 I just arrived back in the US from China and am appropriately jet-lagged. Therefore, this post will be a short one, but with additional statistics on filings of patent applications in China. In one sentence, Chinese citizens filing Chinese patents continue to increase, while foreign parties filing Chinese patents remain fairly constant. Note that in the charts below, a resident filing refers to an application filed in the country by its own resident; whereas a non-resident filing refers to the one filed by a foreign applicant. An abroad filing refers to an application filed by this country's resident at a foreign office. For all charts, the source is the WIPO statistics database, last updated December 2015.
China dominates worldwide productions of silicon. No one else is even close:   Source: Thomson One But this is where the dominance stops for China regarding the semiconductor industry. Virtually all of the chips that China uses for its burgeoning domestic smartphone industry are are from foreign companies. Note that this does not mean that these foreign companies do not use China. In addition to selling up to half of their chips in the Middle Kingdom, they also have manufacturing facilities in China. Indeed, domestic NAND flash consumption is increasing with the rise of Chinese brands. The rise of Chinese brands is even more apparent in the smartphone scene. Seven of the world’s top ten smartphone vendors hail from China. Chinese smartphone vendors also consume greater amount of memory as majority of them produce Android devices, which require more mobile DRAM than Apple’s iOS devices. Given that the Chinese people like their mobile devices more than even Americans (see graphic) the government wants the chips in more of these devices to be Chinese-made. More specifically, China consumed US$12 billion worth of DRAM and US$6.5 billion worth of NAND Flash in 2015. These figures represent 22% and 29% of the global DRAM and NAND Flash industries’ total revenues for the year, respectively. In 2016, China’s NAND consumption is expected to increase to 33% of the world total. China views NAND Flash as key to localizing semiconductor production. China plans to invest $55 billion in local chipmaking businesses by 2020 in an effort to curb reliance on foreign semiconductors. In mid-2015, state-owned Tsinghua Unigroup – the investment arm of Beijing’s Tsinghua University, offered a $23 billion deal to buy US semiconductor manufacturer Micron Technology, Inc. Micron turned down the offer ostensibly because the Committee on Foreign Investment in the United States (CFIUS) would never approve such a deal. CFIUS reviews the national security implications of foreign investments in U.S. companies, ensuring that deals do not give away valuable technology or place too much power in foreign hands. Lately, it has been analyzing Chinese deals with heightened scrutiny, and prevented China’s Huawei from buying a majority stake in networking company 3Com. China's need for a home-grown semiconductor source has been even more heightened by the U.S. Commerce Department instituting export restrictions on Chinese telecom equipment maker ZTE Corp for alleged violations of U.S. export controls on Iran. The restrictions will make it difficult for the company to acquire U.S. products, including chips, by requiring ZTE's US suppliers to apply for an export license before shipping any American-made equipment or parts to ZTE. The Commerce Department has further stated that such export license applications will generally be denied. Although talks are ongoing between China and the US, such tactics highlight the need for China to have a broader domestic market for semiconductor suppliers. China has a lot of ground to make up. Micron, for example, in 2015 obtained 41% of its revenue from China:   Micron is not alone. Qualcomm makes over half its revenue from China:   Also, Intel, Sandisk, Texas Instruments, and AMD all get a significant portion of their revenue from China:     China certainly has the bright minds, and also the money. What it needs is strategic guidance from experienced executives. Already Tsinghua Unigroup has hired Charles Kau, the chief of Micron Technology Inc's Taiwanese joint venture, as its global executive vice president. More than simply business guidance, though, China and its new chip industry will need assistance in the intellectual property world -- specifically with patents. Although the capital investment is coming, and the great technical minds are already here in China, this only starts the business. The next step is market share. That is where the newly powerful Chinese patent system comes in. The new chip companies will need to quickly acquire meaningful Chinese portfolios, so they can quickly leverage their space in the market. China has been a member of the World Trade Organization (WTO) since 2001. And the US and several other Western countries have been keen to accuse China of unfair treatment from time to time (despite the fact that the US President vetoed an injunction by Samsung ostensibly because domestic here Apple was on the other side). Now the chickens are coming home to roost, because the Chinese patent enforcement system will allow Chinese semiconductor companies to fairly -- and quickly -- move into a dominant position in not just the Chinese market, but also the world market. The Chinese companies will likely undercut their American, Japanese, and Korean counterparts. And although we will have to wait to see, if the recent past is any indication, the quality will also be top-notch, as the government and the market will demand as much. It is an interesting time in China in the semi market. Given that the magical new part of Shanghai, Pudong, was built in around ten years, I would bet that China's impact and eventual dominance of the market will take much less time.  PCT Filings by Origin Country Data from WIPO
China businesses continued their dramatic growth in worldwide innovation last year. According to the World Intellectual Property Organization (WIPO), Asian businesses were the key contributors to a record number of patent applications filed under the Patent Cooperation Treaty (PCT) last year. The total number filed in 2015 was 218,000, a 1.7% increase from the previous year. Chinese filers accounted for a 16.8% growth of PCT applications last year. China-based Huawei headed the list for a second year in a row with 3,898 filings, while fellow Chinese company ZTE recorded the third most-filed PCT applications with 2,155. While the US held the top spot for the 38th consecutive year with 57,385 applications filed, the number of PCT applications from the country dropped by 6.7%. WIPO director general Francis Gurry stated that, “We see through this indicator that, while the US maintains its premier position, the geography of innovation continues to shift and evolve, with Asia, and in particular Japan, China and South Korea, forming the predominant geographical cluster.” By country, even with its drop, the USA took first place as it has done for the past 38 years with 57,385 PCT applications. Japan was No. 2 in PCT filings with 44,235, and China was No.3 with 29,846. The UK was in 7th place with 5,313 applications, with Germany, Korea and France in 4th, 5th and 6th places with 18,072, 14,626 and 8476 applications, respectively.  China this week unveiled its 13th Five-Year Plan at the annual session of the national legislature, which opened Saturday. The Plan provides a roadmap for policy priorities, as well as economic and social goals for China over the next five years. This is the first Five-Year Plan drafted under the President Xi Jinping.
The CPC has set forth a lofty goal of becoming a world leader in high technology industries such as semiconductors and in the next generation of chip materials, robotics, aviation equipment and satellites. China also plans to increase its R&D spending to 2.5 percent of GDP for the five-year period, up from 2.1 percent of GDP for the previous five years.. In a speech opening the session of parliament, Premier Li Keqiang declared that innovation is the primary driving force for the country's development. China will implement its "cyber power strategy", the Plan states, emphasizing the importance of controlling the Internet in China. This has sparked concern with foreign businesses operating in China. This year’s proposed target for GDP expansion has been set at a range between 6.5 per cent to 7 percent. Premier Li said that innovation would be the top driving force for future growth, By 2020, 60 per cent of China’s economic growth would come from improvements in technology and science, he added. Oh, and by the way. . . that technology driving China's growth will be protected by Chinese patents. Is your company ready to compete head on with China? The actual plan can be found (in Chinese) here, but an excellent summary by APCO Worldwide is available here.  TMF Group’s Global Benchmark Complexity Index 2015 has ranked China as the fifth most complex country for multinationals to stay compliant with corporate regulation and legislation, and the second most complex in Asia. There are several reasons for this, but paramount among them is the complex governmental structure. Throughout China's many provinces, there are separate regulatory regimes along with a range of dialects. Further, at time, different governmental agencies appear to have overlapping responsibilities. For example, China's complex and rapidly-evolving Anti-Monopoly Law is currently enforced by the National Development and Reform Commission (NDRC), the State Administration for Industry and Commerce (SAIC) and the Ministry of Commerce. Negotiating such agencies takes experience and patience.
However, as the TMF report points out, China is actively attempting to make the rules for opening and running a business in China easier for foreigners. The keys to success are having reliable advisors that can provide trusted guidance. In addition to functional expertise, such advisors must have good relationships with the relevant agencies and parties. And, of course as always, every foreign company must make sure it is acting as a friend of China. Luckily, many such advisors exist. The hardest task is finding someone you can trust. If you need help in this regard, feel free to contact me, and I would be happy to facilitate any connections you may need. See the TMF report at https://www.tmf-group.com/en/media-centre/press-releases/china-complexity-report  China’s top Internet regulator closed the social media accounts of an influential, retired property developer who criticized President Xi Jinping’s campaign to tighten control over state-run media.
Lesson: As always, be a friend to China (and its government) Translation: Don't mess with China See http://www.bloomberg.com/news/articles/2016-02-28/chinese-tycoon-loses-37-million-web-followers-after-faulting-xi 多谢 (many thanks) to all who named me again this year to Intellectual Asset Management's IAM Strategy 300 – The World’s Leading IP Strategists for 2016. I am honored and humbled. I owe it to my clients and colleagues. Thank you so much. Here's to another great year!
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Welcome to the China Patent Blog by Erick Robinson. Erick Robinson's China Patent Blog discusses China's patent system and China's surprisingly effective procedures for enforcing patents. China is leading the world in growth in many areas. Patents are among them. So come along with Erick Robinson while he provides a map to the complicated and mysterious world of patents and patent litigation in China.
AuthorErick Robinson is an experienced American trial lawyer and U.S. patent attorney formerly based in Beijing and now based in Texas. He is a Patent Litigation Partner and Co-Chair of the Intellectual Property Practice at Spencer Fane LLP, where he manages patent litigation, licensing, and prosecution in China and the US.
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Disclaimer: The ideas and opinions at ChinaPatentBlog.com are my own as of the time of posting, have not been vetted with my firm or its clients, and do not necessarily represent the positions of the firm, its lawyers, or any of its clients. None of these posts is intended as legal advice and if you need a lawyer, you should hire one. Nothing in this blog creates an attorney-client relationship. If you make a comment on the post, the comment will become public and beyond your control to change or remove it. |
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