[lbo-talk] The tech industry: The Russians are coming

[" Chris Doss "]

C/o the JRL, which really should stop censoring the eXile.

CNET News.com
March 4, 2004
The Russians are coming
Michael Kanellos is a senior department editor at CNET News.com, where he
covers hardware, scientific and research issues, and start-up companies. He
holds qualifications from Cornell University and Hastings College of the
Law. He has worked as an attorney and a freelance travel writer, among
other occupations.

COMMENTARY--When you look back at the Cold War, it's a wonder sometimes
that it took so long to end.

Back in the heyday of the Soviet Union, the KGB managed to smuggle highly
confidential white papers out of IBM and other companies on a somewhat
regular basis, according to Vadim Temkin, who worked in computer research
in the country years ago and now serves as software quality engineering
manager for Java Card and Wireless Java Technology at Sun Microsystems.

Some of these documents were only a few weeks old. "Hot off the presses,"
Temkin told me a few weeks ago at the U.S.-Russia Technology Symposium at
Stanford University, where he was an attendee.

Although researchers often used these papers to build supercomputers that
could rival some of the capabilities of those in the West, the spy system
didn't work perfectly. The external KGB agents who oversaw the theft were
different to the internal KGB agents at the lab that oversaw photocopying.
Occasionally, when the internal agents saw the "Confidential" warning
stamped on a paper by IBM, they erroneously assumed the warning came from
one of their supervisors. Instead of passing the document to the
researchers, the agents would lock it in a desk drawer.

Another time, an external agent pilfered a 5-inch magnetic floppy disk from
a U.S. corporation. Unfortunately, another agent stapled a piece of paper
to it, destroying the ability to extract the data. "Somebody probably
risked their life getting that," Temkin recalled.

Even bigger bungles occurred. In "At the Abyss: An Insider's History of the
Cold War," former Air Force Secretary Thomas C. Reed tells how the CIA
planted deliberately buggy software with a double agent for the KBG that
eventually got implemented into the control systems for a natural gas
pipeline between the Soviet Union and Western Europe. This Reagan-era bit
of skullduggery (reported also by William Safire) caused the pipeline to
explode and may have contributed to the downward economic spiral of the
U.S.S.R.

Still, the Russians did manage to steal quite a bit of confidential
information, and the United States must have had its own plodding,
bureaucratic blockheads.

Another crucial aspect of this history of espionage is that it's in the
past. Now, Russian scientists are working with U.S. and European companies
and, as a result, the countries that came out of the old empire could
become some of the more significant players in the global tech economy in a
few years.

The IBS Group, a Moscow-based technological company that performs research
and programming for hire, is performing offshore programming for, among
others, Dell and IBM, for example.

Sea Launch--a joint venture of U.S., Norwegian, Ukrainian and Russian
companies--has become the world's first, and only, commercial rocket-launch
service, according to Valery Aliev, the technical director of development
for the program. Since 1999, it has conducted 12 launches for EchoStar and
XM Satellite, among others.

Western venture capitalists will get a more clear glimpse of emerging
technology in September when the Russian version of Tech Tour takes place.
The tours are essentially three-day conferences at which local companies
pitch themselves to U.S. venture investors. A key change for Russian
companies is that scientists can now qualify to keep the rights to the
inventions they developed at national institutes.

Do the tours work? Apparently, yes. Media Lario, a manufacturer of
precision mirrors in Italy, received funding from Intel after a Tech Tour
through that country. Its products are potentially useful in developing
mirrors for Extreme Ultraviolet (EUV), which will enter production lines in
2009.

Russia has a long way to go to catch up with China and India in
establishing links with Western companies. It also doesn't have the same
sort of large population.

On the other hand, the country does have a fairly long history of math and
science. (Russian scientists came up with Velcro as part of its space
program, according to Andrey Fursenko, the head of the Ministry of
Industry, Science and Technologies.)

In the end, Russia could become a larger competitor for the white-collar
jobs now leaving the United States. And this time, the country won't have
to worry about someone wielding a stapler.

********


Business Week
March 8, 2004
Want Innovation? Hire A Russian
Korean companies are cashing in by signing up low-cost engineers
By Moon Ihlwan in Seoul

Few companies have made a bigger splash in global markets in recent years
than Samsung Electronics Co. The South Korean company has blasted past its
Japanese and U.S. competitors to take a big share of the international
electronics and mobile-phone markets. Last year it boasted profits of $5.1
billion on revenues of $37 billion. And one key to Samsung's success has a
surprising address: 1 Bolshoi Gnezdnikovsky Lane, Suite 300, in Moscow.

That's the home of the Samsung Research Center. Opened in 1993, it now
employs 80 engineers and scientists and was largely responsible for 50
international patents in 2003 alone. Among the Russians' achievements:
frequency-filtering technology, which vastly reduced noise on Samsung's
now-ubiquitous mobile phones. "Russia is our No.1 destination for
technology outsourcing," says Cha Dae Sung, who is in charge of "global
technological cooperation" for Samsung.

And Samsung is not alone. LG Electronics, Daewoo Electronics, and hundreds
of smaller companies rely heavily on Russian engineers, who labor either
from Korean suboffices in Moscow or in the office towers of Seoul. "There's
an enormous pool of scientific and engineering talent we can tap into in
Russia," says Song Yong Won, Russia specialist at the state-run Korea
Institute of Science & Technology.

COOLING PIPES. Examples of Russian technical prowess abound. It was a
Russian scientist, Elena Klalkina from Moscow State University, who ironed
out problems in developing the highly efficient cooling pipes that are a
crucial component of LG air conditioners. Another Russian played a role in
the invention of the long-lasting carbon-coated recording heads that helped
Daewoo sell 4.2 million VCRs last year. And it was Russia's Institute for
Information Transmission Problems in Moscow that helped develop the
image-processing chips in Samsung's digital TVS.

Why are so many Russians working for Koreans? Partly because Russia itself
has been so slow to develop its homegrown industries. Moreover, Korea can
no longer depend on its traditional industrial patron, the Japanese. It was
Mitsubishi Motors that taught Hyundai Motor to build cars, Nippon Steel
that helped build Posco's first steel mill, and Sanyo that introduced
television technology to Samsung. Now these companies are Japan's fiercest
competitors, and Tokyo is not so generous with its expertise.

So Korea's industrial chieftains turned northward to exploit Russia's
underemployed educated class. An electrical engineer working for a Korean
company pulls down $3,000 to $5,000 a month, five times more than a similar
job pays in Russia. "The beauty of employing Russian engineers is that they
offer excellent stuff at a much lower cost than their Western equivalents,"
says Han Jeung Su, a director at Salus Biotech Corp. Salus' claim to fame:
It has sold 70,000 vials of a hangover remedy, called KGB, based on a
treatment developed to remove toxic substances from the bloodstreams of
Russian cosmonauts.

Uses have also been found for technology developed by the Soviet military.
ChungHo Nais Co. of Seoul has adapted an electronic plate that was once
used to cool Soviet tanks in Afghanistan for use in chilling drinking
water. The technology was also used for a three-compartment appliance that
chills, ferments, and stores kimchi, the spicy pickled cabbage found on
every Korean dinner table.

If the Korean government has anything to do with it, the Russian
contribution will get stronger. Seoul is helping some 60 Korean startups
with $19 million in grants and loans to tap underused Russian technology.
"We want to act as a go-between to match Korean startups with Russian
scientists," says Kim Sang Hwan, an exec at the state-run Korea
Techno-Venture Foundation. And as long as the money is good, the Russian
inventors will never say nyet to prospective Korean employers.