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Asia's Emerging R&D Hotspots

The economic lure of Asia attracts a wave of new R&D investments and opportunities.

New R&D clusters are emerging in Asia, and the way they attract talent, nurture academic and commercial ventures, and operate could be models for other research centers around the world.

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Source: World Bank, World Development Indicators, August 2005
Whether it’s a quickly growing suburb in China, or an established urban area in South Korea, there are a few constants among these new emerging “hotspots” in Asia; local governments, recognizing the importance of infrastructure and support services to attract companies, are making an investment; more money is being directed toward universities for research, and more emphasis placed on academic-commercial collaboration; and finally, locally trained technical talent, who once fled for better opportunities in other countries, are now digging in, or returning from abroad, to start new businesses or to run local subsidiaries of multinationals.

R&D explosion
“ There’s everything in Asia, from the traditional R&D centers to the newer to the newest,” observes Wei Li, associate professor of business administration, Darden School of Business at Univ. of Virginia, Charlottesville.

Both developed and developing countries alike are discovering strengths in the R&D market and playing to them. South Korea is focused on electronics; Singapore has committed considerable financial resources to turn itself into a biotech center. China and India are the newest and fastest growing R&D players, says Li. In Thailand, Bangkok has successfully wooed investment by large multinationals. The Philippines, by touting its relatively strong infrastructure and its tech-savvy, English-speaking population, has a growing concentration of R&D sites.

Four of the most interesting emerging clusters in Asia are in Beijing, Shanghai, Bangalore, and Seoul. Each of these cities has attributes that appeal to major multinational investors, says John Boyd, president of The Boyd Co., Princeton, N.J., a location consulting firm whose client portfolio includes The World Bank, PepsiCo, and Philips. These attributes include: a highly educated workforce, a major university, a positive business climate, an attractive lifestyle environment, and excellent international airline service.

But even with these obvious advantages, Beijing, Shanghai, Bangalore, and Seoul also present challenges to multinational investors. In China and India, laws and regulations to protect intellectual property (IP) are weak. Environmental regulations, too, are fledgling or poorly enforced, and for the highly sought global talent pool, clean air and clean water is an important factor in where they choose to live and work. Poor infrastructure translates into traffic jams and trouble getting to work. Power shortages are a regular concern.

If addressed early in the planning phases of a new R&D project, however, each of these challenges can be managed.

To see the future of R&D in China, look at Zhongguancun. This high-tech hub in Beijing hosts showrooms, offices and innovation centers trumpeting the brands and new ideas of some the world’s leading technology companies, including Intel, Apple, Microsoft, and others. There are also storefronts with young, smart-looking employees assembling electronics. Some envision the day when these small assembly shops could grow—in part by savvy investments in research and development—into world leaders.

Zhongguancun businesses certainly have access to talent. The tech hub is bordered by Tsinghua Univ. and Beijing Univ., which spawned some of the early tech businesses that have found success outside of China. Lenovo, which recently acquired IBM’s $1.25 billion personal computer division, was founded at The Chinese Academy of Sciences, which calls Zhongguancun home. Nearby are three dozen smaller universities giving employers access to cheap, hungry technical talent.

Hillier’s proposed design for a research and development campus for LG Electronics, Seoul, South Korea. Image: Hillier Architecture

What’s most intriguing about Zhongguancun is the energy and ambition of the local entrepreneurs. They boast a kind of Silicon Valley fervor, in part driven by ready access to news media highlighting the successes of such companies as Google, Ebay, and others. These business owners have some access to foreign venture capital as well as investment money and other support from the central government. Seeking to grow high-tech businesses, the government offers small- and medium-sized enterprises in Zhongguancun access to business incubator space with cheap rents and technical assistance.

The government is also using incentives to encourage local university professors and returning students to commercialize their research. “They see themselves as the creators of the world’s future Intels, Apples, and Microsofts and some of them probably will be,” wrote Edward Tse, Managing Director-Greater China, Booz Allen Hamilton, Inc., in “China’s Five Surprises,” in Strategy + Business magazine.

China’s largest city, bustling Shanghai has ambitions to be Asia’s financial, industrial, and commercial powerhouse. It is making great progress. Fifteen years ago, the Pudong district was farmland. Today, it boasts a Chicago-style skyline and attracts a significant portion of all foreign direct investment going into China.

Much of the investment now going into Pudong is focused on R&D and it is being done by multinational corporations. Honeywell, DuPont, Roche, and Rohm and Haas are a few of the corporations that have recently announced or inaugurated R&D centers in Pudong. Not only will these beachheads provide the multinational corporations access to relatively low-cost technical talent—between 1996 and 2001, universities in China almost doubled the number of science and engineering PhDs they graduated—it will also give them a platform in the world’s growing market.

But in Shanghai, as well as Beijing, certain ground rules apply to those multinational investors interested in building R&D centers, protecting IP, and attracting top-notch talent—two significant initiatives that, if not carefully planned, can work at cross purposes.

Before construction begins, companies have to decide what kind of research they want to do. The importance of the research to the future of the firm will help to determine levels of security. Companies also have to figure out how they will collaborate with local venture partners and how they will use their R&D campus for the education of tech support, sales staff, and their dealer network—all without compromising IP. Some investors in China have done a very good job building research centers that safeguard important work, but their foreboding facades can make it harder to recruit top scientists.

South Korea, and greater Seoul, where much of the nation’s research and development work is concentrated, has managed to turn itself into one of the world’s important centers of research. This accomplishment comes in spite of the country’s lack of natural resources and its challenging geographical location. South Korea is wedged between two imposing powers. To the west is China, an economic and political giant. To the east lies the financial powerhouse of Japan. Pyongyang, the capital of Communist North Korea, looms to the north. So anyone seeking lessons on making the best of the hand they have been dealt should look to Seoul.

R&D as a percentage of South Korea’s total GDP is 2.9%– almost double that of China. In 2004, it boasted 79,500 international patents—again almost double that of China (R&D magazine, September, 2005). In addition to its prominence in cloning, its R&D work in electronics and automobile research is strong, observes Prof. Li. Corporations account for approximately three quarters of the nation’s investment in R&D and South Korea’s large corporations are, for the most part, centralized in Seoul. Auto manufacturer Hyundai and electronics giant LG are just a few of the firms planing to build important research centers in the metro area. 

India now boasts a surging population of tech returnees—people with advanced degrees who fled the country for better paying jobs in Silicon Valley, San Diego, Cambridge, and New Jersey, and are now coming back with global experience and contacts, money, and entrepreneurial ambitions. These returnees, combined with investments by large companies, are turning those urban areas in India with leading universities, good airports, and cultural amenities into emerging centers of research and development.

No place better exemplifies this trend than Bangalore. It boasts one of the largest and fastest-growing concentrations of software and information technology- related research activities in the world. Why? Workers there speak English and the region graduates some 300,000 computer engineers annually, observes Boyd. The roster of tech giants conducting IT research in Asia is a Who’s Who of world leaders. Among them: Cisco, Samsung, Texas Instruments, and Microsoft.

Cisco traces its Indian roots back to 1996 when it launched sales and marketing operations in key cities including Bangalore. Since then, the San Jose computer networking giant’s interest in India has blossomed. In October 2005, it announced plans to invest some $1 billion in India over a three-year-period. Those funds include a major addition to its Bangalore R&D campus.

But the region still faces challenges. Multinationals there grapple with weak enforcement of IP. Although the cost of doing business is low by global standards, it is rising due in part to the inflationary pressures caused by the success the city has had in luring R&D investment. Infrastructure is strained—power outages and traffic congestion are two manifestations—and yet growth continues. Bangalore’s success, or failure, in solving its problems says much about the future of modern India, and the same goes for China and South Korea. 

Steve Gifford
About the Author:
Steve Gifford, AIA, is managing principal of the New York office of Hillier Architecture ( and is currently overseeing design of two major R&D campuses in Asia for multinational corporations.

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