(FORTUNE Magazine) – A SOVIET NIGHTMARE is coming true. Despite impressive success in closing its technology gap with the West since the atomic age began in 1945, the U.S.S.R. is in danger of falling further behind in a crucial field where a breakthrough could dramatically shift the balance of military power. That area is microelectronics and everything that goes with it, from the engineering of integrated circuits to the art of programming. The West -- particularly the U.S. -- is good at microelectronics, and the Russians are woefully behind. The Soviets already devote proportionally more resources to the military than the U.S. does. With some horror they are learning that vastly greater commitments would be necessary to match the West's drive to incorporate microelectronic components into a new generation of high-tech weapons and battle management computers. The revolution in defense microelectronics challenges the Soviets to compete on a new playing field just as they were attaining parity with the West in more traditional areas of weaponry. ''The Russian nightmare has always been that a revolution in technology will challenge the way they've designed their forces,'' says Arthur Alexander, a Rand Corp. expert on military technology. ''Suddenly, out of nowhere, microelectronics is forcing the Soviets to reconsider everything they've done. It could make a 25-year investment in military technology obsolete.'' For example, ''smart'' missiles that can locate and destroy targets could overcome the numerical superiority in tanks that has been central to Soviet strategy in Europe. Most Western military analysts believe that the Soviets will try to counter the U.S. microelectronics offensive, even if the cost to their economy is excruciating. One possible tactic: emphasizing technologies the West is not concentrating on. Since the end of World War II the West has set the agenda for military research. The first nation to explode an atomic bomb, the U.S. was also the first to mount more than one nuclear warhead atop a missile. But the Soviets have repeatedly narrowed technology gaps. Most Western defense analysts agree that the U.S.S.R.'s strategic nuclear weapons are essentially as powerful and as accurate as those of the U.S. And in several key areas of conventional warfare, such as surface-to-air missiles and tanks, neither side has a technological lead. While the U.S. is ahead of the Soviet Union in most fields of basic science, the Russians have made an enormous commitment to militarily useful research and development. Work goes on at hundreds of research institutes and about 50 major design bureaus. At least 60% of qualified Soviet scientists and engineers work in the defense sector, says Julian Cooper, a specialist in Soviet industrial technology at the University of Birmingham in England. One estimate is that in the aggregate, U.S. scientists and engineers spend 25% to 30% of their time on military research. The Soviet investment has paid off with gains in several high-priority areas of military technology. John M. Collins, a senior specialist in national defense for the Library of Congress, gives the Soviets high marks in cryogenics, explosives, oceanography, high-pressure physics, and controlled atomic fusion. Since the late 1960s the Soviets have been working more intensively than the U.S. has on the particle beams and high-energy lasers necessary for building the missile-destroying weapons of a Star Wars system like the U.S. Strategic Defense Initiative. And they are catching up to the West in six of the 20 basic technologies that the Pentagon considers most important militarily (see chart). ''They've had an aggressive R&D program for the last 20 years, and it has started to bear important fruits,'' says Army Colonel Don Fang, who compares U.S. and Soviet technology for the Pentagon. But at the leading edge of military technology, all these advances are secondary to microelectronics, computers, and software. Forty years into the nuclear age, the arms race is taking on a decidedly silicon flavor. Although many politicians and military commanders criticize the cost and reliability of high-tech weapons, American and Western European arms manufacturers are on a microelectronics binge. High-speed integrated circuits and sophisticated software are spreading into virtually every piece of military equipment, from sonar-sensing sea buoys to radar-homing missiles. In the 1960s computers and software accounted for an estimated 2% of the development and manufacturing work on an F-4 Phantom, the hottest U.S. fighter of the day. A decade later the figure for the F-15, a successor to the F-4, was 26%; for the Navy's newest fighter, the high-performance F-18, it is 43%. The percentages actually understate the increase in the importance of electronics, since the cost of computing power has been falling rapidly. ( JUST 15 YEARS AGO complex electronic circuitry was too delicate and bulky to fit into a mobile weapon. Today the development of microprocessors makes possible high-tech electronic eyes and ears for a new generation of tanks, ships, torpedoes, missiles, and airplanes. Other military applications of integrated circuitry range from signal processors that interpret data from infrared radar, laser, and sonar sensors to communications networks that can orchestrate an attack. Once perfected, the new technologies will make it possible to identify, target, and attack opposing forces far beyond the range of traditional weapons. That would mean trouble for the Soviet military, which has long relied on -- and invested heavily in -- numerical superiority to offset the Western technological advantage. Most of the Soviet Union's land forces in Europe, which outnumber NATO's by roughly 2.8 million to 2.3 million, are stationed well behind the East German border. If war breaks out, military analysts say, they could be vulnerable to an American-led high-tech deep strike that would decimate them before they reach the battlefield. In a contest for air superiority, new U.S. computerized radar signal processors would detect and target enemy fighters twice as fast as the Soviets could, making their aircraft vulnerable to attack before they could react. Soviet prospects in a surface naval engagement are already bleak. ''The Soviet surface fleet has a life expectancy of 24 hours,'' declares Antony Preston, an expert on the Soviet military at Jane's Defence Weekly, a British journal. ''They're going to be targeted and hit at a range at which they can't reply. There won't be anything left.'' Computing power is also the key to anti-submarine warfare technology, which is important because the invulnerability of each side's submarine-based nuclear missiles is critical to their deterrent strategies. A breakthrough in submarine detection by either side could drastically shift the balance. Current research by U.S. Navy contractors such as IBM and Raytheon focuses on developing complex software to identify sounds from enemy submarines at great range. The programs will require extremely fast computing to filter out extraneous noises caused by waves, sea creatures, commercial shipping, and polar ice, for example. The U.S.'s signal-processing ability is already greater than the Soviets', and U.S. subs are quieter. Highly advanced space weapons like those proposed for a Star Wars - ballistic missile defense could not exist without microelectronics. ''People talk a lot about lasers, particle beam guns, and so forth, but the real revolution is taking place in sensors, signal processors, and battle management computers,'' says Steven Meyer, a Soviet defense policy scholar at the MIT Center for International Studies. ''The Americans are doing it all, and the Russians know it.'' The Soviets are clearly awakening to the challenge. Marshal N. V. Ogarkov, chief of the Soviet general staff until last year, sounded the alarm. Early in 1984 he told the editors of Red Star, the Soviet army newspaper, that a wide range of innovations in Western technology are making possible at least a tenfold increase in the strike potential of conventional weapons. In an address to the Politburo last spring, Premier Mikhail Gorbachev warned that ''microelectronics, computer technology, instrument making, and the entire information-science industry require accelerated development.'' In January the Soviet government newspaper Izvestia announced Politburo approval of a state program ''to establish and develop the production and effective utilization of computer equipment and automated systems.'' To stimulate research, according to the Communist party newspaper Pravda, the government may introduce new financial incentives for scientists, including wage increases and bonuses for productivity. SOME EXPERTS THINK the Soviets are gambling on highly experimental fields in the hope of leapfrogging the West. For example, several Western analysts believe that research institutes in Kiev and Moscow are among the world leaders in optical signal processing, which could eventually replace electronic circuitry in computers. Photons of light can travel up to a thousand times faster than electrons, because they are not slowed down by the materials they pass through. ''The Russians are so late in current computer technology that they are trying to skip over to the next generation,'' says a French expert. The U.S. has an optical computing program as part of Star Wars, but has emphasized the technology less than the Soviets seem to. Much of the Soviets' disadvantage in weapons technology stems directly from their economic system. The U.S. and its allies benefit from commercial breakthroughs in microelectronic circuitry, computer design, and software. Many of those advances -- computer-aided engineering, for example -- were triggered by the demand for new products, from office automation equipment to * industrial robots. The process works both ways. For instance, chip technology developed by Honeywell for the military has turned up in automobile ignition systems, pressure sensors for blood flow measurement, and solid-state thermostats. ''What we have in this country is a very substantial body of people who understand electronic technology,'' boasts George Mechlin, vice president for research and development at Westinghouse. ''Some apply it in the commercial sector, some apply it in the military sector, and some apply it in both. From a technological point of view there is very little difference.'' The Soviet Union has no parallel resource. The Russian computer industry, its own leaders admit, is hopelessly behind the West's. ''The field is in chaos,'' Pravda conceded in August. ''There are complaints about computer quality and reliability.'' But the most telling barometer of the crisis in the Soviet microelectronics, computer, and software industries is the extent to which the Russian military has been forced to buy or steal Western technology and equipment (see box). ''Each year they run off and collect all this stuff,'' says S. E. Goodman, a University of Arizona professor who is a leading expert on the Soviet computer industry. ''It's an acquisitions bonanza. But they are finding they have to acquire more than they used to just to control the rate that they are falling behind.'' The Soviets concede as much. Last June, when Izvestia asked A. P. Aleksandrov, president of the Soviet Academy of Sciences, about the problem, he replied: ''The paradox is that blind copying of a foreign scientific or technical idea is often exactly what leads to falling behind. The habit of making foreign purchases is sometimes attended by a slackening in our own efforts.'' By copying existing Western equipment, the Soviets may also be locking themselves into technology that is already obsolescent. THE SOVIET TASK is all the tougher because the U.S. military is putting vast sums behind its determination to stay ahead in high-tech weaponry. This year the Defense Department will spend nearly $9 billion for basic science and technology research. Of that, some $194 million is earmarked for the very- high-speed integrated circuit (VHSIC) project, which aims to boost the speed and performance of silicon chips a hundredfold by the end of the decade. Today's advanced microprocessors typically hold several tens of thousands of transistors, but some initial VHSIC chips already have nearly 500,000 transistors packed into them. These denser, faster chips enable a missile warhead armed with them to carry more computing power. Toward still further miniaturization, the Pentagon-sponsored research includes investigations of high-resolution lithography, semiconductor materials, and computer-aided design techniques. In chip design the Soviets are at least a full generation -- five years or so -- behind the U.S. All told, the Pentagon plans to use first-generation VHSIC chips in 37 weapons systems by 1992. Military applications of the new chips include improved jam-resistant radar systems, sonar identification buoys, missile- guidance sensors, and electro-optical signal processors that detect and classify potential targets on a battleground. The government has already awarded contracts to Honeywell, TRW, and IBM to develop a second generation of even faster chips. Another Pentagon project aims to refine computer-aided techniques for software development so that programs can be created ten times as fast as they are now. Building a Star Wars antimissile system will be impossible without a breakthrough in automating software writing. Says Army Lieutenant Colonel Nile Radcliffe, who helps direct research in sensors for Star Wars in Washington: ''We know we will need tens of millions of lines of programming code to build a missile defense system. Currently programmers write about ten lines per day. We don't have enough programmers in the country to meet our needs.'' The Soviet software industry is seriously handicapped by lack of good hardware; some programmers don't have computers to construct their programs on (see preceding article). To design advanced weapons, the military also needs advanced computers. The Pentagon's Strategic Computing Program is pouring half a billion dollars into a five-year effort to build a class of superintelligent computers by the end of the decade. The new computers will aid researchers working on such exotic technological developments as machine vision, speech recognition, and ''expert'' systems that use artificial intelligence programs -- those that seem to imitate human thinking processes -- to analyze complex situations. The Pentagon says artificial intelligence will help build electronic co-pilots capable of scrutinizing data reaching the sensors of a fighter plane and alerting the pilot to a possible threat, and even more sophisticated battle management software that includes programs capable of devising military tactics. Within the past year the U.S. has produced a simple prototype of a so-called autonomous land vehicle that eventually could venture without a driver into enemy terrain and report back what it ''sees.'' ''Almost every new project description that the Pentagon issues these days mentions artificial intelligence in one form or another,'' says George Heilmeier, senior vice president and chief technical officer at Texas Instruments. Western analysts find no evidence that the Soviets have produced more than rudimentary expert systems. Goodman at the University of Arizona says that the Soviets also lag behind seriously in high-speed computing capacity. They have produced no more than a few hundred computers that can handle over a million instructions per second, or mips, a standard measure of computing speed; the U.S. has thousands. The Soviets have nothing in production comparable to the U.S. supercomputers that handle 100 mips or more. The Soviet military is acutely aware of the disadvantages it faces in competing with the resource-rich West. Reorienting the Soviet economy to the computer age will take years of effort and divert billions of rubles from other high-priority programs, such as increasing agricultural output. It will also put pressure on the gigantic outlays now required to keep 5.2 million soldiers in uniform. To plug the technology gap in the short run, the Soviets are likely to resort to low-tech countermeasures that could neutralize exotic Western weapons. ''It's always easier to create a defense than to overcome one,'' says Jonathan Alford, deputy director of the International Institute for Strategic Studies, a military think tank in London. ''To foil a laser-guided missile all you need is smoke. The Soviet response to Star Wars, for example, may be to improve their antisatellite capabilities. It's technologically easier to track and destroy an orbiting antimissile weapon than it is to put one that works in place.'' Although sheer numerical superiority -- and such factors as morale and training -- can still be critical in specific combat situations, key technologies have had a decisive impact on modern military power. In the 1930s, during the Spanish Civil War and the German blitzkrieg of Poland, for example, mechanization and aviation were vitally important. Hiroshima began the nuclear age. Now microelectronics holds center stage, and the Soviet military cannot wish away the realities of the high-tech arms race. The Pentagon's commitment should mean a lavish and continuing supply of R&D funds for U.S. companies in the forefront of defense technology. Even if a Star Wars defense is never built, research toward it can only strengthen the U.S. technological advantage.

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