External Inputs in PRC Science

1
External Inputs in PRC Science Technology
Development Evolution of Foreign High-Tech RD
in China

• Briefing
• for
• China ST Roundtable
• US Department of Commerce

Kathleen A. Walsh The Henry L. Stimson
Center Washington, DC May 3, 2004
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Shifting Emphasis in PRC Technology Development

• Technology Acquisition (primary focus 1960s-80s)
• Finished products / weapons
• Technology Transfer (mainly 1990s-present)
• Required technology and RD from foreign
  investors and defense trade partners
• Technology Training (mid/late 1990s-present)
• Learn how to design, develop, and innovate from
  foreign investors / defense trade partners

China Continues to Rely on Foreign Technology
Inputs
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K. Walsh May 2004
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Not Only is Manufacturing Moving to China
So too is High-Tech RD
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K. Walsh May 2004
4
Estimates of Foreign RD in China Vary
400 Peoples Daily (October 2002) ALL
INDUSTRIES
223 Stimson Center study (2003) ICT
INDUSTRIES 1990-2002
148 Chung-Hua Institute for Economic Research
(2002) ALL INDUSTRIES
120 Peoples Daily (June 2002) ALL INDUSTRIES
11 DOC (1998 survey of US companies) ALL
INDUSTRIES
More Comprehensive, Regular Data Collection is
Needed
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K. Walsh May 2004
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Rise in China RD Tied to IT Industry Boom
Source Stimson Center study (2003)
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K. Walsh May 2004
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Evolution of Foreign High-Tech RD in China
3 Phases

• Exploratory and Strategic Partnerships
• Joint ventures
• University partnerships
• Show RD

1990

• Expansion
• Contract RD / outsourcing
• Go West campaign
• Training programs
• Product devt localization, upgrades, system
  standards integration

1995
2000

• Consolidation
• WFOEs -- Centralized facilities
• More advanced RD objectives
• Enhanced corporate security

Source Stimson Center Study (2003)
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K. Walsh May 2004
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Evolution of Foreign High-Tech RD in China
Phase 1
late 1980smid/late-1990s

• Exploratory and strategic partnerships
• Joint ventures
• University partnerships
• Show RD

Stokes Matrix
Deliberate Use
Y
N
Bohrs Quadrant
Pasteurs Quadrant
Y
Quest for Fundamental Understanding?
Edisons Quadrant
?
N
Source Stimson Center Study (2003)
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K. Walsh May 2004
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Evolution of Foreign High-Tech RD in China
Phase 2
mid- to late 1990s

• Expansion
• Contract RD / outsourcing particularly to
  universities
• Training centers added
• Go West PRCG emphasis and incentives
• Focus on product development localization,
  upgrades, system and standards integration

Note Took place during IT Industry boom pre-WTO
Source Stimson Center Study (2003)
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K. Walsh May 2004
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Evolution of Foreign High-Tech RD in China
Phase 3
late 1990s/early 2000s - present

• Consolidation
• WFOEs more centralized facilities
• More advanced RD objectives moving toward R
  v D
• Closer relations with parent company
• Enhanced on-site security procedures
• Concerns over increasing costs

Note Taking place during IT Industry bust
post-WTO entry
Source Stimson Center Study (2003)
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K. Walsh May 2004
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Present Characteristics of High-Tech RD in China

• Most concentrated in Beijing and Shanghai
• Nearly half (50) located in Beijing (per PRC 120
  estimate)
• Shanghai and Yangtze River Delta area also
  attractive
• Others scattered along mostly east-coast cities
• Still mostly product development work, some
  applied, testing
• RD relationship with Parent Company 3 models

Parent Company
Parent Company
Technology flow
RD Center
RD Center
Source Stimson Center Study (2003)
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K. Walsh May 2004
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Implications for PRC ST Development
Challenges
Opportunities

• Systemic problems / structural obstacles persist
• Bureaucratic slow-down of innovation ?
• High-tech acquisition could lead to information
  overload
• How long before demonstrated in more traditional
  sectors ?
• Possible foreign push-back (e.g., Intel on WAPI
  standard)

• Continued high-tech foreign investment
• Student / professional returnees
• Tiananmen sanctions unlikely to survive 08
  Olympics
• Leverage of market size in global economy aids
  standard-making efforts
• A Chinese RMA in the making?

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K. Walsh May 2004
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High-Tech Standards Growing PRC Capabilities
COMPUTERS
ELECTRONICS
TELECOM
EVD
TD-SCDMA
Linux-based
ICs
Digital TV
Switches

• Several PRC motivations
• Avoid costly licensing and royalty fees . . . and
  gain new sources of capital
• Limit long-term dependence on foreign technology
• Capture domestic market
• Export higher value-added products
• Establish China-market and global high-tech
  standards

Note New standards designed to be compatible
with existing foreign technology
Source Stimson Center Study (2003)
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K. Walsh May 2004
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US Policy Implications

• Needed
• Much better, detailed data on global/China RD
  trend
• More federal dollars to fund basic, fundamental
  research
• A comprehensive, regular innovation survey by USG
• Updated export controls
• More high-tech training of US labor force to cope
  with globalization and outsourcing of mfg,
  services, and RD
• Emphasis on education in science, engineering,
  and other technical fields for American students

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K. Walsh May 2004
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Where Will the Center of New Technology Research
Technology Be in 2014?
Percentage who said yes
Q8 Base total (842)
Source IEEE Tech Survey (2004) Graphic and data
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K. Walsh May 2004