Manoj Joshi: Merging dreams with acquisitions

Visitors take a closer look at Pepper a companion robot at the World Robot Conference in China which is now focused on highend technology PicAPChinese economic developments are of great interest to everyone Whether it is growing fast or undergoing a slowdown it impacts the world economy like no other China has declared its intention of moving its economy from one based on investment and exports to one relying on consumption They have made it clear that in the coming years China will occupy a higher and higher position in global value chains and become like the US Europe or Japan a producer of highend components The process is now underway and is being watched with great interest because it has implications for the entire global economyBeyond the macro picture there are smaller signs of structural shifts and new trends in the Chinese economy In the past China was often an element in the supply chain where higher value and hightech items came from other suppliers say Germany Taiwan or Japan The famous case was that of the iPhone 6 which retailed for 600 in the US in 2012 of which Apple made 250 the Japanese makers of the touch systems and screens made 70 and smaller amoshyunts were made by the Korean and Taiwanese suppliers of the batteries flash memory cameras etc The Chinese made just about 8 mainly in terms of labour cost to assemble it But the Chinese are determined to move up in the value chain The government is working systematically to build highend capabilities and intends to raise the domestic content of core components and key materials to 40 per cent by 2020 and 70 per cent by 2025 This goes along with higher RampD expenditures of some 213 billion in 2015 equivalent to 21 per cent of the GDPOne indicator of this are the Chinese acquisitions in hightech industries in Europe and the US which have accelerated in the past year This July Zhongwang a state supported enterprise bought Aleris a US company specialising in making rollshyed aluminium products for aerospace and automotive industries Earlier this year Kuka a German company specialising in making robots for automobile plants was bought by Midea Group mdash Chinarsquos largest home appliance makerMore recently Aixtron a German company with a long history of making advanced tools required for making sophisticated semiconductors was bought by the Chinese The Aixtron case could well point to the problem Last year the German companyrsquos share prices tumbled when a Chinese buyer Sanrsquoan Optronics cancelled a large order at the last minute As a result the company went up for sale and a Chinese investment group Fujian Grand Chip offered to buy it in May this year Mercator Institute of Chinese Studies which tracked the issue found that Sanrsquoan and Fujian had a common principal investor in Liu Zhendong Further there was a great deal of funding through local and national investment funds for both companies from the Chinese government that has set aside funds to encourage a Chinese semiconductor industryChina has an eye on US firms too though the latter keeps a more wary eye on them through the Committee on Foreign Investment in the US CIFUS which has shot down bigticket investments like the one for Fairchild Semiconductors Likewise Beijingrsquos Unisplendour Coshyrp withdrew from a deal to buy a stake in Western Digital due to regulatory pressureOne major area to watch is the field of Artificial Intelligence AI A White House assessment of AI research indicates that today China with 350 publications leads the field with the US at number two with a little over 250 All other players mdash UK Australia Canada Japan Germany Singapore South Korea or France mdash produce a little above 50 or a little less than that This is not just an absolute lead mdash looked at through their citations by other scholars a measure of their influence indicates Chishyna remains number one Baidu Chinarsquos equivalent of Google runs a huge centre for AI research in San Jose where its chief scientist Andrew Ng is also an associate professor at the Stanford Universityrsquos coshymshyputer science department This centre employs some of the topmost American AI researchersAll developing countries want technology for national developmshyent But China has made it into a fine art Reverseengineered Soviet technology kept China going till 1990s Thereafter as it opened up China made strategic acquisitions in areas like railways power aerospace and automotives with a view to establish its own industries In this drive China has not hesitated to undertake industrial espionage and cybertheft Then using opaque rules and regulations the Chinese have systematically encouraged their champions and fobbed off the western companies and in many instances now they have emerged as their competitors mdash railways and nuclear power reactors are two prominent examplesBut this is only the beginning China has now taken aim in a range of highend fields like AI robotics aerospace renewable energy pharmaceuticals and biotechnology and intends to be the world leader in all of them by the time of their twin centenary mdash 2049 the anniversary of the revolutionThe writer is a Distinguished Fellow Observer Research Foundation New Delhi Send your feedback to mailbagmiddaycom