Laser industry in Russia struggles to build market
Achim Strass
Recently published statistics on the laser industry in Russia and other states of the former Soviet Union* indicate that the structure of the Rus sian laser scene is different from that of the rest of the world. According to investigations of experts of the Moscow-based Laser Association, medical instruments account for 40% of the laser product sales in Russia but only for 20% in the rest of the world. Material processing makes u䂒%, compared to 25% in the rest of the world. Overall, however, the Russian share of the world laser market is merely 1% to 1.5%, though its actual potential is sufficient to control u¥to 10% of the laser market.
About 400 organizations in Russia are associated in some way with the development of laser equipment. One fifth of these are institutes or universities of the Academy of Science, one third are industrial scientific research institutes and universities. Half of the above organizations are small privately owned firms and businesses. Some 75% of the products shown at the Laser Optics Glass-95 exhibition held in St. Petersburg last fall were exhibited by small companies, suggesting that privatization of the laser industry is happening faster than in other branches of Russian industry.
The financial difficulties of the Rus sian laser industry have led to a shar¥reduction in the number of specialists employed. Specifically, the number of specialists active in the domain of laser physics and technology has dropped by half over the past three years. However, the laser industry in Russia exhibits an enhanced viability in comparison with other industries, thanks mainly to its dual (military and civilian) orientation and an increased demand for laser products.
The budget for civilian projects in 1994 amounted to $2 million, less than half the amount budgeted for 1992. The principal source of income is from product sales. According to the statistics of the Laser Association and the Central Mathematical Economics Institute (CMEI) of the Russian Academy of Sciences, the market of the former Soviet Union accounts for 85% to 90% of laser product sales.
The demand for such products in industrially advanced countries is rather poor. The situation in Asian countries such as China and South Korea is slightly better. Russian companies are able to supply high-tech laser devices and know-how to these countries at lower prices than those demanded by Western manufacturers. And the situation seems to be improving. After the Laser 95 international exhibition in Munich, Germany, the foreign factory orders booked by 56 Russian laser companies participating in the exhibition grew in number by an amount equivalent to $3 million to $3.5 million. Seven of the exhibitors were from Belarus and four from Lithuania, both once part of the former Soviet Union.
Learning to compete
Now the question arises: What is the basis of the competitiveness of the Rus sian laser enterprises? According to the data of the CMEI there are three major factors. The first is pricing. Russian laser products, technology, and specialists cost less than comparable products, technology, and personnel in other countries. However, this advantage is being lost as procurement costs and rent charges in Russia are rising, especially in Moscow, St. Petersburg, Novosibirsk, and Vladivostock, where most of the high-tech manufacturing is located. With the loss of the infrastructure of the defense-oriented branches of the laser industry it frequently proves more profitable to buy the necessary components abroad.
Second, there is the human factor. Because there was no international collaboration in the highly militarized USSR of former times, Russian manufacturers of high-tech products have limited knowledge of international property rights legalization procedures and little experience with management and marketing.
The third factor affecting Russian competitiveness is technology development. Classified research done under the seal of secrecy frequently was unique. The scientists and engineers who took part in these developments of necessity did everything by themselves, and the absence of minicomputer equipment in the 1980s led to nontrivial solutions.
Still, one can say that the Russian laser industry, thanks to its advantageous starting conditions, is a potentially very promising field for investors, both Rus sian, and, most notably, foreign. It is a pity they have not realized that. o
*These statistics, first published in the Russian newspaper Isvestiya, were summarized in the German magazine Laser und Optoelektronik (April 1996, p. 9).