The fresh wave of sanctions after the invasion of Ukraine has given new wind to the concept of technological self-sufficiency, with Russia’s government launching multiple initiatives to create domestic substitutes for foreign electronics, online platforms, and software, on which many Russian companies are dependent.
Over a thousand tech companies stopped or curtailed their operations in Russia after the invasion of Ukraine. In just a month, Cisco, SAP, Oracle, IBM, TSMC, Nokia, and Ericsson, as well as Samsung and Apple, left the market, affecting entire industries, including mobile operators, factories, startups, and large state-owned companies. According to IDC, a global market-analysis firm, the Russian IT market in 2022 shrank by $12.1 billion, or 39 percent.
Russian prime minister Mikhail Mishustin said in February that Russia wants to replace 85 percent of foreign software with Russian substitutes, opening dozens of so-called import substitution centers. Among them is a project to create a national operating system for devices. The plan, however, is at an early stage with no road map in sight, says the Internet Research Institute’s Kazaryan.
“Currently, a few big players are trying to woo the government for subsidies to create devices on ‘national mobile OS,’ whatever that might be,” he says.
One of the more promising alternatives to Android is Aurora OS, a Linux-based smartphone operating system made by the Russian state-owned telecommunications firm Rostelecom. But Aurora was primarily made for government use and does not support Android apps. In December, the Russian government refused to allocate any of the 22 billion rubles ($292.1 million) earmarked for the development of the Russian operating system.
Other Russian smartphone makers, such as BQ, have promised to adapt Huawei’s HarmonyOS for its handsets. But there’s been no news of progress since BQ’s announcement in September. Huawei, which is based in China, developed its own operating system in 2019 after Google stopped providing its suite of mobile software services to the company because of US trade sanctions. The Chinese IT giant has said it has no plans to launch HarmonyOS-equipped mobile phones outside of China.
Huawei’s struggle to compete outside China shows that it’s hard for a smartphone brand to gain buyers without access to Google services. Huawei lost almost a third of its revenue in 2020, the year after sanctions cut its access to Google Maps, Gmail, and other common Google apps. The biggest hurdle NCC’s new smartphone may face, however, is cheap and readily available phones from China.
Counterpoint’s data shows that phones from Xiaomi, Realme, and Honor, a budget brand previously owned by Huawei, have replaced once best-selling iPhones and Samsung Galaxy devices, accounting for 95 percent of the market last year.
“There’s still a lot of competition,” says Counterpoint’s Stryjak. “I don’t think there’s a huge gap in the market for a new player.”
Other Russian phones, most famously Yotaphone, have tried to capture the domestic market, but they remained at a very small scale, says Stryjak. Russians prefer brands they already know. Thanks to parallel trading—importing goods without the permission of the manufacturer—even Samsungs and iPhones are still available in the country. NCC says it aims to price its smartphones between 10,000 and 30,000 rubles ($132 and $398).
“We are considering various options. This could be production at Russian factories or contract manufacturing at Chinese enterprises,” NCC’s Kalinin told local media. NCC did not respond to WIRED’s request for comment.
Other Russian smartphone makers such as Smartekosistema, owned by state giant Rostec, have found that they were unable to procure the necessary chips from TSMC for the second iteration of their handset, the AYYA T2. All of this may make creating Russian challengers to Samsung or Apple very expensive.
“You probably can make a smartphone in Russia with Chinese parts, but it’s not very efficient,” says Kazaryan. “And why would anyone buy a Russian phone that is more expensive than Xiaomi?”
