Russian Defense Firms Shift Production Operations to China
Russian manufacturers are utilizing Chinese subsidiaries to bypass sanctions and maintain access to critical defense technologies.
Updated on Oct. 24, 2026 in Semiconductors
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Russian defense firms including Element and StankoMashStroy are increasingly shifting manufacturing operations to China to circumvent Western sanctions. This transition involves registering local subsidiaries and acquiring critical intellectual property to sustain production pipelines.
Why it matters
The shift allows sanctioned Russian manufacturers to maintain access to industrial capacity and advanced defense components. By leveraging Chinese facilities, these firms aim to bypass international trade restrictions while integrating foreign technology into their supply chains.
Element has registered at least four Chinese subsidiaries and completed the acquisition of over 100 million rubles in power electronics intellectual property. These efforts are focused on enabling the production of sophisticated hardware, including five-axis machine tools in the Shaanxi province.
The players
Element
A Russian semiconductor and electronics manufacturer that has been subject to U.S. sanctions since 2022.
StankoMashStroy
A Russian machine tool manufacturer that expanded into China through the subsidiary Shaanxi Stermasi Technology.
The details
Russian defense entities are executing a strategy of localizing production by creating Chinese subsidiaries to integrate with existing industrial frameworks. By acquiring intellectual property—the legal rights and proprietary technical designs for hardware—firms like Element are bypassing limitations on importing completed components. This strategy aims to create domestic capacity for high-precision manufacturing, such as the five-axis machine tools—systems capable of moving a part or tool along five different axes simultaneously to create complex geometric shapes.
Timeline
Element became subject to U.S. sanctions in 2022.
StankoMashStroy became subject to U.S. sanctions in 2023.
Element began chip assembly operations in China in 2024.
StankoMashStroy maintained clients including the Votkinsk Plant and Kupol in 2025.
Element acquired Chinese power electronics intellectual property in April 2026.
The Tech Race
This production shift represents a strategic pivot to maintain defense output despite intensive international trade restrictions. It highlights the growing importance of dual-use technology cooperation between Russia and China in navigating the global sanctions regime.
The move enables sanctioned Russian firms to continue sourcing or producing essential power electronics and machine tools. Global firms operating in the semiconductor and manufacturing sectors should watch for potential supply chain disruptions as these industrial re-alignments formalize through 2027.
The takeaway
Russian defense firms are successfully bypassing trade barriers by embedding their operations within the Chinese industrial ecosystem. Industry observers should monitor for potential policy responses from Western regulators, particularly if Chinese involvement in Russian defense production scales significantly in 2027.
Further reading
Explore deeper trends in supply chain autonomy within the Semiconductors section.
Source note: This article includes information reported by RBC-Ukraine.
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