LIANG Zheng: Comparison of China and India in R&D globalisation

Comparison of China and India in R&D Globalization UK-China Innovation Workshop for Sustainable and Equitable Development March 19, 2010, Tsinghua University Dr. Liang Zheng China Institute for Science&Technology Policy (CISTP) School of Public Policy and Management (SPPM) Tsinghua Universtiy [email_address]

Outline
Globalization of R&D: New Trends
FDI Inflows and Outflows
R&D Inflows
R&D Outputs in Global
OFDI and R&D Outflows
Conclusions

I. Globalization of R&D: New Trends Top 15 locations for R&D by the world’s largest R&D spenders in the UNCTAD survey, 2004-2005 (per cent of respondents) Source: World Investment Report 2005
Most R&D is performed in industrialized countries, but a number of developing ones now also host MNC R&D.
More than half of the top R&D spenders already have R&D facilities in China, India or Singapore.

Among the developing world, Asia is the preferred destination. Some examples:
The share of developing Asia in United States MNCs' overseas R&D rose from 3% in 1994 to 10% in 2002.
More than half of the top R&D spenders have R&D activities in China, India or Singapore.
More than 700 foreign-owned R&D centres in China(2005).
More than 100 MNCs conduct R&D in India and in Singapore.
Developing Asia now accounts for 30% of global semiconductor design.
Source: World Investment Report 2005

Most attractive prospective R&D locations in the UNCTAD survey, 2005-2009 (per cent of respondents) Source: World Investment Report 2005
Further shift towards some developing countries, mainly in Asia, and in Russia is expected.
Few respondents plan to expand R&D in Latin America or Africa.

China and India become the“hot-spot” Source: Booz & Company analysis (2008)

Ⅱ . FDI Inflows and Outflows FDI Inflows to China (billion USD) FDI Stocks in selected countries Source: MOFCOM FDI Statistics, OECD 0 20 40 60 UK Canada China France Germany US Korea India Japan Outward Inward ％ of GDP

FDI from and to India, 2000-01 to 2007-08 (in Millions of US $) Source: Sunil, 2009

Ⅲ . R&D Inflows The Growth of Foreign R&D Centers in India and China Growth of Foreign R&D Centres in India Growth of Foreign R&D Centres in China Source: TIFAC Survey and CSSP/JNU Data base. Source: MOFCOM Statistics 200* 2006-07 145 2005 64 2000 49 1999 19 1995 3 1985 Number Year 1250 2009.7 1200 2008 1160 2007 980 2006.10 750 2005.8 700 2004 400 2003 100 2002 124 2001 Number Year

The location distributions of foreign R&D centers in India and China Location of Foreign R&D Centres in India The regional distribution of the R&D organizations settled by Business1000 MNCs in China （ 2004 ） Source: TIFAC Survey (2006). Source: Xue and Liang(2008) 100 Total 5 Other regions 17 Pune-Mumbai 22 NCR (Delhi) 4 Chennai 7 Hyderabad 45 Bangalore No of Centres Region 100% 59 100% 107 100% 166 Total 15.3% 9 5.6% 6 9.0% 15 Other regions 15.3% 9 4.7% 5 8.4% 14 Jiangsu 11.9% 7 7.5% 8 9.0% 15 Guangdong 10.2% 6 1.9% 2 4.8% 8 Tianjin 23.7% 14 32.7% 35 29.5% 49 Shanghai 23.7% 14 47.7% 51 39.2% 65 Beijing Percent Number Percent Number Percent Number R&D Units Autonomous R&D Centers Total Organizations Regions

The Industry distributions of foreign R&D centers in India and China Major R&D Segment of FDI Firms in India Source: Based on TIFAC Survey (2006), Krishna and Bhattacharya,2007 100 3.0 4.5 6.8 8.3 8.3 8.3 9.8 10.6 14.4 25.8 Share(%) 132 Total 4 Food industry (fermentation, processed foods) 6 Biotechnology (Genomics, bio-informatics) 9 Engineering goods (Medical equipments, textile machinery, electrical test equipments, compressors, motors) 11 Consumer products 11 Chemical (coating, basic inorganic chemicals, polymers and synthetic materials, tanning agents, textile chemical) 11 Agro-chemicals (insecticide, hybrid seeds) 13 Pharmaceuticals (formulations, intermediaries, vaccination, drug discovery) 14 Automotive sector (vehicle and component design, embedded control system, safety systems) 19 Hardware-computer/telecommunications and embedded tools (chip designing-aerospace/mobile, optical switching systems, broad band system) 34 Software development (software applications for different sectors, networking tools, multi-media applications, CAD/CAM tools, multimedia tools) Number of Companies Major R&D Segment (Target areas of application)

The Industry distributions of foreign R&D centers in India and China R&D organisations set up by MNEs in China by industry, 2004 Source: Xue and Liang (2008) 100 59 100 107 100 215 Total 1.7 1 0.9 1 1.9 4 Others 0.0 0 1.9 2 0.9 2 Industrial conglomerates 6.8 4 2.8 3 3.3 7 Food and beverages 5.1 3 3.7 4 4.2 9 Chemicals 13.6 8 4.7 5 6.5 14 Other IT products 5.1 3 5.6 6 6.0 13 Household electronics 15.3 9 5.6 6 8.4 18 Biotechnology and drugs 1.7 1 6.5 7 4.7 10 Commodity chemicals 8.5 5 6.5 7 7.9 17 Automobiles 27.1 16 4.7 5 14.0 30 Industrial equipment and components 0.0 0 14.0 15 8.8 19 Semiconductors 8.5 5 18.7 20 16.3 35 Telecommunication 6.8 4 24.3 26 17.2 37 Software Share (%) Number Share (%) Number Share (%) Number R&D units Autonomous R&D centres Total organisations 1 Industry

The types of foreign R&D centers in India and China Types of R&D Activity of TNC Centers in India [1] Note: Actually 15 centres were involved in multiple types of activities and hence the figure escalates to 115 instead of 100. Source: Krishna and Bhattacharya, 2007 115 [1] (100%) Total 20 (17%) Collaborative R&D - Contract research 23 (20%) 19 (16%) - Locally Integrated Laboratories -do- R&D exports + Domestic Marketing R&D exports + local manufacturing 53 (47%) - Support Laboratories Only Offshore R&D for In-house R&D (ie parent TNC R&D) Number of TNC Centres (%) Collaborative R&D Type Pearce (2005) R&D Type Activity R&D Activity Type from TIFAC Survey

The types of foreign R&D centers in India and China Types of Foreign R&D Centers in Beijing Source: Liang et. al(2008) Multi-type Knowledge Screening Knowledge Generating Knowledge Exploiting Types 4.33 （＋） 1.00 （－） 4.09 （＋） 3.15 （＋） FAC3 （ New Product Development ） 4.61 （＋） 1.00 （－） 2.59 （－） 4.15 （＋） FAC2 （ Technology Adaption and Support ） 4.11 （＋） 4.00 （＋） 3.52 （＋） 2.83 （－） FAC1 （ Knowledge Screen and Explore) 4 （ N ＝ 9 ） 3 （ N ＝ 1 ） 2 （ N ＝ 11 ） 1 （ N ＝ 10 ） Cluster

Influence factors in attracting foreign R&D investments Source ： CISTP Survey(2004-2005)

Drivers of Future R&D Sites (figures in % in responses from 186 global firms) Source ： INSEAD Survey 2006 41 36 21 34 Others(business/markets) 12 18 11 17 Proximity to production facilties 3 11 30 24 Low cost skill base 27 14 13 13 Technology Cluster and Academic institutions 17 21 25 12 Qualified Workers USA Brazil India China

Ⅳ . R&D Outputs in Global Patents as representative indicators

Source: Sunil, 2009 Trends in patent applications by Indian inventors in the USPTO in comparison with BRICS (Number of patent applications)

Source: Sunil, 2009 Trends in patents granted to Indian inventors in the USPTO in comparison with those granted to BRICS (Number of patent granted)

Foreign R&D Centers (In India) Actively Involved in Patenting in USPTO: Patents Granted by USPTO (1990-2006 ) Source: Krishna and Bhattacharya ， 2007 3 3 Microsoft Corporation 6 - - - - 6 Monsanto Company 6 3 - 2 1 Lucent Technologies 7 4 1 1 1 Adobe Systems 8 4 - 4 Intel Corporation 10 5 2 1 2 Analog Devices 10 4 5 1 - Cypress Semiconductor Corp. 19 3 8 8 - - Unilever Home & Personal Care 20 16 4 CISCO 21 11 10 GE Medical System Global 24 8 13 3 Hewlett Packard 31 - - 3 7 21 Hoechst Aktiengesellschaft 47 35 11 1 STMicroelectronics Ltd. 101 56 19 24 2 - General Electric Company 106 52 37 16 1 - International Business Machines Corporation 140 64 34 28 13 1 Texas Instruments Incorporated Cumulative 2005-06 2003-04 1999-02 1995-98 1990-94 Organizations/ Industries

Patent Activity of Select Firms and Organisations in USPTO (1990-2006) Source: Krishna and Bhattacharya, 2007 9 3 5 1 Bicon India Limited 9 4 3 2 Aurobindo Pharma 12 6 6 Wockhard Limited 13 - - 10 2 1 National Institute of Immunology 14 4 3 4 2 1 Indian Petrochemicals Corporation Limited 15 1 1 11 2 - Panacea Biotech Limited 16 4 1 4 7 - Lupin Laboratories Limited 18 5 11 2 - - Orchid Chemicals & Pharmaceuticals 31 6 7 16 2 - Indian Oil Corporation Limited 34 19 9 2 10 1 15 6 - 5 - 5 Dabur Research Foundation Dabur India Ltd 65 11 15 - 15 - 32 1 3 7 - 3 Dr. Reddy's Research Foundation Dr Reddy Labs 78 19 20 23 9 7 Ranbaxy Laboratories Limited 898 248 272 278 71 29 Council of Scientific & Industrial Research (CSIR) Cumulative Patents 2005-06 2003-04 1999-2002 1995-98 1990-94 Organizations/ Industries

Patents Granted by USPTO to Chinese inventors (till 2008) Source ： USPTO Database Accumulative Grants First-Named Assignee CHANGCHUN INSTITUTE OF APPLIED CHEMISTRY, CHINESE ACADEMY OF SCIENCES OF CHINA ASIA OPTICAL CO., INC. UNITED MICROELECTRONICS CORPORATION WINBOND ELECTRONICS CORP. SHENZHEN FUTAIHONG PRECISION INDUSTRIAL CO., LTD. INTERNATIONAL BUSINESS MACHINES CORPORATION SAE MAGNETICS (H.K.) LTD. SEMICONDUCTOR MANUFACTURING INTERNATIONAL (SHANGHAI) CORPORATION CHINA PETROLEUM AND CHEMICAL CORPORATION INTEL CORPORATION CHINA PETROCHEMICAL DEVELOPMENT CORP. TSINGHUA UNIVERSITY HUAWEI TECHNOLOGIES CO., LTD. FU ZHUN PRECISION INDUSTRIAL (SHENZHEN) CO., LTD. HONG FU JIN PRECISION INDUSTRY (SHENZHEN) CO., LTD. MICROSOFT CORPORATION HON HAI PRECISION IND. CO., LTD. INDIVIDUALLY OWNED PATENT 23 24 27 37 42 49 61 62 65 74 79 101 103 109 205 295 641 1033

Ⅴ . OFDI and R&D Outflows

M&A of Top India Firms 2000-2007 Source: Various websites – http:// track.in /Tags/Business/category/mergers/ ; Wall Street Journal; http:// ibef.org ; software 68 USA Cymbal Patni Computers Software na Chile, Australia 2 acquisitions TCS Software 250 USA, UK, Austria, Portugal, Finland 7 acquisitions Wipro Software Na Australia, USA 4 acquisitions Infosys Forging Auto Na 1300 Germany Sweden Carl Dan Swedish Imatra Kilstra AB Bharat Forge Bharat Forge Telecom 140 UK Azure Systems Subex Systems Telecom Telecom 212 95 Bermuda Germany Flag Telecom Trevira Reliance Ind. Reliance Ind Telecom 239 Canada Teleglobe VSNL Pharma Pharma 324 80 Romania France Terapia SA RPG(Aventis) Ranbaxy Labs Ranbaxy Labs Oil and Gas 30,000 Russia, Sudan, Venezuela and African countries Sakhalin and other firms ONGC and Mittal Group Oil and Gas 500 Kenya Kenya Petroleum HPCL Energy 565 Belgium Hansen Group Suzlon Pharma 597 Germany Betapharm Dr Reddy Labs Electronics Electronics 729 290 Korea France Daewoo Electronics Thomson SA Videocon Videocon Steel Steel 5982 56 Canada Australia Novelis Straits Pty Hindalco Hindalco Steel Steel Automotive Tea 12000 293 118 430 UK Singapore Korea USA Corus Group Natsteel Daewoo Tetley Tata Steel Tata Steel Tata Motors Tata Tea Sector Deal Value (Million $) Country Target Firm Indian Firm

Selected M&A deals by Chinese firms, 2001-05 Source: Wu (2005), Boston Consulting Group (2006), see OECD ， 2008 Automotive MG Rover Group (United Kingdom), 2005 Nanjing Automotive IT IBM, PC Division (United States), 2004 Lenovo Group Automotive Sangyong Motor (Korea), 2004 Shanghai Auto Industry Corporation (SAIC) Electronics Hyundai display technology ( Korea), 2003 BOE Technology Group Electronics Thomson SA, Television manufacturing unit (France), 2003 TCL international Electronics Schneider Electronics AG (Germany), 2002 TCL International Telecommunications Philips Semiconductors, CDM hand-set reference design (United States), 2001 Holly Group Industry Target foreign firm/unit Chinese bidder

Selected overseas design and R&D labs of Chinese firms Source: Various press reports, see OECD ， 2008 Automotive R&D centres in Japan, Germany and Chinese Taipei Foton Motor Electronics Design centre in Japan Kelon IT and electronics R&D centre in Germany, United States (South Carolina) and India, design centre in Boston Haier Electronics R&D centre in the United States (Silicon Valley) Konka Electronics R&D centre in the United States (Silicon Valley) Glanz Group Telecommunications R&D centres in Sweden (Stockholm), India (Bengalooru) ZTE Telecommunications R&D centres in Sweden (Stockholm), United States (Dallas, Silicon Valley), India (Bengalooru) and Russia (Moscow) Huawei Industry Location Chinese firm

Ⅵ . Conclusions
There are really similarities between India and China on their roles in globalization of R&D, which are more complementary than competitive
India is more skilled than China in integrating innovative resources globally, but China has huge potentials and learn quickly
The rising of China and India influence global industry composition and innovation governance.
…………

Thank you!
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LIANG Zheng: Comparison of China and India in R&D globalisation

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