Russia:  Hardware Manufacturing

    The Russian Federation had an opportunity to become an emerging player in hardware manufacturing, but ultimately forced out the source of investment and much needed jobs by over taxing foreign owned companies.  In 1993, IBM set up a manufacturing facility around Moscow to produce its computers for the domestic market.  Unfortunately for the Russian people, the IBM based facility had to get out of Russia in February of 1996.  Ultimately, the government overburdened the foreign corporation by taxing away any chance for a profitable enterprise.  Other foreign computer manufactures realized it would be better to set up facilities in adjacent areas and import the hardware into the country taking advantage of reduced barriers.  Companies like Hewlett-Packard and Acer, Inc. have set up shop in neighboring Finland and find it a much more easy and profitable just to import the whole demand for computer hardware into Russia.

    With a burgeoning demand for corporate and home hardware solutions, Russia has a potential to be a large source of overseas revenue in emerging market penetration of hardware needs.  However, the current system of over taxation is stopping FDI.  According to researchers at BIS Strategic Decisions in Paris, the demand for hardware and PC's in Russia should continue to grow at about 20% per annum.

    Domestic production consists mainly of assembling computers from imported components.  The Russian hardware and computer peripheral market was estimated to be $2.6 billion in 1998. Major factors for growth are further improvements in the Russian economy, rapidly growing use of the Internet, hardware price reductions, expansion by large businesses to the regions and resulting need for coordination of their branches’ activities, an increasing number of small businesses, development of computer assembling and resulting demand for electronic components, and an increasing number of individual end users.

    Generally, domestic production of office and computer equipment in Russia consists of assembling personal computers, installing local area networks, and producing UPS systems and modems. Today, more than one hundred domestic companies in about half of all Russian regions are involved in computer assembly.  There is some hardware manufacturing in Russia, mostly in the higher demand areas of St. Petersburg, Moscow and the large cities on the Pacific coast of the Far eastern Districts (Chernobrovkina, US Foreign Commercial Service, 2000).  For instance, in the Russian Far East over 100 small computer firms currently operate, most with less than 20 employees.  The components used in these shops are of foreign origin from the US, Taiwan, Japan and Korea.
 
 

Back to Table of Contents