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Glasnost and perestroika have left the Soviet Union’s microcomputer
industry in turmoil. Since Mikhail Gorbachev came to power in 1985, the
industry has faced real criticism of its performance for the first time.
This has intensified as reform has bitten into the old ministerial system
erected by president Leonid Brezhnev in the mid 1960s. Relaxations of the
Cocom embargo on trade in most Western computer equipment, which gathered
pace last year, have not helped either; more foreign imports have simply
confirmed the Soviet industry’s low level of technological expertise and
need for a complete overhaul.

Computers, so the story went, were to play a major role in the running
of the centralised economy in the Soviet Union. As the mountains of bureaucratic
paperwork pushed upwards, so the need for automation became more acute.
Bureaucrats saw computers as a means of reducing their burden. Small local
computers would interact with larger regional computers that would in turn
interact with even larger republican or All-Union computers. The lower tiers
of this pyramid, which would determine the success or failure of the network,
required tens of thousands of reliable personal computers.

Not until the late 1970s, however, did Soviet planners recognise the
importance of the microprocessor in this computer revolution. Then they
embarked on a campaign to develop an indigenous counterpart of the device
that was helping Western industry to flourish. In 1982, the Soviet Electronics
Industry Ministry claimed to be producing around 15 ‘families’ of microprocessors.
Several were copies of existing Western devices: for example, two families
were direct copies of microprocessors from Intel, one of the most prominent
microprocessor producers in the US. (The apparent ease with which the Soviet
Union cloned Intel’s chips – the 8080A, 8086 and others – has never been
satisfactorily explained.) A second feature of these early microprocessors
was that nine of the 15 families were bit-sliceable devices. Bit-slicing
is a technique for connecting small microprocessor elements in parallel
to provide extra computing power.

By connecting 4 four-bit bit-slice microprocessors in parallel, Soviet
engineers could produce a PC equivalent to a 16-bit microcomputer. It seems
that the technological planners intended to develop 16 and 32-bit microcomputers
without having to develop the technology for manufacturing complex integrated
circuits containing 100,000 or more components, known as very large scale
integration or VLSI, that 16 and 32-bit microprocessors require.

Three ministries were to produce the Soviet microcomputers: the Radio
Industry Ministry, the Ministry of Industrial Communications and the Ministry
of Instrumentation and Control Systems. The Electronics Industry Ministry
was to supply components. The four ministerial producers would not have
to compete for customers: they would simply try to meet the needs of Soviet
industry. As a result, factories received (sometimes) the machines that
the planners decided they required. The absence of any real pricing structure
meant that the high cost of producing such labour-intensive computers was
irrelevant to both the suppliers and to the users. Heavily subsidised electricity
meant that users were also unconcerned about the amount of power machines
consumed. All in all, the technological response was rational in terms of
the existing economic conditions – but totally at odds with what was going
in the West.

Demands for improvements in the production of microcomputers seem to
have been prompted by shortages of the machines in schools. By the beginning
of the 1980s, the Ministry of Education had recognised the need for the
teaching of computer studies in the classroom. At first, schools taught
the subject theoretically, with an emphasis on programming languages and
algorithms. They were linked to large computer centres that processed the
products of the children’s labour, much like the early days of computer
studies in Britain and elsewhere. Then a trickle of industrial microcomputers
found their way into schools. But teachers faced problems of incompatibility
and poor reliability with the new machines. And because education was a
low priority in the eyes of the ministerial producers, schools often did
not receive machines that had been earmarked for them. The result is that
Soviet schools are still turning out students ill-equipped for a computer-based
society.

Around 1983, the Soviet press announced the development of a computer
for schoolchildren, the Agat PC, which would be produced by the Radio Industry
Ministry. Soveit designers claimed that it would be able to use the same
software as the Apple II microcomputer even though the machine would be
quite different internally. They said that the Agat would be based on a
Soviet CMOS, or complementary metal oxide semiconductor, microprocessor,
which is a standard technology in the West. The Agat, in fact, is a straightforward
clone of the Apple computer.

Schools needed millions of the machines and patience quickly ran out
when they failed to appear. In 1984, Evgenii Velikhov, a vice-president
of the Academy of Sciences with special responsibilities for computers and
information technology, admitted that production was beset with ‘reliability
problems’. In particular, he stated, the keyboard was unreliable and needed
improvement.

It was the poor reliability of bit-slice technology that was to prompt
a turnaround in the Soviet microprocessor industry. In complex electronic
goods the most likely cause of a fault is not failure of the integrated
circuit, but of the connections between components. In bit-slice devices
there are many connections, and hence a high chance of failure. The VLSI-based
machines were intrinsically less prone to breaking down. Between 1982 and
1989, 9 of the 10 new families of microprocessor were VLSI devices. Once
more, copies of Intel devices were much in evidence.

By 1986, the Soviet Union was developing and producing clones of the
IBM PC; the central processor was known as the K1810, an Intel 8086 lookalike.
Instead of adopting a unified approach, however, three ministries were each
busy producing their own IBM-compatible PC. The Radio Industry Ministry
was building the ES-1840 PC; the Ministry of Industrial Communications,
the Neiron-I9-66 PC; and the Ministry of Instrumentation and Control Systems,
the Iskra-1030. The Electronics Industry Ministry supplied the components
for all these machines.

Commentators both in the West and within the Soviet Union have for many
years described the problems of departmentalisation in the Soviet ministries.
This showed itself in many forms, but in the PC industry it had a profound
effect. Most users of PCs in the West are aware of the importance of compatibility
between computers, which allows software and hardware designed for one machine
to work on another. The machines that the different Soviet ministries produced
were not only incompatible with existing Western machines but they were
also incompatible with one another.

Problems of hardware incompatibility with Western machines reflect the
Soviet Union’s failure to use ‘inch standards’ for its components. Japanese,
American and German machines use components based on the imperial units
of measure. This means that the pins of a silicon chip, for instance, are
one tenth of an inch apart: the distance between the complementary Soviet
sockets is 2.5 millimetres, which prevents a Western microprocessor being
plugged directly into them. The same problem arises with plug-in boards
and cable connectors. It seems that the authorities above the ministries,
such as the State Committee for Science and Technology and the Council of
Ministers, were unaware of this problem until only a few years ago.

In an effort to prevent this situation from continuing, a ministerial
shake up was announced in July 1989. As a result, the Ministry of Instrumentation
and Control Systems and the Ministry of Industrial Communications ceased
to exist. The former was merged with the Electrical Engineering Ministry,
the latter with the Ministry of Communications.

The computer production facilities of both these ministries were not
part of the mergers – they have ended up under the control of what has become
the main computer-producing ministry, the Radio Industry Ministry. As a
result, the remaining departmental barriers in the computer industry are
between two organisations: the component manufacturer, the Electronics Industry
Ministry, and the computer producer, the Radio Industry Ministry.

There have been moves to reduce these obstacles. Some industrialists
are now calling for the removal of all interdepartmental barriers between
the two organisations; others suggest that the State Committee for Computer
and Information Technology, founded in 1986, should coordinate the work
of the two ministries. Other critics, particularly from the Academy of Sciences,
are trying to set up a PC production base completely outside this system.

In 1983, the Academy of Sciences formed the Department of Information
and Computer Technology and Automation to strengthen Soviet research in
this field. The department set up groups, known as Interbranch Scientific
and Technical Complexes (ISTCs), to look at specific areas of expertise.
In 1986, it established an ISTC to speed up the development and production
of PCs in the Soviet Union. At the head of this complex was a very dynamic
figure, Boris Naumov, who has probably made some of the most important contributions
to the development of Soviet PCs. By 1987 he was becoming exasperated with
the limitations imposed on him by the economic system in the Soviet Union.
The ministries, he said in an interview in Pravda in August 1987, viewed
‘the problem of personal computers through the prism of their own interests’.

Naumov gave a fairly pessimistic appraisal of the current state of affairs.
After noting the age-old problem of departmentalisation, he continued: ‘There
is no economic lever which can be used to overcome these barriers. As a
result, although the state has provided large-scale resources to solve the
personal computer problems, the number of workers in the personal computer
field in ministerial organisations (other than the Electronics Industry
Ministry) since the ISTC’s existence has not grown, and in some circumstances
it has even shrunk. The ISTC has no influence over these situations. Now,
the leadership of the USSR Academy of Sciences is looking at the problem
of economic incentives for the interbranch complexes; it is hoped this position
will improve.’

Conflicts with the old regime

In the end, the ISTC’s main problem is that it is a new type of organisation,
designed to be innovative but placed inside the framework of the old-style
bureaucratic economy. Its coexistence with departmentalism and bureaucracy
is not an easy one. Naumov doubted that it was possible to create technology
of a world standard under these conditions. According to him, bureaucracy
is not interested in innovation; it is interested in meeting targets and
fulfilling plans. ‘The trouble is that the bureaucracy has nourished (and
continues to nourish) confidence that the interbranch complexes will not
survive, they will die away, as many old ideas have died away in the past.’

Naumov’s remedy was to let the ISTC for personal computers operate outside
the framework of the Soviet economy. He suggested that joint enterprises
with Western companies would provide the ISTC with the one thing it still
lacks – design and production facilities directly subordinate to itself.
This would strengthen the ISTC’s position in negotiations with the ministerial
organisations. Unfortunately for the Soviet PC industry, Naumov died unexpectedly
on 11 June 1988.

Nevertheless, in 1988, legislation was introduced permitting joint ventures
between Soviet and non-Soviet partners, many of which have since been set
up to produce PCs. By the end of last year, there were about 25 joint ventures
in the field. They varied in size from an initial investment of 50,000 roubles
(50,000 Pounds) up to nearly 48 million roubles. Western partners include
ICL, Olivetti and Honeywell, and less well known names such as Hegotron,
Impala and Gerald Computers. Soviet partners are even more varied, with
industrial, academic and cooperative organisations all involved. Joint ventures
buy components on the world market and assemble them into PCs in the Soviet
Union. Last year, a fairly basic model with a hard disc, printer and monitor
cost between 60,000 and 80,000 roubles, irrespective of whether it was going
to a home or to a factory. At the official exchange rate, the machines are
between 30 and 40 times as expensive as PCs in the West.

The largest and one of the most dynamic joint ventures is with the American
trading company, Management Partners International, which was set up specifically
to form joint ventures in the Soviet Union. (MPI’s main partner is CRT,
a company based in Chicago.) Known as Dialog, the enterprise was founded
in 1988 with an investment of 15.35 million roubles. KamAz, a manufacturer
of lorries, has the largest stake with 32.6 per cent of the equity, while
Moscow State University and the Central Economics and Mathematics Institute
have 13 per cent each. The Space Research Institute in Moscow has 7.2 per
cent, a section of the Economic Achievements Exhibition Centre, 2.6 per
cent and a Soviet export trade organisation, 9.8 per cent. The American
partner holds 21.8 per cent of the equity. Dialog assembles PCs, produces
diskettes, develops software and conducts technological research in these
fields. It is involved in the construction of a factory for making PCs at
Kishinev, capital of the southern Soviet republic of Moldavia. The plant
is expected to be producing more than 500,000 PCs a year by 1995.

For the moment, Western partners can repatriate their profits only by
selling products developed in the Soviet Union, such as software, in the
West. This is also the only way that a joint venture can obtain the foreign
exchange it needs to buy components. When the rouble is a hard currency,
the Soviet government has promised to introduce legislation that will enable
foreign companies to repatriate profits directly.

Joint ventures have two significant contributions to make to the process
of perestroika. They will give Soviet industry experience of the economy
of the world market and, by competing for customers with the ministerial
producers of PCs, they will encourage manufacturers to respond to the demands
of the market and not to the whims of the bureaucrats.

The Soviet PC industry is a caricature of the economy. The prominent
defects are plain to see; exaggerated and unflattering, they make the need
for perestroika’s success more pressing. By the end of this year, Soviet
planners say there will be 1.1 million Soviet-built PCs in the Soviet Union.
Even if this target is met, it will still fall far short of the expected
demand for more than 30 million machines.

The West holds up the PC as an emblem of the success of the capitalist
economy – often at the expense of ignoring the social costs of the industry.
The Soviet PC provides a rather tarnished image of an economy, but of one
that may be about to receive some real spit and polish.

Paul Snell has just completed a thesis on the Soviet microprocessor,
microcomputer and personal computer industries at the Centre for Russian
and East European Studies, University of Birmingham.

* * *

A perfect way to discourage research and development

The Soviet Union’s economy is divided into sectors with a ministry in
charge of each one. An industrial ministry is responsible for the development,
production and delivery of products relating to its sector. Leonid Brezhnev
set up the system in the mid 1960s after the failure of Nikita Khrushchev’s
experiments with geographically-defined production organisations.

The system’s structure changed little until 1989, when Mikhail Gorbachev
concluded some major reforms initiated soon after he came to power four
years earlier. In July 1989, some ministries were merged with others and
disappeared.

There are now about 25 industrial ministries. There are also two industrial-related
state committees with the same hierarchical power as that of the ministries.

Seven ministries and one state committee make up the Soviet Union’s
‘military-industrial complex’. These include three organisations involved
in the production of computer technology: the Electronics Industry Ministry,
the Radio Industry Ministry and the State Committee for Computer and Information
Technology. Because of their involvement with military strategy, the trio’s
production plans and achievements are not published in much detail. This
makes it difficult to evaluate the performance of the computer industry
accurately; from information released in the Soviet press, however, it is
possible to draw some broad conclusions.

Besides the industrial and civilian ministries, there is the academic
research hierarchy. In this, republican academies replace ministries and
report to the Academy of Sciences instead of to the State Administration
or Military Industrial Commission (see Diagram). The quite separate interests
of the industrial and academic organisations within the hierarchy often
leads to barriers between academic research and industrial innovation.

The Academy of Sciences created the Interbranch Scientific and Technical
Complexes (ISTCs) to help to overcome such barriers. But the idea has not
worked well in practice. For instance, there is an interbranch complex for
the development of personal computers. But though this ISTC has access to
production facilities, the people in charge of the equipment remain under
the authority of a ministry and they tend to ignore orders from the complex.
This dual subordination has been apparent in the Soviet Union for many decades,
and the ISTCs are just one type of organisation faced with the problem.

The organisations above the ministries and academic institutions are
the Military Industrial Commission, the State Administration, which includes
various planning departments and the State Committee for Science and Technology,
and the Academy of Sciences. These bodies are subordinate to the Council
of Ministers, which was effectively the Soviet government before the ‘democratisation
process’ introduced under the Gorbachev regime. Since 1989, power has switched
from the Council of Ministers to the Congress of People’s Deputies, and
to Gorbachev himself, who has sweeping presidential authority.