There is no innovation going on in China in the electronic industry, but there will be, Harry Rowen, former assistant Secretary of Defence in the US government, chairman of the US National Intelligence Council and president of the RAND Corporation told an audience at the Globalpress Summit Conference in Monterey last night.
“There are a thousand US companies with R&D centres in China, there’s no research, and not a lot of development, but there is a lot of design work,” said Rowen, “Chinese venture capitalists ask: ‘Why should we innovate when there’s so much low-hanging fruit out there?’”
The China government thinks differently. “The Chinese government finds this situation deeply unsatisfactory,” said Rowen. He said that the government planned to increase China’s annual spending on R&D from $30bn in 2005 to $113bn in 2020.
“There is no innovation in China but, in five to ten years’ time, look out”, said Rowen, instancing China’s rapid rise up the table of the most prolific countries in filing for patents. It is now 18th in the world.
Asked by EW about the state of China’s university system, Rowen replied: “There are no first-class universities in China”, adding, “But they’re trying to change.”
He said that many extremely bright students came through the Chinese system, and some went on to US universities, but added: “Some of the brightest students don’t want to go back.”
Rowen said that the Chinese IT industry is dominated by management from large Taiwanese companies led by Foxconn and Quantum Computer. “The Chinese and Taiwanese are very reticent about this,” said Rowen.
He said that, although China exported $342bn worth of IT and electronic equipment last year, 85 per cent of that value was attributable to imported components. For instance, $47bn worth if ICs were imported, not for use in China, but to be put into equipment and re-exported. “China is an assembler of products rather than a manufacturer,” said Rowen.
Rowen is a great believer in China’s future. One reason is that: “China has the most competent economic management of any country in the world,” he said.
However, asked by EW about the traditional Chinese outlook that the top people are entitled to a good life, while the bottom people are entitled to little, Rowen replied: “Attitudes must change”.