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.
Beijing—
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.
Shanghai—
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.
Seoul—
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.
Bangalore—
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 (www.hillier.com)
and is currently overseeing design of two major R&D
campuses in Asia for multinational corporations.
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