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Paper No. 18
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PAPER NO. 18
25- op 6tl;l
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CONFERENCE
ON SOVIET. BLOC ELECTRONICS INTELLIGENCE
0b November e 9 December 1966
Prepared by the Electronics Eg77jigment Branch
of the Office of Research and Reports
November 1966 25X1 C
This report was prepared specifically for use at the
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Foreword
This paper presents a refined estimate of the size and composition of the
Soviet electronics industry. Also included is an estimate of the value of
electronic hardware produced for the new military programs which have been
undergoing deployment since 1962, a statistical discussion of the growth rates
of the industry in past years as well as prospects for further rapid growth in
the future, and a comparison of the estimates of size of the US and Soviet
electronics industries in 1965 and 1970.
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CONT-ENTS
I. Introduction . . . . . . . . . . . . .
II. Background . . . . . . . . . . . . . . .
III. Production . . . . . . . . . . . . . . . . ? .
IV. Growth of the Industry . . . . . . . . . . . ? ? ? ? ? ? ?
V. Military Production . . . . . . . . . . . ? ? ? ? ?
VI. Prospects for Future Growth . . . . . . . . . . . . . . ? . ?
Table 1. USSR: Estimated Value of Output of Electronics by Major
Sector of End-Use, 1958-65 . . . . . . . . . . . . . . . . .
Table 2. USSR: Estimated Expenditures on Electronics for "New"
Military Programs, 1962-65 . . . . . . . . . . . . . . . . .
Figures
Page
1
.6
Figure 1. USSR: Estimated and Planned Output of Electronics 8
by Major Sector of End-Use, 1958-65 . . . . . . . . . .
Figure 2. US and USSR: Best Estimate of Value of Output of Total
and Military Electronics, 1965 and 1970 . . . . . . . . . 10
Figure 3. US and USSR: Rates of Growth in Electronics
Output, 1960-70 . . . . . . . . . . . . . . . . . . 12
Appendixes
Appendix A. Derivation of the Gross Value of Output of
Electronics in the USSR for 1956 and 1965 . . . . . . . 13
Appendix B. Sources . . . . . . . . . . . . . . . . . . . . ' ? ? ?
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TRENDS IN THE ELECTRONICS INDUSTRY OF THE USSR
I. Introduction
It should be stressed at the outset that verification of estimates of produc-
tion of electronics equipment in the Soviet Union is becoming increasingly
difficult. The USSR continues to maintain a high degree of secrecy about the
activities of the electronics industry, and the flow of useful quantitative
information has virtually ceased. In particular, data on the physical production
of vacuum. tubes and semiconductors, which provide a useful check on aggregate
estimates, have not been released since 1961. On the positive side, output figures
on consumer electronic items continue to be published as well as some value figures
for the production of electronic computing equipment, and, more recently, some
significant foreign trade information has become available through
official Communist sources. While some helpful generalizations can e rawn rom
these data, they are of only limited use in describing the movement of the total25X1 C
industry. From the standpoint of military electronics, sensitive new methods of
intelligence collection have added a useful dimension to military-economic
analysis. On the whole, official Soviet data on the electronics industry in
recent years has been sparse.
The picture is only slightly brighter in respect to the availability of pro-
duction-indexes. Plan and plan fulfillment indexes continue to be published
erratically for the industry as a whole and/or for some of its subsectors, but
the loose and inconsistent terminology employed in stating indexes sometimes poses
vexing problems for analysis. For example, according to a recent statement by
Kalmykov, the output of the "radio industry" doubled during the seven-year plan.
This index could refer (1) to,the aggregate output of electronics equipment; (2)
to the output of final assembly only; or (3) to the output of radio, television
receivers, and other consumer items. Considering the immediate context in which
the statement was made, its variance with all other published aggregate indexes,
and the fact that the term had been equated earlier in a journal article to con-
sumer electronics equipment, 2/ it is assumed that in this case the index refers to
the consumer sector and is not an aggregate output index. A further note of ambi-
guity is contained in two additional references to the "electronics industry." In
the first reference, the Minister of the Electronics Industry has stated that the
rate of growth of the "electronics industry" increased by 1.5 times during 1965. J
From the context of his statement, it is believed that the Minister was referring
to the output of his Ministry and not to electronics in the more aggregate sense.
Since the Ministry of the Electronics Industry is responsible for the research,
development, and production of electronic component parts (in contrast to the
Ministry of the Radio Industry, which is responsible for the production of final
goods), the term "electronics industry" in this case may be equated with the com-
ponent sector of the industry. In the second reference, the journal Radio
reported that the output of the "electronics industry" grew by 2.4 times during
1960 64. 4/ From context it is concluded that, in this case also, reference is
made to the output of components. Fortunately, the problem of index identifica-
tion, while vexing, has not proved unmanageable.
In the past, indexes which referred to the output of the electronics industry
by its various designations such as the radiotechnical industry, the electronics
industry, the radioelectronics industry have been found generally to be indexes
of aggregate output -- the gross value of output of all electronics equipment.
As such, they readily serve as a basis for production estimates. Aggregate output
indexes subsume the output in the USSR of those electronic items which are nomi-
nally included within the conceptual framework of electronics output in the
United States. They measure the growth in output of the whole industry in gross
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value terms, including all output of military/space electronics as well as expen-
ditures on research and development. J These indexes are assumed to be "commodity"
indexes that are constructed by adding up the reported output of each plant but
excluding the value of nonelectronic items -- for example, nonelectronic consumer
goods, which might be produced as secondary output by an electronics plant.
In this paper, all aggregate value estimates are expressed in "net" terms --
that is, an allowance has' been made for double-counting of components and for the
relatively small value ofoutput representing production equipment manufactured by
the industry as a capital; input into its own production process. In other words,
aggregate value estimates; represent the output of final electronics products only.
One final caveat: estimates represent preliminary findings of continuing research
and should be viewed as t'ntative.
i
II. Background
The rate of growth of the Soviet electronics industry during the seven-year
plan (SYP) is a crucial element in the analysis of its present size and compo-
sition. Given this datum, the gross value of output of the industry can be uniquely
determined for 1965 and tone military and nonmilitary shares of that output com-
puted with a reasonable degree of confidence.
Three indexes which are available give rise to alternative hypothesis concerning
the growth path followed by the electronics industry during the past seven years.
First, there is the possibility that the original seven-year plan remained sub-
stantially intact, implying an average annual growth of about 17 percent. Second,
there is the possibility? suggested by an official of Gosplan, that the growth
rate actually declined. iii the final three years of the SYP to less than 15 percent
per year (compounded). Finally, there is the position that output accelerated
sharply during the finallthree or four years of tie SYP raising the average annual
growth rate for the peridd as a whole to about 22 percent. Analytically, the
problem may be divided into two parts: (1) determining which path the industry
actually followed and (2) determining whether, in point of fact, the goal was
reached. In respect to tthe first point, it has long been the position of CIA --
presented at the Conference -- that the industry was intended to
grow by four times during e SYP. In respect to the second point, it is bel+;sved
for reasons partly empirical and partly rooted in the dynamics of growth in Soviet_
defense industries that dross output during 1959-65 did, in fact, grow by four
times.
25X1 C
The original seven-year plan for the production of electronics equipment in the
USSR called for a level cf output in 1965 three times as great as that of 1958, 6/
When all available indexes are linked together, it appears that production grew at
a relatively stable rate of about 16 percent a year (compounded) during the first
three years of the SYP (959-61). Allowing for some slight acceleration during,
the final four years as stew capacity was phased in, this growth rate was entirely.,
consistent with the progkammed goal. In early 1963, Nelepo, an official of Gosplan,
announced that output in1965 would be "more than 50 percent greater than that of
1962." 7/ If assunption6 about the growth in output up to 1962 are correct, this
implied 7a falling off in the growth rate during 1962-65, indicating that the
original 1965 output goal would be substantially underfulfilled. No meaningful
interpretation can be attached to this index in the light of numerous press
references to "accelerated" output during 1962-65 and, in particular, to the
announced policy of the 6ommunist Party.: This policy, contained in a
late 1962 source clearty indicated that production was being pushed at a
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priority pace: "The program of the Communist Party calls for the forced produc-
tion, in every way possible, of automatic lines and machines, automation equipment,
telemechanics, electronics, and precision equipment." 8/ Moreover, the original
SYP must itself be rejected as an indicator of the industry's true growth rate.
Following the November 1962 Plenum of the Central Committee of the Communist
Party, it became apparent that decisions -- ratified at this Plenum -- had been
made to accelerate the electronics industry's output significantly. Explicit
evidence of a revision in output goals was contained initially in the January
1963 issue of Kommunist, which announced that output of electronics equipment in
1965 would be four times that of 1958 -- that is, the 1965 target was increased by
one-third over that of the original plan. Subsequent announcements by all leading
officials of the electronics industry -- Kalmykov, Chairman of the State Committee
.of Radioelectronics; Kazanskiy, Deputy Chairman of the State Committee of Radio-
electronics; and Shokin, Chairman of the State Committee of Electronics
Technology -- repeated the index, each in his own way, making it unmistakably clear
that the gross output of all electronics would increase by'four tines. 2/10 11/ 12
No new aggregative index has become available since the completion of the SYP
to confirm (or repudiate) the fact that the output of electronics equipment in
1965 had reached a level four times that of 1958. On a less aggregative basis,
it may be noted that the upward revision in the original plan for computers was
fulfilled. 13/ Moreover, in the area of component production where one would
expect a substantial expansion to support an expanded output of final equipments,
there is evidence of accelerated growth, particularly in 1965. Production of com-
ponents grew at an average annual rate of about 19 percent during 1960-64, compared
with an estimated 24 percent for the industry as a whole. The rate of growth of
components in 1965 was increased by 50 percent, implying an actual rate of growth
incomponent production of about 29 percent during 1965 compared with an estimated
rate of 30 percent for the industry as a whole. in addition, the output of semi-
conductors in 1965 grew by 40 percent over 1964. 14/ (Interestingly, statistics
for the United States electronics industry show a high degree of correlation in
the movements of components and aggregate output, component production tending to
grow at a rate only slightly below that of the aggregate) mere are other
evidences of a vigorous expansion of output of components. Soviet manufacturing
facilities for component production equipment have expanded. In 1962 there were
seven specialized plants manufacturing production equipment for the component
sector. During 1962-65:, four more plants were reportedly under construction. 15/
Moreover, imports of production equipment, principally from, the Free World
countries, have increased significantly in recent years. The Soviet foreign
trade handbook for 1965 shows an expenditure during 1964-65 of about 23 million
foreign exchange rubles on production equipment for the radioelectronics industry
(most of which was probably allocated to the component sector). 161 Imports of
production equipment before 1962 are believed to have been negligible.
It is believed that the revision in output goals for electronics in 1962 was
linked primarily to structural changes in Soviet military policy. A hint of this
is contained in statements by Marshal'.Sokolovsky in the 1963 edition of his book
on Soviet military strategy. Apparently referring to decisions made by the
Central-Committee of the Communist Party in 1962, he writes:
Suffice it to.say that the entire fundamental reorganization
of the Soviet armed forces, occasioned by the incorporation
into them of nuclear and:missile weapons, and of radio elec-
tronic gear, has been, and is being effected, on the basis of
decisions of the Central Committee of the CPSU which. made a
scientific determination of the general line of development of
modern weapons of war and of the probable nature of a future
war between the camps of imperialism and socialism.. 17
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More explicitly, it is believed that expanded output of electronics was needed
to support incipient str*tegic military programs -- HEN HOUSE missile/satellite
tracking facilities, the'DOG HOUSE and TRIAD installations around Moscow, the
TALLIN-type long-range aircraft interceptor facilities, and single-silo ICBM
complexes.
III. Production
Sufficient information is now available to write two simple equations that
can be solved for the gross value of output in 1956 and 1965, thereby eliminating
the need for many of the; assumptions associated with :previous estimates. In this
case, only one assumption is used -- that the output of the Soviet electronics
industry in 1965 was four times that of 1958. Official Soviet data used in setting
up these equations are as follows:
(1) The index of growth in the output of the electronics industry during
1956-65.
Z:heoutput of electronics in 1958 was 1.48 times the output
in 1956.. A value of output in 1965 of four times that of 1958 pro-
vides anindex of growth over the entire period 1956-65 of 5.92
times.
(2) The gross value of output of the parent machine building and metal-
working sector (MBMW) in 1956 and 1965.
The value of output of MII4W for 1965 has been announced as 61
billion jubles. 18 The value for 1956 is derived by applying the
officialMBMW index to a published figure for 1955 and is deter-
mined to'be 19.8 billion rubles.
(3) The increase in the share of electronics in the gross output of
MBMW during 1956-65.
Accprding to Asval'dov, an official of the machine building
industry;, the share of electronics in the gross output of MBW
increase] by 8 percentage points between 1956 and 1965. 19/
It can be determiied that the gross value of oi.tput of the Soviet electro-
nics industry in 1956 and 1965 was 1.7 billion and 10.2 billion rubles,
respectively.' Adjusting for double counting of components, it is estimated that
the "net" value of output -- the value of final goods and services -- in 1965 was
urrent estimate of "gross"
h th
e c
7.3 billion rubles (US+$10.5 billion). Althoug
o o e
ll
- r --
s n
value fa
Conference, it is significantly lower in "net" terms. .Lower net values derive
from a much greater allowance for double counting than.formerly.**
For mathematical solution and discussion, see A:ppendix:A::.
For discussion, set i ppehdix A .
25X1 C
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Annual levels of production of nonmilitary electronics (industrial and con-
sumer) have been estimated from officially published date, Using the above values
of aggregate output together with the estimated value of nonmilitary production,
the size of the military sector of the electronics industry has been derived as a
residual. The estimated structure of the Soviet electronics industry for selected
years, in dollars and rubles, is given in Table 1. (Because of rounding, the total
may not agree with the sum of the components).
Table 1
USSR:
Estimated Value of Output of Electronics Equipment by Major Sector of End Use,
1958-65
Billion US$
Sector of End Use
1958
1962
1963
964
1
1965
Military/Space/R&D
1.5
3.0
4.1
5.7
7.8
Nonmilitary
1.0
L.8
2.1
2.4
2.7
Total
2.6
4.9
6?3
8.1
10.5
Billion Rubles
Total
1.8
3.4
4.4
5.7
7.3
Percent of Total
Military/Space/R&D
in percent of total
58
61
65
70 74
IV. Growth of the Industry
The Soviet electronics industry, as official production indexes attest, has
grown at an unusually rapid rate since 1950. According to a statement by Kazanskiy
in 1964; "In the last decade the rate of growth, of electronics was almost five
times as great as the growth rates of most other branches of industry." 20/ This
statement accords generally with what has been observed in official data. It is
probable that, on the average, throughout the period 1950-65, the Soviet electro-
nics industry has grown faster than any other major branch of industry in the
USSR. During the SYP, output is believed to have grown at an average annual rate
of about 22 percent. It is estimated that average annual rates on the order of
29 percent were achieved during 1963-65. Estimated average annual growth rates
for selected periods are as follows (in percent):
1950-52 1956 1257 1958 I L59-6o 1961-65
35 29 23 20 16 24
Little is known about how the large expansion in output during the seven-year
plan was accomplished. There is some evidence of expansion and renovation in
existing facilities, and major new centers of electronics production are known
to have been developing in the Baltic republics, in Belorussia, the Ukraine, and
the Transcaucasian republics of Armenia and Georgia. If conditions in the elec-
tronics industry are assumed to have paralleled those in machine building as a
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whole, it may be postulated that one-half of the increase in output during 1959-65
was provided by existing; facilities. This statement contains no important economic
insight, however. More to the point, the accelerated importation of production
machinery from the Free world and, indeed, expansion in the supply of domestically
produced equipment may have increased the amount of capital per wofurtherrker to the
extent that the new capital embodied modern technology may have
labor productivity.
To a large extent,the fact of rapid growth is explained by two factors: (1)
military priority and (~) the low technical requirements of the production pro-
cess. The electronics industry in the USSR is oriented primarily toward the
production and supply of military goods and services to the Soviet military
establishment. In 1965$ output of military electronics equipment constituted nearly
75 percent of the industry's output. With the preponderant share of output devoted
to military purposes, it is clear that the growth rate of all electronics is
highly sensitive to changes in military force levels or to changes in military tech-
nology. This sensitivity grows as complex weapons systems become increasingly
electronics-intensive.
As a defense-associated industry, electronics is a high-priority claimant to
available economic resoturces. Its technical requirements, however, are modest.
Capital inputs are relatively small. It is estimated that only about 200 million
rubles worth of producion equipment had to be added to existing capital assets in
1965 to expand output by more than 1.5 billion :rubles. Labor, the principal input,
can be quickly trained and assimilated. On the basis of the fragmentary data
available on labor force and productivity, it is estimated that the labor force of
the Soviet electronics industry, including scientists, engineers, and technicians,
more than doubled during the past five years, totaling at least 1.5 million in
1965, while output triled. Hence, it may be inferred that about two-thirds of
the growth in output over the past seven years can be explained by growth in the
labor force and about one-third by increased labor productivity. The productivity
of labor in the Soviet; electronics industry appears to be much lower than in
advanced Free World countries. This results from a combination of factors: (.l)
because of a deficiency of highly-automated equipment in component production, the -
-
capital-output ratio ip low, implying a relatively large output per unit fScacapital
that.is, the Soviet component industry is excessively labor intensive; (2)
production management as inferior; and (3) the Soviet industry iwas expanded so fast
that production equipment of advanced designed could not be supplied in sufficient
volume, even with the assistance of substantial purchases from the Free World.
(In the US industry the opposite appears to be true; gains in factor productivity --
increases in output per worker resulting from improvements in the efficiency of
capital and managerial inputs -- has been the main contributor to growth in
Moreover, the supply of professional engineering manpower in the USSR appears
have kept pace with the overall growth of the electronics industry's labor force.
The data base is tenuous, but available evidence indicates that during the past
five years the higher `; educational establishments have been increasing the supply
of engineers trained for employment in?radioelectronic, electrical, aandiinsarument-
percent
building fields, at at annual average rate of about 13
rate corresponding roughly to what has been estimated for the growth of.the labor
force in the electronics industry as a whole.
V. Military Production
About $40 billion; worth of electronics equipment (military and nonmilitary) were
produced in the USSR during the seven-year plan period. This is about US $5 billion
_6-
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(or 14 percent) greater than would have.been produced had the original goals of
the seven-year plan been retained.4-
One of the basic premises of this
paper increment of output was needed during 1962--651 to meet the demand for eelebctronics
generated by programs the nature, scope, or timing of which were not envisaged
by planners in 1958. More than 40 percent of this sum, or $2.2 billion, can
be associated with expenditures on "new" military programs; disposition of the
remaining $2.8 billion has not yet been ascertained. However, there is no
evidence to indicate that nonmilitary production or conventional military pro-
grams entailed any significant alteration in expenditures on electronics from those
originally programmed for 1959-65. It is suggested, residual represents expenditures on miliitaryand/or rspace-associateduresearch
and development activity, on expanded procurement for space, or
possibly on
procurement for military programs as yet unidentified.
Figure 1 shows the growth in output of electronics, including military and
nonmilitary shares, during the seven-year plan. The: area labeled "new" military/
space/R&D programs represents the difference between the estimated value of the
original and revised plans for total output. The area labeled "originally
planned" military/space/R&D represents dollars spent on the procurement of elec-
tronics for conventional military usages, for space hardware, and on associated
research and development expenditures.
During the period 1962-65, about $16 billion worth of electronics equipment
was produced for conventional military programs, space, and R&D. Expenditures
on electronics for conventional military programs include procurement for ground
forces, navy, air force, strategic missile attack forces (MMBM's and ICBM's,
excluding: hardened single-silo complexes), and strategic missile defense forces
(SAM'S, excluding long-range SAM systems).
Me magnitude of the difference between what was produced and what would
have been produced under the original plan is a function of the actual growth
rates for individual years. If output had grown along a four times path from
the inception of the seven-year plan and if it grew at a steady compounded
rate of 22 percent per year (compared with 17 percent compounded under the
original plan), the total increase in output under the revised plan, relative
to the original, would have been 33 percent.
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/?.'
fed al-2a
,'9/7,x7ea' Q ,/pii ` of a/ec*v" t
'
,~y
is Egc~ilame.7 `ire fhe C/SS~:
f
'
9
o,
ec
41gj r er~d- lase ~5
/958' -/9
/9S8 1959
%960
1-961
,1962 x"96 3 /96? 196"
(Plan)
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Estimated annual expenditures on electronics equipment for the new military
programs are shown in Table 2.
25X1 D
Estimated Expenditures on Electronics Equipment for Identified
New Military Programs, 1962-65
Million US$
Program
1962
1963
1964
1965
1962-65
HEN HOUSE*
7
.48
92
48
195
Moscow TRIADS/DOG HOUSE
-
6
48
105
159
Long-range SAM
-
259"
351
467
1,077
Single-silo ICBM (hard site)
-
68
216
460
744
Total
7
381
707
1,080
2,175
Taken as a whole, the production of electronics equipment for military/space/
R&D during the period 1959-65 amounted to about 70 percent of the total volume of
electronics produced. During the current five-year plan period, this share is
expected to decline. Looking beyond 1970, it is likely that the needs of the
public, industry, and the economy at large for electronic goods and services will
force an increasingly larger share of resources to nonmilitary purposes.
VI. Prospects for Future Growth
By any standards, the Soviet electronics industry is large. In 1965 the value
of output of final goods and services was more than US $10 billion, or about 60
percent of that of the United States. The production of electronics for military/
space/R&D, however, is estimated at about 90 percent of the US level. On the
basis of current projections, it is unlikely that, in the near term, the Soviet
electronics industry will draw abreast that: of the United States in the aggregate
output of goods and services. In terms of output of electronics for military/
space/R&D, however, the prospects are much less sanguine from the standpoint of
the Free World; by 1970 it is likely that the USSR will surpass the level of the
United States. Figure 2 shows the estimated structure of the electronics indus-
tries of the United States and the USSR for 1965 and 1970. 25X1 D
Since radar costs vary (nonlinearly)
with power'levels, any change in this parameter for the HEN HOUSE can significantly
alter the estimate of the expenditure series for this program. The current esti-
mate is based on a peak power df 13 megawatts; 25X1 D
n er ese conditions, pre-
liminary investigations 's ow t1aat expenditures could be 25 to 50 percent
greater than the figures shown above.
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figure 2
vs 7, 0'I AS 5R
,Bes~srirr~c~~e of 47/4/C 0/ 0 ,, .emu t 0/ To/a/
47/074r? 12/n `a'ry /ecr`f-or~~C ~crr~r, r~ert /965 c~r~ /97C
/ S /370
C/5 U S C?i,SSR C/S
25.4
Soviet growth rates} have been projected out to 1970 on the assumption that the
industry will revert to a rate more compatible with its secular growth pattern.
The sharp upturn during ;1963-65, as suggested above, is believed to have reflected
exceptional short-term requirements. With production capacity in 1965 more than
double that of 1962, it zs believed that the need for accelerated levels of invest-
ment and growth in output on the scale of 1962-65 has abated. Substantially
reduced growth rates during the post-1965 period should provide the industry with
ample capacity to satisfy follow-on military requirements as well as growing demands
for industrial and consumer commodities and services. Moreover, the apparent
desire of the Soviet leadership to strive for a more balanced growth of industry
generally during the curkent five-year plan period may also weigh against any sharp
upturn in the growth curve of the electronics industry similar to that of 1963-65.
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It seems clear that output of electronics equipment will continue to grow at a
priority"rate. According to statements at the recent 23rd Party Congress: "The
Five-Year Plan directives for 1966-70 provide for preferential development in the
output of equipment for the electronics and radiotechnical industries 21 "con-
siderable growth of the electronics and radioelectronic branches of machine. building
is expected 22/ "during 1966-70, priority development of electronics is re-
tained." 23/0n the basis of an earlier official statement that the output of
electronics would grow "significantly faster" than machine building as"a whole during
1966-70 / (machine building is scheduled to grow at a compounded rate of about 10
percent), a rate falling between 12 and 16 percent is believed reasonable, and the
mid-point, 14 percent, has been selected as the best estimate. Similarly, on the
basis of an examination of past trends together with official statements about the
growth in output of some categories of consumer and industrial electronics, growth
rates on the order of 15 to 20 percent for nonmilitary electronics through 1970
appear reasonable, and 17 percent has been projected.
The best estimate of growth in output of military electronics has been deter-
mined by the above constraints. On the basis of maximum assumptions about the growth
of aggregate output of electronics equipment and minimum assumptions about the growth
of the nonmilitary sector, it is postulated that during 1966-70 the military residual
is unlikely to grow at a rate slower than 8 percent or faster than 16 percent. The
implications of these rates relative to the question of the future intersection of
growth rates of military electronics in the United States and the USSR are shown in
Figure 3.
Projections for the United States assume a continuation of the current war-
induced demands for military electronics equipment, a leveling-off of procurement
and R&D expenditures for space purposes, and moderate outlays for an incipient ABM
procurement program. Clearly, any widening of the war in Asia, announcement of
new goals for space, or a major policy change in US strategic defense plans could
impart a substantial upward bias to the projected US growth rate for military/space/
R&D. Growth for the United States and the USSR for the recent past and projected
through 1970 are shown in Figure 3.
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F,ur-e
Lis err-) d !_J5 5P
G'~--ovvfh_ire O itpc~t a c I~+Cf r c~ c ! r, f,
U
/ 9 70
US rate based on data of Electronics Industries Association. The position of the
curves is understated by the relatively small amount of military in-house R&D,
which is not ncluded.,'However, the slopes of the curves are not appreciably,
affected by_tle_omission.
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APPENDIX A
1. Derivation of the Gross Value of Output of Electronics in the USSR for 1956
and 1965-
5
The statement by Asval'dov that the electronics industry's share of output in
MBMW increased by 8 percentage points between 1956 and 1965 yields the following
formulation in words and symbols.
The share of electronics in the output of MBMW in 1965 -- equals the share of elec-
tronics in the output of MBMW in 1956 -- plus eight percentage points,
X2
X1
61.0 billion rubles = 19.8 billion rubles + .08
Xl
gross value of output of electronics
in 1965
gross value of output of electronics
in 1956
19.8 billion rubles = gross value of MBMW in 1956
61.0 billion rubles
gross value of MBMW in 1965
Another measure of output in 1965 compared with 1956 is provided by linking
the following indexes: Output in 1958 was 1.48 times 1956. Output in 1965 was
estimated to be 4 times 1958. Thus output in 1965 is 4 times 1.48 (or 5.92)
times output in 1956. This relationship is expressed as:
X2
5.92 X1
Simultaneous solution of these algebraic formulations yields unique values for
the output of electronics in the USSR for 1956 and 1965.
2. Derivation of Net Value of Output of Electronics 25X1C
It has become apparent, in the intervening period
that the previously estimated "net" value of output o electronics was probably too
large; an unusually large volume of military electronics output, especially in
recent years, could not be accounted for by existing "price and count" techniques
and was inconsistent with other intelligence estimates of Soviet military expendi-
tures. It is now believed that insufficient allowance was made for double counting.
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25X1 C
The estimated "net" value of output of the Soviet electronics industry in 1965
is 7.3 billion rubles, corhpared with 9.5 billion rubles presented at the last
In part the lower "net" value derives from the use of a
lower gross u e major source of the divergence is in the allowance made for
double counting of components. In this paper, that allowance has been maximized
through the use of a cons~ant ratio (gross over net) of 1.35. This ratio has been
derived from comparison w.th the US electronics industry over the period
1956-6g.when levels of production, generally speaking, correspond with those in the
USSR during 1956-65. In the United States the average ratio throughout the period
was about 30 percent, declining from 35 percent in earlier years to a little more
than 20 percent in later rears of the period. The higher ratio of 35 percent is
believed to be the most suitable analogue, at least for recent years, owing to
contrary tendencies in tho Soviet and US electronics industry. Whereas in the US
large producers of end-egiipflent are becoming increasingly associated with the pro-
duction of components (toreduce costs), thus tending to reduce double counting;
in the USSR an opposite tendency has been noted.('ncreasing specialization of com-
ponent production is being promoted, thus tending to increase double counting).
The use of 1.35 as a ;gross-to-net ratio has the following economic meaning:
if all components are counted twice, the "gross" value of output will exceed "net"
by 35 percent; it implies a structure of industry such that all production is
neatly compartmented into producers of Fend-equipment" and producers of "componentsg:"
Of course, neither the electronics industry in the United States hor that in the
USSR is so neatly structured. An indeterminate amount of component production is
accounted for by producers of end-equipment and is not double counted. A possibly
offsetting factor is double counting of interplant transfers of subassemblies, for
which no explicit allowance is, or can be, made.
Since the above ratio is viewed, as a maximum, it follows that the estimated
output of military electronics equipment, derived as a residual, is likely to be
a minimal figure.
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APPENDIX B
SOURCES
1. Izvestiya, 7 May 1966, p. 3. U.
2. Voprosi Ekonomiki, No. 9, 1965, p. 63. U.
3. Izvestiya, 4 January 1966, P. 3. U.
2.. Radio, No. 11, 1965, p. 1. U.
5. USSR, Ti ov a Instruktsiya K Sostavleniyu Otchetov Pro shlen kh Prod ri atii
Vypolnenii Plana Po Produktsii (Standard Instructions for Compilation of
Reports of Industrial Enterprises on the Fulfillment of the Output Plan),
Moscow, 1963. U.
Radiotekhnika, No. 5
7.
8.
May 1959,,P. 7. U.
Ekonomicheskaya Gazeta, 28 September 1963, p. 1+5. U.
USSR, Ekonomicheskaya Entsiklopedi a, Promyshlennost i Stroiteltstvo, No. 2,
p. 615. U.
9. Ekonomicheskaya Gazeta, 2 March 1963. U.
10. Ekonomichesk a Gazeta, 5 October 1963, p. 4. U.
11. Izvestiya, 7 May 1963, p. 5. U.
12. Ekonomicheskaya Entsiklopediya Pro yshlennost' i Stroitel'stvo, Vol. 2,
724
U
p.
.
.
13. Ekonomicheskaya Gazeta, No. 52, December 1965, p. 12. U.
14. Izvestiya, 4 January 1966, p. 3. U.
15. Ekonomicheskaya Gazeta, 2 March 1966, p. 10. U.
16. USSR, Vneshnyaya Torgovl a SSSR, 3A 1965 GOD. U.
17. JPRS: 22,451, Military Strategy, 24 December 1963,
18. Ekonomicheskaya Gazeta, 13 March 1966,-p. 9. U.
19. Voprosi Ekonomiki, No. 3, 1965, p. 13. U.
20. Trud, 15 March 1964, p. 3. U.
21. FBIS Daily Report,(USSR and East Europe), 23 February 1966. U.
22. FBIS Daily Report, (USSR and East Europe), 11 April 1966, p. 23, U.
23. FBIS Daily Report, (USSR and East Europe), 30 March 1966, p. 38. U.
24+. Planovoye Khozyajstvo, No. 5, 1964, p. 21. U.
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T2E,Vos /N 1W tGEcf'AL aovsC'r .iA/1 udT,ep or r/t&- 1,11'.r'4
SOURCES
25X1 C
1. Izvestiya, 7 May 1966, p. 3. U.
2. Voprosi Ekonomiki, No. 9, 1965, p. 63. U.
3. Izvestiya, 4 Jan 1966, p. 3. U.
4. Radio, No. 11, 1965, p. 1. U.
25X1A
5. USSR, Tipovaya Instruktsiya K Sostavleniyu Otchetov Promyshlennykh
Predpriyatii Vypolnenii Plana Po Produktsii (Standard Instructions for
Compilation of Reports of Industrial Enterprises on the Fulfillment of
the Output Plan), Moscow, 1963. 0-
6. Radiotekhnika, No. 5, May 1959? p. 7. U.
,7. Ekonomicheskaya Gazeta, 28 Sep l963..$ U.
8. USSR, Ekonomicheskaya Entsiklopediya, Promyshlennostti Stroitel'stvo, No. 2,
p. 615.
3
9. Ekonomicheskaya Gazeta, 2 March 196 iG 7., U.
10. Ekonomicheskaya Gazeta, 5 Oct 1963, p. 4. U.
11. Izvestiya, 7 May 1963, p. 5. U.i l4lcsaJ