Alexander Lukashenko, in his Message to the Belarusian people and Parliament, quite rightly raised the issue of the problems of developing the digital economy and the need, taking into account sanctions, to create domestic software for critical facilities from the national security viewpoint.
At the same time, it must be said that problems in this industry are noted not only in our country, but also in those countries for which high-tech is a kind of business card. In fact, 2022 was marked by a real parade of mass layoffs in such major tech giants of the world as Meta, Apple, Microsoft and so on.
On the one hand, despite these negative trends in the high-tech labor market, managers and analysts of the hi-tech industry agree that the digital industry market will grow. Programming in various languages by intelligent systems similar to chat-GTP will eventually change both the qualitative specifics of employment and the scale of human resources involvement.
On the other hand, data-driven services such as artificial intelligence, next-generation 5G networks, smart car markets and the Internet of Things have opened the way to new driving forces of economic growth. The growth of chipmakers' production capacities in recent years has lagged significantly behind the needs associated with scaling these services and activities. Already now, companies in these market segments are experiencing an acute shortage of chips: first of all, control and service microcontrollers. Over time, the shortage of chips and the shortage of components will increase not only in the short term, but also in the medium term.
It is obvious that our digital industry, addressing the problem outlined by the President, should proceed from both trends in both the software and hardware market. When making decisions, it is also necessary to remember the results of the trade and economic confrontation between the United States and China, as a result of which there was a record decline in the supply of Qualcomm chips to the Chinese market (year-on-year for 2020, shipments were down by 48.1%), and Huawei was included in the so-called "trade blacklist" of the United States. The situation with Huawei has prompted other brands such as Oppo, Vivo and Xiaomi to use an alternative in the face of systems on a chip from MediaTek.
Speaking about the results of the confrontation from the point of view of today, we see that the largest companies in China are expanding their production capacities. Here we can mention Yangtze Memory Technologies (YTMC), a company specializing in the production of 3D NAND flash memory used in SSD drives, Shanghai Micro Electronics Equipment (SMEE), the only company in China that produces lithographic machines, as well as SMIC, a company that produces logic microchips for processors (enough for more than 100 thousand chips per month and this is more than Samsung and Intel produce together). If SMIC gets the equipment at the disposal of other national manufacturers, its capacity will significantly exceed the capabilities of the largest semiconductor manufacturer in the world – Taiwan's TSMC.
In this regard, it should be borne in mind that these measures are not just the result of sanctions and a trade war between two countries – leaders of the digital industry, but quite a standard phenomenon of new protectionism in the digital era.
Before, the bans concerned mainly the import of technologies (if the country has its own potentially viable supplier of such technologies) and were based on the goals of retaining monopoly profits, which otherwise could have been obtained by foreign companies. Cybersecurity risks only increased the attractiveness of such a ban. A powerful deterrent to the introduction of the import ban was the expectation of symmetrical retaliatory measures.
In a world of decentralized international competition, unlike import bans, export bans cannot be prevented by retaliatory measures in the field of trade policy, since the technology leader imposes them regardless of the competitor's retaliatory measures. This means that it will be quite problematic to purchase key technologies that are at the forefront of the new wave of economic growth both in the producing country and in third countries, regardless of the effects of potential sanctions. This is a new reality that will have to be reckoned with, and, therefore, put import independence and technological sovereignty, which our President has repeatedly spoken about, at the forefront. At the same time, it is extremely important to indicate the primary contours of ways to achieve technological sovereignty, taking into account our capabilities.
In general, the post-bubble turbulence in the consumer electronics market and new trends in digital protectionism indicate the emergence of a window of opportunity for new players, as the search for alternatives by Chinese companies will be broader. The experience of Huawei, which strives to launch its own microchip production in Shanghai in these conditions, demonstrates there is no need to implement an expensive technical process from 8 to 3 nanometers at the beginning. At the first stage, the planned factory will produce a limited amount of 45-nm chips using technology at least 15 years old, which, however, will be the first step for the development of independent semiconductor production.
This is certainly not enough to compete on an equal footing with the leaders of the smartphone and PC markets, which will offer consumers devices with 5- and 3-nm chips. However, industrial and commercial equipment in the form of the same 5G base stations and backbone network switches traditionally requires more reliable and carefully debugged production processes. In this market, 20nm chips will be quite competitive even in 2023.
In addition, another trend is extremely important, which is aimed not only at energy optimization and technological process, but also at hardware protection. Back in early December 2022, 17 European countries signed a joint declaration on financing the development of cost-effective processors with data protection function.
The creation of secure microprocessors in the near future will be of key importance for use in smart home technologies, the Internet of Things, automobiles, medical equipment, mobile phones and network components. To use the economies of scale, we need to focus specifically on this market segment, and not just on niche products in the defense industry.
It should be noted that the technical process of the Integral in recent years has been about 350 nm and a technical process of 2 nm is hardly achievable for us in the near future. At the same time, achieving the goal set by Huawei at the current cost of the corresponding lithographic technologies is not an exorbitant task, subject to state support for the project. As we noted above, 20 nm is quite enough to compete in the market segments indicated above. Moreover, 90-nm chips is currently almost enough to any military equipment. Considering that neither European nor American manufacturers have sufficient and comparable experience with the Russian company JSC MCST and technologies for the production of hardware-protected microprocessors, the domestic company Intergal with proper cooperation with Russian partners will be able to enter the rapidly growing market with high added value.
In general, complex transformations are needed to change the IT industry vector of development to the internal one. The starting point of these transformations and the strategic development of HTP is the Presidential Decree No. 102 of April 12, 2023 "On the development of the Hi-Tech Park". The decree provides for the establishing a management company in the HTP structure, representing HTP in cooperation with foreign partners and assisting the park residents in expanding exports, entering new markets and attracting foreign investment is a necessary, but insufficient step.
For further development, the Decree mentions "a comprehensive legislative act defining the legal basis for HTP activities." It should be prepared by the Council of Ministers by the end of 2024.
When forming the vector of development of the IT industry to the domestic market and the parallel introduction of new equipment, as a rule, it is quite difficult to predict how much the cost for maintaining a large number of new units of equipment will be. In order to minimize such negative effects and achieve the cumulative macroeconomic effect of digitalization, we believe it is possible to move towards the creation of a domestic analogue of the GitHub platform – a kind of common state repository for open-source IT projects (except for providing cryptographic protection), for which an open license will be valid and which can be used for free, including in other products. Unlike disparate solutions that only complement the image of digital populism, we will be able to create a powerful fulcrum for collective and relatively coordinated efforts of effective digitalization, in which most products will not involve a license fee, and software maintenance will exclude monopoly pricing.
Apart from these measures, it is necessary to form, as it were, a common joint large IT department for all factories. In a concrete implementation, it is proposed to create a research and production center for the development of software and hardware and software complexes for the domestic industry, capable of functioning in self-sufficiency conditions. Basic principles of the project: – organic economic model (based on income from services provision, not investments); – organic growth of the organization structure.
The organizational model may look as follows: – research institutes in the form of joint-stock companies and 100% owned by the state (such experience is used in the Russian Federation); – founders – industrial flagships (BELAZ, MTZ, Belkali, etc.); – investment resources are provided only for the initial period (from 3 to 5 months) for the functioning of a small the group (5-7 people) forming the organizational core – in fact, we can say that one full-time unit accounts for one founding enterprise. This number of people at the initial stage is due to the fact that due to the specific complexity here we are talking about knowledge intensity, not labor intensity. Implementation is laborious, and as customers subscribe to the product, organic growth is underway. The development of the organization is carried out by providing domestic organizations with state-owned services for the creation, implementation and maintenance of software under the "subscription" model (monthly subscription fee). The cost of the subscription will be calculated based on the number of workers – this is an objective indicator, according to which the subscription cost will be about 1-2 rubles per employee per month.
The classification of the implemented product is the "unified digital industrial environment of Industry 4.0" (ECPS 4.0), which combines the functionality and capabilities of optimization and resource planning systems at the enterprise, automation of interaction with customers, decision support. At the same time, the development and installation of ECPS 4.0 in the production process of the flagships of the Belarusian industry may not require the HTP-type taxation regime. The total cost of all the founders of the research and production center prior to launch of the project, according to preliminary calculations, may be about BYN 300,000. This amount at the general stage for all factories can be divided by the number of founders. In the future, each factory can pay 1-2 rubles in terms of each worker for a system that will increase the return on their labor by 20-30%.
As an initial requirement for the software product being created, it is permissible to set the bar for economic effect in the range of 1000-2000% of the cost of the product in a three-year perspective. The average cost of a comprehensive solution for an enterprise is about BYN 10,000 per month. The average level of automation effect with the help of modern enterprise management software systems is equivalent to an increase in the workforce of the enterprise by 20-30%.
Therefore, the company gets the opportunity not to allocate significant resources to create systems in the format of an investment project, but to get a real return in 5-7 months after the start of the subscription for IT services.
The main component that ensures the success of the strategy is the creation of a standard system that at the same time takes into account the individual characteristics of business processes at enterprises due to a configurable architecture. Unlike the concept that provides for the formation of IT structures directly at enterprises, this approach allows you to distribute the costs of creating a software product, which means eliminating the need to create any financing tools. On the other hand, the centralization of competencies allows us to solve much more complex tasks, moving towards "Industry 4.0", machine learning technologies, industrial robotics, and so on.
Thus, the organic growth model provides for the start of a project using a small team, which is further scalable taking into account the real needs for specialists of a particular profile. Since organic growth, although slow, is prone to an exponential growth law, and bureaucratic growth is limited by linear rates, starting with a small organization according to the proposed organizational form and business model allows us to talk about tens of thousands of employees and active expansion into world markets in the future in 3-5 years, primarily Chinese, especially seriously suffering from the lack of quality internal software vendors.