares or seek alternative financing methods to survive, according to Maxim Koposov, director of Promobit. Alexander Ponikin, director of project activities at Yadro, also assumes that the level of support in 2025 will not be lower than in 2024, emphasizing the importance of timely financing for the future of the industry.
