Aircraft construction companies of the Khabarovsk Krai have room for the production growth
The aircraft construction sector of the Khabarovsk Krai generating the most high-tech part of the gross regional product, including Sukhoi Superjet 100, is at the cross-roads. At the cusp of the technological transition, the country’s leadership made a strategic decision to support the development of Komsomolsk-on-Amur, the engineering capital of the Russian Far East. The next few years will show how effectively such new tools as preferential conditions of the priority development territories and cluster approach will be applied to the aircraft industry.
In 2015, the 100-th serial Sukhoi Superjet 100 airliner (the first civilian plane designed in today's Russia) was made in the Khabarovsk Krai. Assembling the most high-tech product of the Russian aircraft engineering industry is being performed under international cooperation at the facilities of PJSC Sukhoi Civil Aircraft. Now the plant is able to produce up to 3 planes a month. The SSJ-100 flies to dozens of countries, constantly expanding its geographical presence which is the rightful cause for the pride of Komsomolsk-on-Amur aircraft construction workers. However, the Khabarovsk Krai machine building complex has much more to offer to the world market.
Due to the concentration of military enterprises, the Khabarovsk Krai has historically been an engineering industry leader among the Russian Far Eastern regions. The region ensures up to 80 % of the engineering production in the Russian Far East. Aircraft construction and shipbuilding make up 35 % of the manufacturing industry production in the Khabarovsk Krai. Aircraft construction is part of the huge industrial complex with the decades of development behind. Along with the growth of the state defense order (in 2011-2014 only it almost doubled, growing 2.23 times in aircraft construction and 1.53 times in shipbuilding) enterprises in the Khabarovsk Krai constantly increase investments in technologies and production.
There is a program worth 27,8 bln rubles for 2007-2020 to boost the technical development of the Komsomolsk-on-Amur Aircraft Production Association (KnAAPO), which belongs to the Sukhoi Holding. The largest part of the program (18,64 bln rubles) will be allocated in 2017-2020. The company is one of the key manufacturers of equipment for the Russian Ministry of Defense. The fifth-generation T-50 fighter first took off from its grounds. Compared with the previous generation of T-50 fighters, it has a number of unique features, combining the functions of an attack aircraft and a fighter. These aircrafts, along with the upgraded fourth-generation aviation complexes, will determine the potential of the Russian Air Force in the next few decades. Technical re-equipment and introduction of modern production structure resulted in the 2.5-3 times reduction of the labor intensity of aircraft production at KnAAPO, increasing labor productivity at least 2 times.
The Sukhoi Civil Aircraft branch also developed the production capacities. Its investments in the fixed capital amounted to billions of rubles. To manufacture SSJ-100 components, the company purchased, installed and commissioned equipment from leading aircraft manufacturers. The strategic partner of the project is Italian Alenia Aeronautica. French Snecma is a risk sharing partner, while Boeing is a consultant.
Aircraft construction enterprises account for 90 % of investments in the Khabarovsk Krai engineering industry. Aircraft construction and shipbuilding are the most enthusiastic in terms of innovations among other regional production industries, accounting for up to 62 % of the innovation activity. KnAAPO, Sukhoi Civil Aircraft branch, and Amur Shipbuilding Plant (ASP) form the main industrial potential of Komsomolsk-on-Amur. The state defense procurement in these fields amounted to 33 billion rubles in 2015, the entire budget of Komsomolsk-on-Amur being about 6 billion rubles. With this powerful financial support, aircraft construction is a potential driver of innovative economy. It creates prerequisites for the development in the Khabarovsk Krai of the fifth and sixth technological waves, characterized by high value-added industrial production.
The engineering industry in Russia in general is going through difficult times. The industry collapsed during the financial and economic crises, almost all major engineering companies came under state control and are being modernized mainly by direct subsidies from the federal budget. There are virtually zero new successful private projects in the field of engineering in Russia. Technologically stronger neighbors in the Asia-Pacific Region - Japan and South Korea - also put pressure on the industry.
However, shipbuilding and aircraft manufacturing world markets are entering a new technological wave. Redistribution of shares held by the leading manufacturing companies is underway. In the longer term, shipbuilding market will continue to grow, despite periodic recessions of a cyclical nature. Development of offshore oil and gas production and emergence of a global natural gas transportation system are considered by experts as main growth drivers for medium and large shipbuilding in the next 10-15 years. The global market for aircraft and components has not experienced any drop in demand over the past decades. The main driving force behind its development is the growth of passenger and freight traffic, which is forecast to increase 2 and 2.3 times respectively by 2025. The average annual passenger traffic growth rate in Russia and the CIS in the next 20 years is expected to be 7 %, according to the forecasts of the United Aircraft Corporation (UAC). The demand for new passenger aircraft from Russian airlines for the period up to 2032 will be 1.9-2 thousand aircrafts of various passenger capacity.
Major investment targets for the development of engineering industry in the Khabarovsk Krai include strengthening of the cluster approach to the development of the industry and focusing on launching new specialized companies and small innovative projects. Long-term defense contracts contribute to the development of modern technologies and generate demand for innovation. But boosting Khabarovsk engineering competitive advantages is impossible without strengthening the "technological core", which should include full technology service cycle and pilot projects. The inevitable way of the aircraft construction and shipbuilding development in the region is the integration and technological cooperation of all the enterprises.
KnAAPO is a company with a full production cycle from casting and forging to final assembly and flight tests, with the possibility of after-sales maintenance. The Sukhoi Civil Aircraft branch in Komsomolsk-on-Amur only assembles SSJ-100; that is why it depends on the supply of components and operation of the other enterprises of the production-sales chain. In 2015, for example, it was planned to produce 50 SSJ-100 airliners in Komsomolsk-on-Amur, but the actual output was only 17. The enterprise was ready to fulfill the assigned plans, but failed to meet the target. KnAAPO has no such problems. In November 2015, the Sukhoi Holding signed an unprecedented contract with China for the export of 24 Su-35 fighters. It will be enough to give KnAAPO 10 years worth of work.
SWOT-analysis of the engineering development factors in the Khabarovsk Krai shows that the strengths of the industry in the region are: active involvement in state programs (and hence permanent funding through the state corporations - the USC and the UAC), advanced production capacities and great experience in solving complex problems, pilot projects for the civil sector and experience in the implementation of design works, the proximity of potential markets for their products - Asian countries. Also important are specialized universities and research institutes, repair facilities and expertise to access the services market, experience potentially convertible into technologies of other industries.
But the weaknesses of the engineering industry are also apparent: high dependence on state procurement, narrow processing specialization of the basic manufacturing operations, logistics and transportation difficulties in the supply of components, low level of cooperation of the universities, research institutes and enterprises with the international networks of component suppliers and researchers. Transport and energy tariffs in the Russian Far East being higher than the average national level does not increase product competitiveness of the local enterprises in the domestic market as well.
The Khabarovsk Krai Government is sure that only the cluster approach can solve development problems of high-tech engineering. In 2015, the regional authorities adopted a program to create a cluster around the leading factories of the aircraft construction and shipbuilding industries. These are KnAAPO, Amur and Khabarovsk Shipbuilding Plants, and Dalenergomash Group. Important components of the cluster must be the Pacific National University, the Far Eastern State Transport University and the Komsomolsk-on-Amur State Technical University, several research institutes and the independent non-profit organization "Far East Innovation Promotion Agency" (FEIPA), an entity controlled by the regional government and able to become a project coordinator.
Most of the potential cluster members are concentrated in Komsomolsk-on-Amur which has recently discovered a unique opportunity to implement the existing potential of Khabarovsk engineering in the dynamically developing Asian markets. The Komsomolsk-on-Amur agglomeration is a key center of the machine-building complex of the Khabarovsk Krai. The total output of this sector, according to the FEIPA, is about 33 billion rubles (more than 7 % of the region’s GRP), where Sukhoi Group accounts for 25 billion rubles, shipbuilding companies account for 5 billion rubles, and the other engineering companies account for 3 billion rubles.
In 2015-2016, Komsomolsk-on-Amur got two powerful developing tools. Last year, the Komsomolsk priority social and economic development area was created. It provides favorable conditions for the implementation of private business projects. And in the spring of this year, the Russian government adopted a comprehensive plan for long-term development of the city worth more than 60 billion rubles. The federal and regional authorities are willing to spend these budget funds for the infrastructure of the Russian Far East industrial center in the period up to 2025.
The characteristic feature of the Komsomolsk PSEDA is that it relies on the inter-industrial cooperation, and this is the basis of the concept of uniting the aircraft construction and shipbuilding industries in a cluster. The Energiya (Energy) Group, with a project of the plant for high-precision mechanical processing of the components for the needs of the UAC with a capacity of 1.7 million machine-hours a year, has already become a basic resident of the PSEDA. The plant worth 7.7 billion rubles is intended to serve not only the needs of the aircraft factories in Komsomolsk-on-Amur (approximately 1 million machine-hours), but other UAC companies as well. That is exactly why the provisions on purchasing goods from PSEDA residents should be included in the procurement regulations of UAC, USC, and Sukhoi Civil Aircraft. Further search for basic PSESA residents aims at providing opportunities for cooperation with other leading companies in Komsomolsk-on-Amur. Those may be companies producing aircraft equipment and electronic components, hydraulic systems, and interiors.
National fishing fleet will be built in the Khabarovsk Krai
The shipbuilding industry in the region employs about 4,000 people. The leading enterprises are Amur and Khabarovsk Shipbuilding Plants (ASP and KSP). They are part of the United Shipbuilding Corporation (USC). Both plants perform final assembly. It means that these companies are supposed to organize the final assembly of the ships within the holding. The components, including those from the USC, are supplied from outside the region. The main technological decisions are also made at the corporate offices located in other regions of Russia.
In 2015, shipbuilding and ship repairing enterprises of the Khabarovsk Krai shipped about 9.6 billion rubles worth of products (twice as much as in 2012). According to Vyacheslav Shport, the Governor, with proper state support, region plants are going to build 53 vessels for military and civilian purposes by 2030. The two companies have different situations with procurement orders from the Navy: ASP got additional orders for building the 20380 Project corvettes. In the August of 2015, the first corvette left for refinement to a base in the Primorski Krai. KSP now works with civil orders only.
Throughout its history, ASP has built 56 nuclear-powered submarines, 41 diesel submarines, and 36 surface warships. It currently makes surface warships only. In the future, the plant will be mainly engaged in building civilian vessels and corvettes for the 20380 and 20385 Projects. The company's production facilities include hull plating, assembly and welding, wiring, pipe, engineering, metallurgy and painting units, as well as a materials and products testing center, a nuclear and radiation safety department, and an electroplating coating section.
KSP specializes in building sea and river vessels, dynamically supported ships, small and pleasure boats, ocean-going trawlers, and refrigerators. Two shipyards with an area of 68,000 sq. m. make it possible to build vessels with the displacement of up to 2,000 tons. Throughout its history, the plant has built about 350 vessels, including 200 vessels for the Navy: guard and anti-submarine ships, low magnetic minesweepers, missile boats, vessels for physical fields’ control, armored artillery ships, and command ships. The company can build civil hovercraft. In 2013, KSP launched two azimuth tugs commissioned by ZAO (private limited company) Rosnefteflot.
The main hope for the development of commercial shipbuilding in the Khabarovsk Krai lies in the interest to the region capacities shown by the Ministry of Industry and Trade. The Ministry of Agriculture and the Russian Federal Fisheries Agency are developing a mechanism to distribute 15 % of the fishing quota to support shipbuilding, and 5 % of the quota - to the development of coastal fish processing, starting from 2018. Thus, part of the total quota will be allocated on a competitive basis to those companies that invest in fleet renewal and the development of fish processing. Nine fishing companies have submitted applications to the Ministry of Industry and Trade for building 16 ships. The draft plan for the placement of orders, formed by the Ministry of Industry and Trade, includes both ASP (can build 16 units), and KSP (37 units - 31 middle fishing freezing trawler ships - and 6 research vessels).