Since invading Ukraine a year ago, Russia has faced an exodus of tech companies and services. This includes the exit of Samsung and Apple, two of the world’s most popular smartphone brands. In response, the country has redoubled efforts towards technological self-sufficiency, including the development of a new Android smartphone.
The phone, which has yet to be named, will be built by National Computer Corporation (NCC), one of Russia’s largest IT companies, with an ambitious goal of selling 100,000 smartphones and tablets by the end of 2023, the founder of NCC said on Monday told local media that he wants to invest 10 billion rubles ($132.9 million) in the project and hopes to capture 10 percent of the consumer market by 2026.
The news comes just days after the US Department of Commerce banned the export of phones and other electronics costing more than $300 to Russia. However, experts say that a Russian smartphone will have a hard time beating cheap rivals from China and may struggle to use Google’s Android.
“I think while the phones might be Android at first, Google might not allow the full license in the near future,” says Jan Stryjak, associate director at Counterpoint Research, an industry analysis firm. “The phones may need to switch to a different operating system.”
Google no longer offers Russian users paid apps or updates for these apps. But it has stopped blocking people in Russia from using its free services like Gmail, Maps, Play and YouTube. The company did not immediately respond to WIRED’s request for comment on Russian companies using Android.
The new smartphone project is just one of Russia’s many attempts at technological self-sufficiency and digital sovereignty. The country has pledged “unprecedented” amounts of funding to develop its electronics industry, enticing Russian firms. But not everyone is convinced that government subsidies will lead to new products — or whether products like NCC’s phone will succeed.
“Honestly, as far as I know, it looks like a PR stunt,” says Karen Kazaryan, director general and founder of the Internet Research Institute, of NCC’s smartphone project.
At its core, this digital sovereignty means government control of the internet within its borders, including content, data and infrastructure, allowing the government to shield the country’s online sphere from the rest of the world. The Russian government began promoting the idea after sanctions following the annexation of Crimea in 2014.
In a way, Russia’s efforts have been successful. After Instagram, Facebook and Twitter were banned in the country, some Russian users switched to domestic social media, notably to VKontakte, the Russian version of Facebook. Russian companies, both state-owned and private, have also tried to lure Russians from TikTok, Instagram, and YouTube to homemade variants like Yappy, Rossgram, and RuTube. However, many of these platforms have come under criticism for outdated designs, a lack of users, or too much government propaganda.
Another project that attracted a lot of attention was the domestic RuStore app store launched by VKontakte and the Russian Ministry of Digital Development in May last year, which was intended to replace Google Play and Apple’s App Store. According to VKontakte, the store has more than 10 million users.
The new wave of sanctions following the invasion of Ukraine has breathed new life into the concept of technological self-sufficiency, as the Russian government launched several initiatives to create domestic replacements for foreign electronics, online platforms and software on which many Russian companies depend .
Over a thousand tech companies suspended or restricted their operations in Russia following the invasion of Ukraine. In just a month, Cisco, SAP, Oracle, IBM, TSMC, Nokia and Ericsson, as well as Samsung and Apple all exited the market, impacting entire industries including mobile operators, factories, startups and large SOEs. According to IDC, a global market analysis firm, the Russian IT market shrank by $12.1 billion, or 39 percent, in 2022.
Russian Prime Minister Mikhail Mishustin said in February that Russia wants to replace 85 percent of foreign software with Russian substitutes and open dozens of so-called import substitution centers. Among them is a project to create a national operating system for devices. However, the plan is still in its early stages with no roadmap in sight, says Kazaryan of the Internet Research Institute.
“Right now, some big players are trying to court government subsidies to develop devices with ‘national mobile operating systems,’ whatever that is,” he says.
One of the more promising alternatives to Android is Aurora OS, a Linux-based smartphone operating system from Russian state-owned telecommunications company Rostelecom. But Aurora was designed primarily for government use and doesn’t 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 Russia’s operating system.
Other Russian smartphone makers like BQ have promised to customize Huawei’s HarmonyOS for their phones. But there hasn’t been any news of progress since BQ’s announcement in September. China-based Huawei developed its own operating system in 2019 after Google stopped providing its suite of mobile software services to the company due to US trade sanctions. The Chinese IT giant said it has no plans to launch HarmonyOS-equipped handsets outside of China.
Huawei’s struggle to compete outside of China shows that it’s difficult for a smartphone brand to attract buyers without access to Google services. Huawei lost almost a third of its revenue in 2020, the year after sanctions restricted access to Google Maps, Gmail and other popular Google apps. However, the biggest hurdle for NCC’s new smartphone is cheap and readily available phones made in China.
Counterpoint 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 big gap in the market for a new player.”
Other Russian phones, most notably Yotaphone, have tried to break into the domestic market, but they have remained on a very small scale, Stryjak says. Russians prefer brands they already know. Thanks to parallel trade – importing goods without the manufacturer’s permission – even Samsungs and iPhones are still available in the country. NCC plans to target prices of between 10,000 and 30,000 rubles ($132 to $398) for its smartphones.
“We are examining various options. This could be production in Russian factories or contract manufacturing in Chinese companies,” 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 they have been unable to source the necessary chips from TSMC for the second iteration of their handset, the AYYA T2. All this can make the creation of Russian challengers from Samsung or Apple very expensive.
“You can probably make a smartphone in Russia with Chinese parts, but it’s not very efficient,” says Kazaryan. “And why would anyone buy a Russian phone more expensive than Xiaomi?”