While Soviet President Mikhail S. Gorbachev was meeting with a select group of business leaders in San Francisco, a group of 11 Soviet scientists was combing Silicon Valley, looking to establish joint ventures with computer and software companies.
The group, which included representatives from the Soviet Academy of Sciences, came to the Bay Area for the "Soviet Silicon Summit for High-Tech Trade," sponsored by Global Development Corp. of Santa Clara. The Soviet representatives also participated in a June 8 seminar, "Doing Business With the Soviets," conducted by Global Development for the benefit of Silicon Valley firms.
As Gorbachev has repeatedly indicated, the Soviets have a strong interest in American computer technology. The Soviet Union has some limited ability to make its own IBM-compatible PCs and, according to a five-year plan, intends to produce 6.3 million machines through 1995. Most of those will be IBM XT compatible systems, although there will also be limited production of 286- and 386-based PCs. The demand for PCs far outstrips domestic capacity. Dataquest estimates that the Soviets plan to import 28 million PCs by the end of the century.
Alexandre Giglavyi, Information Technologies Learning Center director at Moscow State University, said there are 500,000 to 600,000 PCs in the Soviet Union. Most are IBM compatible and based on a Japanese design using the CP/M operating system, now virtually obsolete here.
About 100,000 computers are used in homes, he said. Most home PCs, typically 8-bit systems with cassettes to store data, are primitive by Western standards. Even floppy disk drives are luxuries in the Soviet Union.
There are Soviet clones of several popular U.S. designs, including the Commodore 64 and the Apple II, but IBM compatible machines are priced well beyond the reach of average citizens. It costs about 60,000 rubles to buy an AT compatible with 1 megabyte of random access memory and a 20-megabyte hard disk. That represents about "20 years pay of an average worker," Giglavyi said. Bargain hunters can buy a XT-clone for 35,000 to 45,000 rubles.
Giglavyi expects Soviet industries and agencies to need 11 million PCs through 1995 while education will need an additional 17 million to 18 million systems. This is far beyond the country's domestic capacity and is good news for Western companies seeking to penetrate the Soviet market.
A Dataquest report, "The U.S.S.R. PC Market," estimates 1990 Soviet imports at 5,000 to 15,000 386 PCs, 100,000 to 200,000 286 machines, 10,000 to 30,000 PC/XTs, and 4,000 to 8,000 Apple Macintoshes. Older style 8-bit computers should account for 2,000 to 4,000 imports, Dataquest said.
Several American firms already have made inroads into the Soviet Union, but U.S. security regulations have restricted export of the most desirable high-end systems to the Soviet Union. That, however, is changing. The United States, as of July 1, will decontrol export licensing requirements on most personal computers, including 386-based PCs (up to 33 megahertz) and all current generation Apple Macintosh machines (up to 40 megahertz).
Giglavyi expects Soviets schools to buy a large number of IBM PS/2 Model 25 systems but he also expects strong sales of machines from smaller companies. Giglavyi characterized IBM as a "huge bureaucracy" that is "very difficult to work with."
The Soviet delegation to the Silicon Summit wasn't just window shopping. The delegation leader, Nicolai Kleschev, who heads the Academy of Science's International Center for Informatics and Electronics (InterEVM), signed letters of intent to create joint ventures with at least three Silicon Valley area firms.
One agreement is expected to generate a new line of Soviet-U.S. PCs called the "Perestroika Computer." Fortron/Source, a Livermore, Calif.-based PC maker, signed a letter of intent with InterEVM to produce a line of 286 and 386 PCs to be distributed in both the United States and Soviet Union. The machines, said Fortron/Source international sales manager Linda Janssen, will initially be manufactured and assembled in California but long-term plans call for manufacturing in the Soviet Union.
A major barrier to U.S.-Soviet trade is the Soviet Union's lack of "hard currency" that can be converted to Western funds. The problem calls for creative solutions. Televideo founder Philip Hwang, who attended the seminar, said his company found itself investing in Soviet hotels and leather processing plants to help various Soviet organizations generate the cash necessary to buy his company's computers. Other companies are entering barter deals, exchanging manufacturing and distribution know-how for Soviet software, raw materials, brain power and labor.
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