The Dragon vs' the Elephant Comparative analysis of innovation capability in the telecommunications

1
The Dragon vs. the ElephantComparative analysis
of innovation capability in the
telecommunications equipment industry in China
and India

• Professor Sunil Mani
• Planning Commission Chair Professor
• Centre for Development Studies
• Trivandrum-695011

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Outline

• The telecommunications industry in China and
  India
• The sectoral system of innovation
• Innovation Capability
• Traditional indicators (a) RD investments and
  (b) Patents
• Competitiveness of exports
• Capability in hardware
• Capability in telecoms software
• Conclusions

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Research Intensity
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Patenting performance in the US
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China Scientists and engineers engaged in RD
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India Scientists and engineers engaged in RD
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Relative technological strengths China vs. India
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Growth of telecommunications services sector in
China and India, 1990-2005(Million subscribers)
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Trends in teledensity in China and India,
1991-2005(Number of main lines per 100 people)
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Extent of Digital Divide in China
and India, 1978-2003(Ratio of urban to rural
tele densities)
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Chinese and Indian investments in
telecommunications, 1975-2001
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Growth of telecoms revenues in China and India,
1997-2003(Value in billions of US )
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Distribution of Telecom revenues China Vs India
(c2004)
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Relative profitability of the Chinese and Indian
Telecom Services Industry
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Relative size of the market for telecom
equipments, 1992-2003
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Digital Access Index China and India, 2002
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Sectoral System of Innovation-China

• Chinese
• Stronger and more closely knit- public labs have
  been converted to production enterprises
• Manufacturing enterprises are highly research
  intensive and two of them have emerged as leading
  MNCs in their own right
• Strong rivalry between domestic manufacturers and
  indeed between them and western MNCs
• The state has provided strong and effective
  strategic direction

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Sectoral System of Innovation- India

• Indian
• Weak and fragmented- the public laboratory has
  strong research capability- successfully
  transferred generated technologies to local
  enterprises- helped to jump start a domestic
  equipment manufacturing industry
• Domestic manufacturing enterprises do not have
  strong in-house RD capabilities
• Leading state-owned equipment manufacturer have
  become a mere trader. Deregulation of telecoms
  equipment industry has had adverse consequences
  for the leading domestic equipment manufacturer
• Growth of RD outsourcing deals
• FDI into telecom equipment manufacturing

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Growing importance of local producers in the
market for telecom switches in China, 1982-2000
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Innovation Capability

• Definition Ability to conceptualise, design,
  manufacture, and sell state-of-the-art-telecommuni
  cations equipment both at home and abroad
• Measurement is not easy- no single indicator
  captures the above definition
• Following four indicators are employed
• Traditional indicators (a) RD investments and
  (b)patents
• Competitiveness in exports
• Capability in hardware design
• Capability in telecoms software

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Traditional IndicatorsHuman resource devoted to
telecom RD in China and India(Number of RD
scientists and engineers)

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Ratio of Chinese to Indian investments in Telecom
RD, 2000-2003
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Number of patents granted to Chinese and Indian
Inventors in Telecom technologies in the US,
1991-2004
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Profile of the Largest Chinese Telecom Equipment
Manufacturer
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Huawei-Exports
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Growing market share of Huawei in China
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Number of US patents granted to Huawei
Technologies (China) in the US, 2000-2004
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Comparison between the largest Chinese and Indian
telecom equipment manufacturers
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Competitiveness of telecom exports, 1992-2003
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China has innovation capability in 3G Mobile
Telephony Technology
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China introduces its own standard for 3G Mobile
technology

• Chinas Ministry of Information Industry
  (January 2006) formally approved TD-SCDMA, a
  local standard for third-generation wireless
  service. The move signals an important step
  towards the development of the countrys
  telecommunication industry. Following
  confirmation of the commercial viability of the
  local 3G standard, Beijing is expected to start
  issuing 3G wireless-operation licenses as early
  as March or by mid-2006. Domestic and
  international telecommunications companies,
  including Huawei Technologies Co, Lucent
  technologies, Motorola Inc and Nortel Networks
  Corp, welcome the move.

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Diffusion of TD-SCDMA Technology in China
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Market Perception Based on 2005 Wireline Telecom
Equipment Market Perceptions Study by Heavy
Reading
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Share of C-DOT designed switches in Indias
telecom network(As on March 31, 2004)
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Telecoms software exports from India (Millions
of US )
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Conclusions

• China is a later entrant to telecommunications
  research and manufacturing. But it has already
  evolved as a major world player
• The Chinese and Indian innovation systems
  presents exactly the opposite picture. China
  first allowed MNCs in the design and manufacture
  of telecom equipments. Later on through carefully
  crafted policies it engineered positive
  technology spillovers to local companies.
  Currently the Chinese market is dominated by
  these local companies
• Further it has built up considerable innovation
  capability in wireless telecommunications
  equipments- development of the TD-SCDMA 3G Mobile
  standard for instance
• India has built up some capability in telecom
  software, access technologies and in RD
  outsourcing
• Chinese telecom sector has undergone better
  strategic direction than Indias