From Post-Soviet legacy to innovation: Armenia’s technological transformation
Photo. Dato (WMAM), Wikimedia
Armenia, located in the strategic region of the South Caucasus, has faced the challenge of rebuilding and modernizing its economy, infrastructure, and science-and-technology capacity since gaining independence in 1991.
The legacy of Soviet industrialization left strong technological foundations, but the political and economic transformations of the early independence years caused significant regression in many sectors. Over the last decade, however, Armenia has begun to re-mobilize its intellectual potential, rapidly developing its IT sector, attracting foreign investment, and deepening cooperation with global leaders in technology and defence.
Historically, Armenia was an important node in the Soviet technological and industrial system. World War II prompted the establishment of new factories on its territory to produce military equipment. These facilities manufactured parts for military aircraft and repaired damaged equipment. Armenia produced ammunition, anti-personnel and anti-tank mines, infantry vehicles, and other types of military hardware. After Stalin’s death, economic reforms reoriented Armenian industry toward electronics. Production began of early computers — Razdan and Aragats — automated control systems, radio electronics, space communications equipment, rocket launchers, and various components used in naval submarines. Because of the USSR’s decentralized strategy, Armenian factories produced components that were then shipped elsewhere for final assembly. The emphasis on technological design made Armenia a center of science, particularly in mathematics and physics1
The liberalization of the Soviet economy led to the emergence of many new firms in Armenia. By 1990 the country hosted around 40 large research institutes and manufacturing enterprises. One of the most important scientific centers was the Yerevan Scientific Research Institute of Mathematical Machines (YerSRIMM), which at its peak employed more than seven thousand people. It was there that the first Aragats and Razdan computers and later versions Razdan II and Razdan III were designed. In 1987 Armenia also saw the founding of its first private company providing IT services—ArmSoft. The collapse of the Soviet Union, the First Nagorno-Karabakh War (1988–1994), closed borders, and the ensuing economic crisis sharply reduced the country’s technological potential. The outflow of capital and skilled workers severely depleted the capabilities of Armenian firms2.
After the 1990s collapse, Armenia gradually began to rebuild its lost potential. The sector started to attract a significant inflow of foreign investors who established local operations to take advantage of young, highly skilled workers.
Photo. Defence24
Looking at the last decade, one can observe uninterrupted revenue growth generated by Armenia’s IT market. With the start of the Russian invasion of Ukraine in 2022, a large number of specialists from the Russian market decided to relocate their operations to the Caucasus. Today there are about 1,250 companies operating in Armenia, approximately 60% of which provide services. 3 To strengthen its market position, the government has declared advanced technologies a national policy priority. The Ministry of High-Tech Industry actively works to attract new talent and offer favorable conditions. To draw new employees, tax refunds are offered. To encourage a shift from service provision to a product-based ecosystem, R&D companies receive tax incentives. Small firms that meet certain criteria may qualify for a 1% turnover tax. Tax rebates are also available for companies hiring technical staff for the first time and investing in their training. Although this new policy package has faced some criticism for prioritizing foreign companies and specialists, the government maintains that its proper implementation can help small entities grow and large ones innovate4.
In 2023 the Ministry of High-Tech Industry of the Republic of Armenia and Amazon Web Services (AWS) signed a memorandum of understanding to modernize the country’s technology infrastructure and accelerate cloud adoption in Armenia’s public and private sectors. The cooperation is intended to speed digital transformation, support the development and adoption of a cloud-first approach—covering appropriate digitization strategy, modernization of IT systems and services, capability development, adoption of suitable business models, security policies, and open data.
The MoU focuses on providing support to facilitate cloud adoption for tech startups and SMEs through a series of programs and on providing access to AWS’s global community of specialists and experts to develop tailored frameworks for enterprises and migration roadmaps to the cloud 5.
In 2025, Armenia announced cooperation with Nvidia, Firebird, and Team Group to establish a regional AI supercomputing center. The project is set to be the largest technological initiative in the South Caucasus. It is intended to serve as a hub for AI research, education, and entrepreneurship, fostering innovation and economic growth in the region. This cooperation continues NVIDIA’s existing presence in Armenia, which includes a research center established in Yerevan in 2022. The Afeyan Foundation for Armenia is also expected to join the project, strengthening diaspora engagement in domestic investment6.
The Ministry of High-Tech Industry of the Republic of Armenia, Levi Semiconductor, and Enterprise Armenia signed a protocol of cooperation to establish the first plant in Armenia engaged in clean production of multi-component semiconductors and silicon optical microchip substrates. The high-tech facility is to produce at least 12,000 microchip substrates annually. In addition, Levi Semiconductor will create about 86 new jobs, some 50 of which will be in research and development7.
As an important Soviet industrial and technological hub, Armenia once had a developed electronics and computing sector, where, among other things, the USSR’s early computers and advanced control systems were produced. After the Soviet collapse, the country went through a deep economic and technological crisis, losing much of its skilled workforce and industrial capacity. Since the beginning of the 21st century, however, the IT sector has been rebuilding dynamically, and Armenia is once again becoming an attractive location for foreign investors and specialists.
Dominik Lebioda
Bibliography:
2A. Avetisyan, How the Golden Past of Armenia’s Tech Industry Is Motivating Its Future, https://evnreport.com/creative-tech/how-the-golden-past-of-armenias-tech-industry-is-motivating-its-future/ (Accessed: 11.11.2025).
3Armenian Code Academy, Armenian Tech Market Insights 2024, p.7-8.
4D. Manukyan, Armenia’s Tech Sector in 2025: Snapshot of the Ecosystem, EVN report, https://evnreport.com/creative-tech/armenias-tech-sector-in-2025/ (Accessed: 17.11.2025).
5 Armenian Ministry of High-Tech Industry and Amazon Web Services (AWS) sign Memorandum of Understanding, arkatelecom.am, https://arkatelecom.am/en/news/telecom/armenian\_ministry\_of\_high\_tech\_industry\_and\_amazon\_web\_services\_aws\_sign\_memorandum\_of\_understanding/?utm\_source=chatgpt.com (Accessed: 17.11.2025).
6 Armenia announces $500mn AI supercomputing hub with NVIDIA and Firebird, Intellinews.com, https://new.intellinews.com/articles/armenia-announces-500mn-ai-supercomputing-hub-with-nvidia-and-firebird-386116?utm\_source=chatgpt.com (Accessed: 17.11.2025).
7 The First Plant for the Production of Multi-Component Semiconductor and Silicon Photonic Microchips, Enterprise Armenia, https://enterprisearmenia.am/media/news/the-first-plant-for-the-production-of-multi-component-semiconductor-and-silicon-photonic-microchips/ (Accessed: 17.11.2025).
