Monthly Archives: February 2010

SMS craze

23 billion text messages sent during the Chinese New Year holiday. 13 billion for the sole New Year’s day and eve. 1.33 billion MMS. Chinese mobile users have once again broken the previous year’s record.

The popularity of SMS is so great that operators actually had to restrict the number of text messages sent. The limit of 200 messages within an hour (or 1,000 within a day) has been extended to 500 per hour (or 2,000 per day) for holidays and week-ends – the agreement is mainly intended to combat spams.

The SMS craze is even endorsed by top-level officials. Bo Xilai, party chief of Chongqing, has reportedly sent a message bearing quotes from Mao Zedong (known as red-texting) to 3 million users in April 2009. In the end it really comes down to deciding what counts as spam…

China and the smart grid

Smartgrid, intelligrid, futuregrid, there seems to be no boundary to naming the next generation of electrivity grids. No limit on the amount spent either: China is preparing to invest USD 7.3 billion in smart grid technology – more than on power generation – in 2010. Even if the investment comes as a fiscal stimulus, it may propel China on the course of technological innovation in yet another sector.

Akin to telecommunications where wireless has bypassed wireline in many developing countries, China will leapfrog the current generation of electricity grids and go directly “smart” for new infrastructures – the plan is to have a smart grid operational at the national level by 2020.

Re-designing an entire electricity network comes with an incredible number of challenges but, like in telecommunications, it will give China the opportunity to re-think technology [almost] from scratch. Get ready for another war on standards…

Are Chinese firms innovative?

The question comes back year after year: how innovative are Chinese firms?

Coming up with a meaningful answer is far from easy. It requires first to define what we mean by innovation – it can take many forms, from disembodied technology to a new product or process – and what we mean by Chinese firms – for instance, do we include joint ventures. It then requires to find a measurement “tool”. Patents filed are often used as a proxy.

Statistics computed by the World Intellectual Property Organization (WIPO) both at the country and firm level tell us that China ranks 5th in 2009 (behind the US, Japan, Germany and South Korea). With 7946 patents filed, China has seen a surge of 29.7% over the past 12 months.

At the firm level, Huawei comes second worldwide with 1847 patents filed. In other words Huawei accounts for more than 20% of all patents filed by Chinese firms abroad. A paltry though in comparison to the 580000 patents delivered by the China State Intellectual Property Office. ZTE, another telecom equipment manufacturer, beats Huawei at the domestic patenting race.

Some firms are more innovative than others, some file more patents domestically than internationally but the trend is there: a limited number of firms have set their goals on becoming leaders in innovation.

Rare earth technology

“Middle East countries have oil, and China has rare earths. Let us export rare earths to increase our foreign exchange reserves.”
Deng Xiaoping

Yttrium, lanthanum, neodymium, promethium…. While not part of your daily vocabulary you will certainly find these rare earth elements (REE) in your close environment: wind turbines, iPods, hybrid vehicles, the list of high-tech applications using REE seems without an end.

The bad news? Since the turn of the century, China controls close to 95% of the world’s REE production and possesses 50% of the world’s reserves. There is even a Rare Earth Industry Development Plan.  The Chinese government has imposed increasing export duties and quotas on the rare earths industry. There are even some rumours that the most valuable of these elements will be prohibited from leaving China or restricted to companies located on its soil.

The good news? Europe, Japan and the United States seem to have suddenly woken up to the strategic nature of REE and, akin to oil, are considering setting up strategic reserves. In addition, rare earths are not as rare as their name suggests. Alternative supply sources exist (e.g. in Vietnam or Australia) so in the end it may just be a question of pricing.