In late December 2024, the Cabinet of Ministers approved the Digital Development Strategy for Innovative Activity until 2030, which specifically provides for creating microchip production in the country. The Ministry of Digital Transformation estimates that at least $1 billion will be needed to kick-start such a manufacturing project.
Cabinet Decision & Strategic Background
On December 31, 2024, the Ukrainian government adopted the Digital Development Strategy, along with an action plan for 2025–2027.
- Key Focus: The strategy highlights semiconductor production, noting the rapid global growth in this sector and its importance for advanced innovations—artificial intelligence, powerful computing (data centers), smartphones, the Internet of Things, and beyond.
- EU Context: The European Union’s “Chips Act” is mobilizing €43 billion in investment, setting a goal of capturing 20% of the global semiconductor market by 2030. According to the Ukrainian government, this opens potential for Ukrainian manufacturers to integrate into European supply chains.
Currently, Ukraine has no specialized industrial enterprise producing semiconductors. The country’s past achievements—supplying up to 40% of the microelectronics in the Soviet Union—largely disappeared after the early 1990s. Many highly qualified engineers either changed careers or emigrated. However, the new strategy aims to restore at least part of that legacy, leveraging modern knowledge and the presence of qualified specialists in micro- and nanosystem engineering.
Objectives & Outcomes
-
Legislative Proposals
The government plans to develop a bill outlining incentives and frameworks for semiconductor manufacturing. This could involve tax benefits for R&D, protection of intellectual property, and streamlined procedures for foreign direct investment. -
Innovation Cluster
Officials foresee an “innovation cluster” connecting research institutes, higher education institutions, startups, and private companies working on semiconductor design and manufacturing. Cooperation with other strategic clusters—especially those related to defense technologies—will be encouraged. -
Cooperation with EU & Global Firms
The Cabinet’s plan calls for memoranda with EU organizations and global tech leaders. Ukraine hopes to participate in EU-wide programs spurred by the European Chips Act, aiming to tie into Europe’s mission to ramp up semiconductor self-sufficiency. -
Investment Promotion
By the third quarter of 2025, the Ukrainian government wants to secure joint projects with foreign partners, attract investment for pilot lines or full-scale production facilities, and integrate local manufacturers into larger global supply chains.
Scope of Production: 180 nm to 110 nm
The Ministry of Digital Transformation envisions Ukraine producing “mature-node” chips of about 180 nm, 130 nm, or 110 nm processes—far from cutting-edge by global standards (where companies like TSMC operate at 4 nm or even 1.8 nm). Nonetheless, these larger-process semiconductors remain crucial for many sectors:
- Defense: Microcontrollers, radars, and communication systems that do not demand the smallest transistors.
- Automotive: Many vehicle electronics and engine control units use 110–180 nm technologies.
- Agriculture: Sensor devices in farm machinery often rely on mature-node chips.
Oleksandr Grudanov, a member of the digital working group, explains that such chips are more than sufficient for essential domestic needs, particularly in defense-oriented or harsh-environment designs (e.g., high reliability, tolerance of temperature extremes).
Potential Models for Partnering
Two main approaches are being considered:
-
Licensor Model
- Ukraine signs a deal with a major partner controlling the construction, equipment configuration, and pilot-line launch.
- The state may keep a controlling stake, ensuring priority production for defense and specialized projects.
- Training Ukrainian specialists at the licensor’s facilities abroad.
- Estimated start-up cost: up to $1 billion, plus separate fees for the technology license.
-
Strategic Partner via Tender
- Ukraine holds a competition to select a private or multinational firm that can provide technology, know-how, and capital.
- The partner decides on capital allocation.
- While this could reduce Ukrainian ownership, it may fast-track advanced capabilities.
Before finalizing either model, the government must pass “Chips Act UA”—domestic legislation offering subsidies, tax breaks, and legal clarity on technology transfers—much like the EU or US approaches.
Timeline & Prerequisites
- Security & Stabilization: Investors will require assurance that the war situation is stabilized and that insurance or similar guarantees exist for any new facility.
- Two-Year Facility Build: From the moment an agreement is signed, it is expected to take two years to construct and prepare a semiconductor plant.
- Third Year: Full Capacity: Large-scale commercial output could begin by the end of the third year after commencement.
Why Now?
- Rebuilding the Defense Industry
Military demand for advanced electronics has grown significantly as Ukraine seeks to strengthen its defense capabilities. - Integration with the EU
Ukraine is moving closer to EU membership, and producing locally can expedite trade and reduce dependence on foreign supply chains under potential conflict conditions. - Skilled Workforce
Despite decades of “brain drain,” Ukraine retains a pool of engineers experienced in microelectronics and can tap into significant R&D potential.
Conclusion
Ukraine’s ambition to launch domestic chip production underscores its drive for technological sovereignty and integration into advanced markets. Although the project faces high upfront costs—at least $1 billion—along with complex licensing and security hurdles, it holds promise for boosting the defense sector, spurring innovation, and aligning with European industrial goals.
With the Digital Development Strategy in place, Kyiv plans to begin formal negotiations with global partners as early as 2025. If successful, these endeavors could mark a transformative leap, reviving an industry that once made Ukraine a heavyweight in Soviet-era microelectronics—and forging new, long-term stability for the nation’s economy and security.
