“We are at a turning point”: an industry representative on import substitution of telecom equipment in Russia

— Ivan Aleksandrovich, Nokia and Ericsson suspended deliveries of telecommunications equipment to Russia.

What is the approximate share of these companies in the Russian market?

— It is difficult to talk in general about the market share of a particular company, because they work in different sectors.

For example, Ericsson is one of the largest, and perhaps the largest supplier for the Big Four operators of cellular communication equipment.

At the same time, other leaders in the network telecom equipment market are Huawei, Cisco, etc.

- Are there any difficulties with the supply of equipment from other foreign manufacturers?

— The fact is that in such areas as, for example, cellular communications, it is very difficult to change the equipment manufacturer.

Such a transition is always fraught with risks of incompatibility, the introduction of equipment from another vendor into a network that is based on products from another manufacturer requires a fairly long testing period.

Yes, it is possible, but it is always not just a matter of procurement, it requires serious technical engineering training.

So the problems of logistics are not the main ones now.

It is important to achieve interoperability so that networks are guaranteed and stable.

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How long does it usually take - months, years?

— Months.

- Specialists from TelecomDaily previously reported that the average Internet speed in Russia decreased by about 0.7 megabits per second compared to November last year.

The reason is the growth of traffic in Russia.

So far, this slowdown is not noticeable to users, but is there a risk that the situation will worsen?

- I think that this is not the biggest risk at all - that the Internet will become slower.

Now large foreign manufacturers stop technical support of their equipment in Russia.

And this problem needs to be solved - for example, through the supply of the same equipment through independent channels - we are not talking about a gray market, I emphasize.

- Are these deliveries through intermediaries?

- Through intermediaries, through neutral countries - parallel imports, which are not controlled by the manufacturers of this equipment.

And such imports are legalized by a recent decision of our government.

This is a necessary measure now, because it is important for us to maintain the stability of industry and the economy.

However, the issue of maintenance of this equipment still needs to be resolved, and this is more difficult.

How to replace authorized technical support?

If the official distributor of the manufacturing company worked in Russia, he could well continue technical support.

Such intermediaries significantly increase the stability of the market.

Unfortunately, large Russian companies preferred to work directly with equipment suppliers, so the market for independent services is poorly developed in Russia.

And the lack of maintenance makes real the risk of not just slowing down the Internet, but in general the loss of stability of many information systems.

- What is the service life of telecommunications equipment that operators already have at their disposal?

How often does it need to be updated and upgraded?

- Infrastructure equipment developed by large corporations, usually very reliable, can be operated for years, sometimes even without technical support.

But here the question of probability arises - the fleet of this equipment is quite large, and even if we estimate the average service life of several years, this does not mean that some unit cannot fail today or tomorrow.

Of course, operators try to duplicate equipment in systems that need to work continuously and without fail.

However, again, this is all a matter of probability.

So the situation is very vulnerable.

• Cell tower

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- In 2020, the share of domestic telecom equipment in the Russian market accounted for only 7%.

This was discussed in a study by NeoAnalytics.

Do you agree with this assessment?

And what is the market share of domestic equipment now, has there been any progress in recent years?

- I think that this is an underestimation, which does not take into account closed market segments, government orders.

If the total cost of telecommunications equipment manufactured in Russia is calculated in relation to total sales, including these sectors, the share will be from 10% to 15%.

— Is the output of domestic equipment increasing?

— The volumes of domestic production are increasing, but the share of domestic producers in the market is not growing yet.

This is due to the outstripping growth rates of the Russian market for such equipment.

- In which areas is the dependence on imports most pronounced?

- Russian developments may well close most of the market for low- and medium-capacity equipment.

If we talk about network telecom equipment, then access and aggregation level equipment is being successfully developed and produced in Russia.

But the production of equipment at the level of the network core is just being mastered, it is still far from mass production.

Let me explain for non-specialists: access equipment is the equipment that is installed, conditionally, in the apartments and offices of users - routers, routers, etc. Such equipment receives traffic from a group of users - these are relatively small volumes.

At the aggregation level, streams are already collected and distributed from many end devices.

The network core controls all flows, such equipment is used by telecom operators.

Naturally, such equipment should have enormous productivity.

Basically, all equipment is produced on the chips of American companies, such as Broadcom Inc.

It is the microcircuit, the network processor, that determines the functionality of the manufactured equipment.

Now, due to sanctions, there are great difficulties with the supply of chips to Russia.

— Do you also need imported microcircuits for access and distribution level equipment manufactured in Russia?

- Undoubtedly.

Interestingly, US regulators are now lifting restrictions on the supply of telecommunications equipment to Russia, but the import of chips is still banned.

It turns out that now Russian manufacturers and developers of telecom equipment will find themselves in more difficult conditions than the end buyers - telecom operators.

The customer can buy Chinese equipment, but the developers have nowhere to get chips.

• Microcircuits

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- Do we have the potential to eventually establish our own production of microcircuits?

- In principle, we have the production of chips, but telecom equipment needs chips with extremely high performance.

To understand: even access-level telecom needs chips of 28 nanometer technology, and Russian semiconductor manufacturers can only provide a level of 90 nm.

And then the mass production of such microcircuits has yet to be established.

And it will take years to completely replace imports of chips.

- What is Open RAN technology and can it help us in this situation?

- Open RAN is a standard that ensures the compatibility of equipment from different manufacturers when creating next-generation cellular networks.

Earlier, I talked about how difficult it is to change hardware vendors because of the risk of incompatibility.

However, due to the fact that Huawei is ahead of Western companies in 5G networks, the Chinese company's competitors decided to join forces and create an open standard.

It took Western manufacturers to join forces against Huawei.

This turned out to be in the hands of Russia - the use of such a standard allows us to gradually increase the share of Russian developments in our networks.

In general, we are developing our own equipment, there are certain achievements.

So, in the NTI Competence Center based on Skoltech, very interesting results at the prototype level are now being obtained with small forces - global corporations take much more resources and funds to obtain similar developments.

The question is how to consolidate these successes, move on to mass production - everything depends on microcircuits.

— That is, our developers can already do everything now, except for microcircuits?

- Yes.

The question is how to implement these developments when the supply of electronic components is blocked for us.

- What is the situation in the field of providing data processing centers (DPC)?

Earlier it was reported that the government is preparing for a shortage of computing power.

- This is a separate story, and in this area the concept of open standards is also being implemented, by analogy with the Open RAN - Open Computing Project.

Plus, the so-called virtualization technologies are rapidly developing.

They also allow you to use hardware based on different types of processors, which gives you some freedom.

• Server in the data center

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Traditionally, the entire computing infrastructure was built on chips with the X86 architecture from Intel and AMD.

The entire server hardware industry depended on them.

Now companies such as Google, Alibaba, Amazon have set themselves the task of getting out of technological dependence on Intel.

They themselves are developing not only servers, but central processors for them.

As a rule, these processors have an open architecture.

And this also opens up additional opportunities for us, as is the case with telecom equipment.

— The Association of Developers and Manufacturers of Electronics has previously advocated protectionist measures against Russian manufacturers of telecom equipment.

For example, ARPE was among the signatories of an appeal to the government with a request to tighten the rules for importing IT equipment. 

- It is important where exactly the equipment is developed.

If in Russia, then this means that we are accumulating the necessary engineering competencies not only for the creation, but also for the technical support of the telecommunications infrastructure.

This is even more important than the production itself - it can stop for a while, it is painful, but not critical.

But the ability to maintain the stability of the information infrastructure, to serve it, is already critical.

That is why the requirement to use Russian developments is so important.

So that in the event of some kind of failure, you do not have to contact engineers who are abroad.

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Localization of production by foreign companies, as previously planned by Nokia and Ericsson, makes it possible to transfer a small part of the manufactured products to Russia.

But such production does not create demand for domestic development of components and microcircuits.

The choice of components is made by the developers.

— What forecast can be made as to whether the share of Russian equipment will grow now?

— Now the main task for companies is not to lose key personnel.

And it is very important to increase the share of our own developments in the market.

You can even go this way: transfer production to other countries, to China, for example.

Chip deliveries to Russia are limited, but assembly operations can be transferred to China, which is not under such harsh sanctions.

And the equipment already assembled there can be delivered to Russia.

Temporary relocation of production can help keep the market for Russian developers, who may return to Russia in the future.

But if we now lay down our hands and give our market to Chinese or other manufacturers, it will be very difficult to return it.

In fact, we are now at a turning point.

There are two scenarios - or we will simply transfer our market from Western Chinese manufacturers,