Element does not rule out entering foreign markets with help of local investors
MOSCOW. Oct 25 (Interfax) - PJSC Element , the parent company of the Russian microelectronics group formed by Sistema PJSFC and state company Rostec, does not rule out attracting local partners to help finance its expansion into foreign markets, Element president Ilya Ivantsov said in an interview with Interfax.
"In the countries that we're talking about [the Asia-Pacific region and Middle East] there are local players who are interested in entering the microelectronics market. Especially against the backdrop of the substantial interest that has formed around the sector on the global market. Accordingly, we now see many potential co-investors," Ivantsov said.
Entering the global market is one of the company's strategic objectives, but Element plans to work on achieving it carefully and gradually, in the least capital-intensive ways, he said.
"At the initial stage, one can talk about creating entities to sell our products. However, one must take into account that in many countries the matter of localization is just as acute as here. We will enter such markets through the creation of development centers, independently or with local partners. Based on these centers, using already existing products, we will be able to develop local solutions for each target market. Right now we are testing specifically such models for entering international markets," Ivantsov said.
The company does not plan to raise additional external financing to fund its entry into foreign markets. Element's investment program, which totals 92 billion rubles, is already backed by the necessary financing, but it does not provide for significant spending on international expansion, Ivantsov said.
"As such [international expansion] projects acquire outlines, they might be financed from three sources. These are our own funds, money that we'll start earning on these markets and the funds of partners," he said.
He said Element will be able to successfully compete on foreign markets with global vendors in certain segments of microelectronics, such as power electronics, with products based on silicon carbide or gallium nitride rather than regular silicon.
"Furthermore, we see that consumers on the international market are interested not only in individual components, but also in more integrated, complex devices, in modules and units. Our objective is to make, based on our electronic component base, the modules and units that could be competitive on the global market, both in terms of technical characteristics and price," Ivantsov said.
In addition, there might be demand on foreign markets for the products of electronic engineering, an industry only a few countries in the world have, he said. There are now countries that, for various reasons, want to enter the microelectronics manufacturing market and get an alternative to a U.S. or Chinese technology stake, Ivantsov said.
"This requires one's own production equipment, own materials, own specialized software. There is such a need on the market and this opens up very big prospects for us," he said.
Element approved an investment program for 2023-2026 totaling 92 billion rubles. It is 90% backed by financing, with subsidized loans and credit accounting for about 30%. The average interest rate on them is about 1.5%, the company has said.
The program is aimed at developing competencies and manufacturing facilities for production of basic electronic components, radio and electronic equipment and modules, as well as equipment and materials for production of basic electronic components.
