An overview of China for Research and Development facilities

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An overview of China for Research and Development facilities

  1. 1. China R&D OverviewJune 2013This report is solely for the use of Talent Neuron clients and Talent Neuron Subscribers. No part of it may be circulated, quoted, orreproduced for distribution outside the client organization without prior written approval from Talent Neuron.1
  2. 2. Talent Neuron Copyright and DisclaimerCopyrightThe material in this report is copyrighted. No part of this report prepared by Talent Neuron can be reproduced eitheron paper or electronic media without permission in writing from Talent Neuron. Request for permission to reproduceany part of the report may be sent to info@talentneuron.com. Customers are welcome to use an unlimited number ofcopies of the materials contained within this report. Furthermore, customers may copy any graphic herein for theirown internal purpose. Talent Neuron requests only that members retain the source name/logo mark on all pagesproduced. Please contact our Talent Neuron account manager at +1-408-716-8432 for any help we may provide.The report herein is the property of Talent Neuron (A Zinnov LLC Company). Beyond the membership, no copyrightedmaterials of Talent Neuron may be reproduced without prior approval.DisclaimerAll the information contained in this report is obtained through proprietary technology aggregation algorithms, humanexperts, network of domain experts, discussions with industry leaders, public and confidential information sourcesbelieved to be reliable. Talent Neuron makes no representations or warranties regarding the errors, omissions orcompleteness of any information contained herein and shall have no liability for the same. The report is provided solelyfor informational and marketing purposes and opinions must not be construed as advice, recommendations orendorsements. The reader of the report is advised to conduct an independent evaluation and form conclusions withrespect to the information provided.
  3. 3. 520+ Cities~12,000 Unique DataPoints Per City9 Domains &400+ Skills~7,500 Companies &22 Million ProfilesModule 1: Talent Intelligence Module 2: Talent Analytics• Location Profiles• Talent Pool (Installed and Fresh)• Salary and Cost• University• Peer Companies• Monitor• Role Views• Job Engine• Top Brains• Public People Profiles• HR Data Consolidation• Peer Benchmarking• Decision Support Analytics• Workforce Planning• Skill Circles• Hypotheses Validation3Talent NeuronTalent Neuron has two module Talent Intelligence and Talent Analytics. Our data spectrum covers500 cities, 9 Domains and 400+ skill sets
  4. 4. Talent Neuron, gathers data from multiple sourcesData Mining from ConnectorsJob SitesCompanyCareer SitesSocial Media/Public ProfilesPatentDatabasesCommunitySitesTechnologyContributor ListUniversitiesPublication/JournalDatabasesSurvey Data fromCompaniesData from Govt./Industry BodiesData from LocalRecruitmentCompaniesData on City levelsuitability &EcosystemCorrelated dataon Talent,Cost, Peer companiesTalent Neuron PrimaryResearch & InterviewsNews Articles & PublicData – Crawling Engine4
  5. 5. Zinnov 5Note: *MSA – Metropolitan Statistical AreaSource: Doing Business in Chengdu; Invest in Chengdu – government website; Government of Chengdu. 2011-05-13. Retrieved 2012-03-16;Government of Suzhou. 2011-03-18. Retrieved 2012-03-18; Doing business in SuzhouParameter ChinaMNC R&D Globalization Market US $7.65 BillionMarket Growth Since FY 2009 15.9%Total Number of MNCs 1,046# of Top 1,000 Global R&D Spenders 342Total Number of MNC Centers 1,300Total MNC R&D Talent Pool ~152,000R&D Suitable Fresh Talent Pool ~56,000Average Cost/ Person/ Year ~US $50,400MNC R&D Landscape in China8.39.310.60 5 10 15 20FY 2009FY 2010FY 2011Year on Year Cost Savings by China R&DCenters (USD Billion)Net Saving~USD 28 BnChina is generating significant cost savings to the Head quartersCHINA OVERVIEWChina is rapidly evolving in its R&D globalization journey and is competing head on with otheremerging nation5
  6. 6. Zinnov 6CHINA OVERVIEWThe growth of MNC R&D centers in China has been phenomenal in the last decade1993636299041,1001,300138163266 275196 20005010015020025030002004006008001,0001,2001,400Before 00 01-02 03-04 05-06 07-08 09-11Total Number of MNC R&D Centers (till March 2011) Number of New MNC R&D Centers (till March 2011)20111046 MNCs1300 R&DCentersNote: *A company can have more than one R&D centersSource: Economist Intelligence Unit (EIU); Ministry of Commerce (MOFCOM), China, Newspaper Articles; Talent Neuron AnalysisOf the Fortune 500 companies worldwide, over 400 already have R&D centers in ChinaMNC R&D Centers* in China (till 2011)Microsoft,Fujitsu,Ericsson, Intel,NortelSamsung,Motorola,Panasonic,Toshiba, TICisco,Broadcom,IBM,Electrolux,LogitechnVidia, EMC,Nokia, Kronos,McAfeeARM, BritishTelecom,SanDisk, AvayaYahoo, BMW,Eli Lilly,Foxconn, Esri6
  7. 7. Zinnov 7Vertical Wise Split of MNC R&D Centers24%16% 16%14%8%5%4%13%27%14%16%13%8%5%4%13%Manufacturing* Semiconductor Software Telecom Chemicals FMCG ComputerHardwareOthers**0%5%10%15%20%25%30%2008 201120111046 MNCs1300 R&D Centers• China is increasingly becoming an R&D destination for many of the auto OEMs such as Audi, Toyota, Volvo, because of the fact that itis one of the biggest market for these OEMs presently• R&D in new technology areas such as Cloud, Mobile/ Telecom and Internet/ e-commerce is prevalent due to a large market, accessto potential customers and increased government support• More and more Pharma Giants (like Pfizer, Novartis etc.) are increasingly expanding their R&D base in China . 15 of the top Pharmagiants have expanded presence in China latelyNote: *Manufacturing includes Automotive, Aerospace & Defense, Industrial & Electronic Equipment ; ** Others include Pharmaceuticals, Construction & Materials, Energy,Biotechnology, Media & Entertainment, etc.Source: Ministry of Commerce (MOFCOM), China, Newspaper Articles; Talent Neuron AnalysisCHINA OVERVIEWManufacturing vertical is the single largest contributor towards offshore R&D to China, followedby semiconductor, software and telecom7
  8. 8. Zinnov 8ShanghaiDalianBeijingGuangzhouShenzhenChengduChinaSuzhouXi’anNanjingHangzhouXiamenFuzhouTianjinWuxiChongqingWuhanTelecomElectronicsSoftwareInfocommElectronicsITNote: This is generic to the technology sector. We will provide the specific details for online technology companies in the final reportSource: Ministry of Commerce (MOFCOM), China Primary Interviews, Company web sites and press releases, News Articles, Talent Neuron AnalysisTier-1 locations20-30% difference in salaries. Cost of living veryhigh in Beijing, ShanghaiSuzhou and Chengdu have one of the largesthigh tech parks in ChinaChina has the world’s longest High speed rail(HSR), Wuhan-Guangzhou HSR etc.Huge sums of money being invested in Tier - IIcities to urbanize the populationSuzhou is the second biggest industrial city afterShanghaiSome Tier-II cities have good Universities. Moretalent is migrating into these citiesIn addition to the waiver of Corporate taxes,Local taxes (about 3%) are exemptedFor the companies which already have centersin Tier I cities, further increase might not besustainable. Hence, more companies arelooking to scale in Tier II citiesCost arbitrage overtier-1 CitiesImproved R&DinfrastructureImproved rail-roadconnectivityRapid pace of ChinaurbanizationEconomic & culturaldevelopmentAvailability of talentpoolIncentives by thelocal governmentsEstablished secondary locationsEmerging secondary locationsGrowth Drivers for Emergence of Tier-2CitiesScalabilityCHINA OVERVIEWChina is witnessing rapid expansion of secondary locations as these are increasingly becomingviable for MNCs and domestic companies to set up their R&D centers8
  9. 9. Zinnov 9Note: Source: Ministry of Science and Technology (MOST), China, Ministry of Commerce (MOFCOM), China Primary Interviews, press releases, News Articles, Talent Neuron AnalysisOtherDriversThere is a rapid infrastructure growth in all citiesacross China. In future, moving around in China willget better and faster. Tier I and tier II cities areconnected by high speed rail links and expressways,which has reduced the travel time drasticallyCertain Tier - II cities are planning their center ofexcellence. For example, Wuxi is focusing onNanotech, Shenzhen in Gene Research, Nanjing onClean tech, etc. This provides a lot of planningcapability for companies to go to areas of excellenceTier - II cities have gone all way out to usesolar power and other forms ofrenewable energy. They are preparingwell for future energy requirements. Asolar panel is visible in every lamp postand home in a Tier - II cityIntellectual property-related concernshave reduced among the MNCs once theymove long-term employees of Chineseorigin back to ChinaThe Suzhou and Chengdu municipal governmentsrecently released investment incentives to speed upthe economic growth of headquarter enterprises inthe city. The objective is to get more than 200qualified and competent headquarter enterprises toset up business operations in the cities by 2015Incentives for Headquarter EnterprisesEnergy Advantage Reduction in IP related concernsTheme Based FocusRapid Infrastructure GrowthThe cities are going out of their way to incubatestartup companies. Nanjing, for example, providesgrant of 10 million RMB for the right kind ofstartups. Suzhou government provides incentivesfor start-up companies, headquartered in Suzhou.The aspiration is very highRapidly Incubating Startup EcosystemsCHINA OVERVIEWTier - II cities in China are going out of their way to develop infrastructure, incubate start-upcompanies and provide incentives to attract more hi-tech companies9
  10. 10. Zinnov 10Note: S&T – *Science and TehnologySource: Ministry of Science and Technology (MOST), China, Primary Interviews, Company web sites and press releases, News Articles, Talent Neuron AnalysisAchieved goals in the 11th 5 year plan Projected outcomes in the 12th 5 year planStepping up the development of manufacturingindustryLeveraging new technologies to develop China’sindigenous brands with proprietary IPRsPriority given to 11 major sectors through Sci.-TechDevelopment Guidelines to encourage innovationDeveloping tier-II cities in terms of R&D, givingincentives to companies which set up centers thereTo develop seven new strategic industries with favorablepolicies focusing on innovation led growthSuccessful implementation of the National PatentDevelopment StrategyCultivation of human resources via the deployment ofNational Talent Development PlanTo improve the IPR landscape by the introduction ofNational campaigns against IPR infringement activities• 5 National S&T* programs engulfed2,500 projects in 2010 with a sum worthRMB 40 billion• 56 National High Tech parks churned outa combined revenue of RMB 10.6 Trillionin 2010StrategicS&T*focus ofthe Chinesegovernment• Focus on scientific development,environment and energy efficiency• Concentration of R&D centers fromsimilar industries in key strategiclocations• Replicating success of tier -1 cities likeShanghai in tier-2 cities like Suzhou,Chengdu, etc.CHINA OVERVIEWThe government has come up with visionary policies and plans to promote R&D activities in tier– II cities10
  11. 11. Zinnov 11Note: Source: Ministry of Science and Technology (MOST), China, Ministry of Commerce (MOFCOM), China Primary Interviews, press releases, News Articles, Talent Neuron AnalysisGovernmentSupport• Income Tax Exemptions &Reductions• Business Tax Exemptions• Import Duty Exemptions• Depreciation Benefits• Apart from the stipulated 25% Income Tax, the Local state income tax typically 3% isusually exempted during the preferential period of 5 years in most of the cities• If the annual increase of expenses on R&D is 10% and above, MNC R&D centers enjoythe deduction of taxable income by 50% of the actual amount in accordance withrelevant regulations in many states• MNC R&D centers are exempt from customs duties and import added value tax forR&D and up-gradation equipment which is not available in China or the performanceof which cannot meet its requirements• MNC R&D centers can be exempted from business tax on their incomes gained fromthe business concerning transfer of technology, technical development and relatedtechnical consultation and services, etc.• Subsidies for certifications• Training subsidies forpersonnel• Rental waivers free land forfixed time period• Special funding schemes• MNCs R&D firms can enjoy preferential treatment inbuying or renting office buildings. Employees of theenterprises can get preferential treatment in buyingresidential property. Preferential treatment includeswaiver of the rentals and lease deposits for a fixedperiod of time, In some cases the infrastructure isalso built by the government• MNC R&D centers may obtain scientific and researchprojects of governments at all levels and projectsentrusted by social organizations, enterprises andindividuals through competitive bidding andtendering. Funding and grants are often providedCountry OverviewCHINA OVERVIEWProviding assistance to MNC R&D centers in the form of tax benefits and financial incentives hasbeen a key functional feature of the government11
  12. 12. For Detailed information on Location, Talent, Cost, Risks, University Informationcontact info@talentneuron.comTalentNeuronGlobalLocationProfilesGlobalTalentInsightsGlobalCost &SalaryInsightsUniversityOutlookPeerCompaniesMonitorRole ViewJobEngineerTalent Neuron PlatformTalent Neuron Platform provides granular data for over 500 cities in 83 countries. It tracks over 12,000 unique dataparameters for a city that spans across location attributes, talent pool size (Domain, Function and Skills), Universities,Salary and Cost etc.Source: Talent Neuron Website 12
  13. 13. THANK YOU4701 Patrick Henry Dr.Building 7Santa ClaraCA – 95054Phone: +1-408-716-843221, Waterway Ave,Suite 300The WoodlandsTX – 77380Phone: +1-281-362-277369 "Prathiba Complex", 4th ACross, Koramangala Ind. Layout5th Block, KoramangalaBangalore – 560095Phone: +91-80-41127925/6First Floor,Plot no. 131, Sector 44,Gurgaon-122002,Phone: +91 124 4420100 info@talentneuron.comwww.talentneuron.com@talentneuron13

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