Russian Tech Firm Angstrem-T Struggles on US Sanctions

Sanctions from the US that targeted Russia’s nascent high tech industry have caused a Russian microchip company, Angstrem-T, significant financial woes and delayed the establishment of an initiative meant to produce substitute for Western products, the firm’s owner stated.

Angstrem-T Russian and American flags

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

Angstrem-T makes semi-conductors, and it has accumulated huge debts. It is also 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, who is the chairman of the company’s board of directors.

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

The US moves were a respond to Russia’s annexation of Ukraine’s Crimean peninsula in 2014 as well as its support for separatist rebels in eastern Ukraine. It has imposed further sanctions against Russia since 2016 over other separate issues.

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

The company is also largely dependent on US products. However, the sanctions now ban it from doing business with US firms.

“Although we initially receive the (US) 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,” said Reiman. “The factory is working, the products are being produced, but the question of procurement remains.”

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

When Angstrem-T started producing its first chips in 2016 after almost a decade of false starts and delays, Prime Minister Dmitry Medvedev depicted the initiative as a way Russia could beat already existing US sanctions.

“It’s good that we are starting to produce these ourselves,” said Medvedev said at the factory’s opening, a month before Angstrem-T itself was hit by the US 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 consolidates company data, the firm had 87.4 billion roubles ($1.34 billion) in debt last year. During the same time, 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-nanometer microchips it produces has significantly shrunk in years, according to the source.

A draft Russian government roadmap for the development of the microchip industry indicates that once VEB’s takeover is complete, Angstrem-T should switch its production to the more modern 28-nanometer chips.

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

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

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