29/03/2014 Talking Business with Linda Yueh


29/03/2014

Similar Content

Browse content similar to 29/03/2014. Check below for episodes and series from the same categories and more!

Transcript


LineFromTo

Now on BBC News, it is time for Talking Business with Linda Yueh.

:00:00.:00:09.

Could China's Silicon Valey surpassed the original in America?

:00:10.:00:13.

Is the world's most innovative company Chinese? Here in Shenzhen,

:00:14.:00:21.

I'm Linda Yueh, and we are Talking Business.

:00:22.:00:42.

A warm welcome to the programme. Three decades ago, I would be

:00:43.:00:47.

standing in the middle of a small fishing village. Then the Chinese

:00:48.:00:58.

government chose Shenzhen of one of the special economic zones that

:00:59.:01:02.

would become a manufacturing hub for exports. Two decades ago, I would be

:01:03.:01:06.

surrounded by factories producing cheap toys and clothing. Now it's

:01:07.:01:11.

high`tech firms, that not only produce here but conduct research

:01:12.:01:17.

and development to such a skill but it is raising the question ` could

:01:18.:01:23.

Shenzhen rival Silicon Valey? I went perhaps the most innovative company

:01:24.:01:27.

in the world that is based here to find out.

:01:28.:01:33.

We think of made in China as cheap toys, socks, shoes, bags,

:01:34.:01:39.

electronics. Manufactured on a huge scale with low skilled workers. But

:01:40.:01:43.

the world's most innovative company might be Chinese. Tech giant ZTE has

:01:44.:01:50.

filed the most pate ands over the past few years, more than any other

:01:51.:01:59.

firm. Three, including ZTE, of the top five mobile phone companies in

:02:00.:02:04.

the world are based in Shenzhen, a short distance from Hong Kong.

:02:05.:02:07.

Chinese firms may be large, but they are not global household names.

:02:08.:02:10.

Also, they are not in the top tier Almost all of my suppliers have

:02:11.:02:33.

factories or offices nearby, so it is very easy to reach them if I have

:02:34.:02:37.

some issue, I can call my supplier and they come to our office within

:02:38.:02:42.

half an hour. The mobile phone industry in this

:02:43.:02:47.

area was encouraged by the Chinese government as a source of exports.

:02:48.:02:58.

It is not just the big players. There are 6000 manufacturers in

:02:59.:03:03.

Shenzhen. China produces more than half of the 2.5 billion phones sold

:03:04.:03:10.

around the world annually. That is equivalent to half of the adult

:03:11.:03:14.

population on the planet buying a new handset every year.

:03:15.:03:20.

We all use our mobile phones to talk, text and send e`mails. All of

:03:21.:03:24.

that equates to gigabytes of data being sent every day. Data that

:03:25.:03:30.

could end up in the wrong hands. That perceived risk has led the US

:03:31.:03:34.

government to largely banned tech companies from China. Within a

:03:35.:03:40.

generation, Chinese firms now jostle with American and European ones. But

:03:41.:03:45.

it takes time to see if a nation is truly innovative. If China succeeds,

:03:46.:03:51.

then it will mark a key chapter in the shift from West to East. Method

:03:52.:04:03.

and device for enhancing virtual topography. That is just one of the

:04:04.:04:15.

thousands of patents listed here. I am here in Shenzhen, and I'm about

:04:16.:04:19.

to speak to the president of ZTE. But it is not just this wall. Look

:04:20.:04:26.

at this one. There are thousands more patents listed here. ZTE has

:04:27.:04:35.

filed the most patents in recent years. But is it truly innovative?

:04:36.:04:45.

That is why I asked the head. For the last more than 20 years, we

:04:46.:04:53.

have been dedicated to innovation. We believe that innovation is the

:04:54.:05:02.

key for our success. How to make this innovation from ZTE's

:05:03.:05:09.

understanding, we have three ways. One way is to be more close to our

:05:10.:05:17.

customer and end users. We try to know more about the requirement and

:05:18.:05:21.

the needs of our customer. Then we find a way to serve their challenges

:05:22.:05:28.

and win the customers. The second way is to attract more talented

:05:29.:05:35.

people globally, so we have many centres, not only in China but also

:05:36.:05:43.

oversees. We have five in the USA, three in Europe, trying to attract

:05:44.:05:54.

talented people. It is also a very important way to make innovation.

:05:55.:05:59.

The third way is to get more partners, and get a better ecosystem

:06:00.:06:07.

for innovation. Today it is a lot easier for one single company to

:06:08.:06:13.

make an innovation all the way. How'd you get from the point of

:06:14.:06:16.

where your technology is competitive, you are putting out a

:06:17.:06:19.

camera which has more features and more ability, new handsets, than say

:06:20.:06:28.

even the existing dominant players. What kind of strategy do you need to

:06:29.:06:33.

put your phone at that price and? It is brand recognise Asian. `` brand

:06:34.:06:47.

recognition. If you only put advertisements and money to promote

:06:48.:06:55.

your brand, it is not the smart way. So first of all we need a unique

:06:56.:07:02.

technology to attract customers. We also need innovation in business

:07:03.:07:08.

models. Like we not only provide these handset and hardware, we also

:07:09.:07:19.

make unique software services to really get our ZTE uses. That is

:07:20.:07:31.

very important to promote the ZTE Brent. And the other part of your

:07:32.:07:35.

business, which is equipment for telecommunication, you have been

:07:36.:07:41.

blocked by the US government from their agencies, and you and why

:07:42.:08:01.

Huawei. We have lots of different systems, and this is one. But

:08:02.:08:08.

through ZTE's efforts and revolution in technology, finally we can

:08:09.:08:16.

approach the USA market to win our customers. We believe this is

:08:17.:08:22.

bringing the value to our customer in the USA. That is the only way to

:08:23.:08:27.

win the market. There is a perception that Chinese innovation

:08:28.:08:33.

is imitation and not as innovative as you would find in Silicon Valey.

:08:34.:08:45.

What would you say to that? Silicon Valey is a great city for

:08:46.:08:59.

innovation, but in China, we now have new leading technologies in

:09:00.:09:08.

different areas, like ZTE. We announced unique radio technology

:09:09.:09:12.

last year, and this helped ZTE to have the fastest`growing 4G player

:09:13.:09:20.

in the world, announced by the consultant company IHS. In your

:09:21.:09:28.

ambition for the company, it sounds like you think technologically you

:09:29.:09:35.

should... There are other reasons why you are not the most recognised

:09:36.:09:38.

innovative company in the world. Is that your aim over the next few

:09:39.:09:43.

years, to get the business model to support the technology that you

:09:44.:09:51.

think should be making you the most innovative company in the world? We

:09:52.:09:55.

have this dream, and also this vision. Division two B the most

:09:56.:10:05.

innovative company in the world. So all of our people, all of our team,

:10:06.:10:13.

our management, want to realise this dream.

:10:14.:10:17.

I also had a chance to see for myself the latest gadget made by

:10:18.:10:21.

this Chinese telecoms giant. Who is calling me? Hello! How I

:10:22.:10:26.

you? These days, you don't have to pick

:10:27.:10:39.

up the phone or even turn on your computer to receive a call from a

:10:40.:10:43.

friend. You can just talk to her through your television screen. How

:10:44.:10:51.

is this possible? Via a little box that can be very low cost. What is

:10:52.:10:57.

extraordinary is the speed of the technology. Depending on how fast

:10:58.:11:03.

your Internet connection is, where I am standing right now the company's

:11:04.:11:06.

headquarters, this signal is being rooted to another city 1500

:11:07.:11:13.

kilometres away, and yet I am able to talk to my friend virtually in

:11:14.:11:17.

real`time. So in the future, depending on whether you like having

:11:18.:11:21.

your movies interrupted, you can make calls in your TV to your

:11:22.:11:25.

friends at pretty low cost and pretty fast speed.

:11:26.:11:31.

How much of what China produces is due to innovation versus imitation?

:11:32.:11:35.

And what would it mean if innovation was to shift from West to East? To

:11:36.:11:42.

find out, I caught up with two experts, Michael Enright, Professor

:11:43.:11:45.

of business at the University of Hong Kong, and the author of China

:11:46.:11:50.

into the future, Nicky sense, other worlds's most dynamic economy. And

:11:51.:11:59.

the Professor and author of forgotten ally: China's World War

:12:00.:12:06.

II. Welcome to both of you. How innovative are the tech mobile

:12:07.:12:12.

handsets and equipment being produced by Chinese companies?

:12:13.:12:21.

In China you are not seeing basic invasion, the hard science, you are

:12:22.:12:26.

seeing adaptation. That is what you expect of a country at its stage of

:12:27.:12:31.

development. China can put a man in space but it is still relatively

:12:32.:12:37.

backward when it comes to the type of onward invasion that is going on

:12:38.:12:41.

elsewhere in the world. Ron, do you think that is what is

:12:42.:12:51.

happening in China at the moment. Well, I think that the comparison

:12:52.:12:56.

that Michael has given us is important. The level of development

:12:57.:13:01.

has shaped China. In the 1950s, Japan as a country, would have

:13:02.:13:06.

gotten laughter, were it suggested that this is where hi`technology was

:13:07.:13:12.

innovative. So we need to allow China the time to develop. But

:13:13.:13:16.

having said that, there is issues, when I look at the context or the

:13:17.:13:21.

ecology of our development in China that I find worrying. The

:13:22.:13:27.

innocencives given to incentives are top down. Going to bay binge ``

:13:28.:13:33.

Beijing's high`technology zone, there is a lot of work going on but

:13:34.:13:38.

it is imposed from the top. In the United States, the perhaps most

:13:39.:13:42.

innovative place of the last 60 years, is that more has to be

:13:43.:13:46.

bottom`up. I would be interested to know how much of the bottom`up

:13:47.:13:49.

development is to be expected from China in the next few years. I am

:13:50.:13:53.

cautious about that. Michael, you work with companies, do

:13:54.:13:57.

you see evidence that some of them can do this bottom`up invasion? We

:13:58.:14:03.

see a few Chinese companies that do that? ZTE, forrence stance, Huawei?

:14:04.:14:12.

`` for instance, Huawei? They are protecting themselves when they go

:14:13.:14:17.

international when they go against charges for violation of patents, as

:14:18.:14:22.

it is against brand new systems. But there is some interesting invasion

:14:23.:14:26.

going on in China. It is going on by foreign companies who are using

:14:27.:14:32.

Chinese stills, and capability researchers, increasingly to develop

:14:33.:14:37.

products for not just a China market but for global pacts. Rana, is this

:14:38.:14:43.

is question that the Chinese products are not as Cabinetive, or

:14:44.:14:50.

are there reasonses such as security risks, like Chinese Telecoms

:14:51.:14:55.

companies not being able to operate freely in the open market? There are

:14:56.:15:03.

issue, as Chinese receives smatter technology, at this moment, with the

:15:04.:15:08.

Flight MH370, the Chinese technology is shown to be competent. That sets

:15:09.:15:13.

alarm bells ringing in a lot of Western and non`Chinese security

:15:14.:15:17.

establishments, quite what is involve fundamental you collaborate

:15:18.:15:20.

with a country whose political intentions are not entirely clear.

:15:21.:15:22.

So those things come together. Do you think that a place like that

:15:23.:15:28.

could surpass Silicon Valley? It depends in terms of production,

:15:29.:15:33.

output yes. In terms of invasion, the core ideas, no. Not at present

:15:34.:15:39.

for a number of reasons. One is both the education and the economic

:15:40.:15:43.

system in China, it does not promote the type of innovative

:15:44.:15:48.

entrepreneurship that is required. The capital markets don't support

:15:49.:15:52.

it. The Ken venture capital markets are thin and access to the stock

:15:53.:15:56.

markets is controlled, that means that the exit for the venture

:15:57.:16:02.

capital and private equity investor is not there. The IP protection in

:16:03.:16:07.

China. Foreign companies complain about it. Think of Chinese companies

:16:08.:16:12.

not being able to protect their IP in China. They cannot even get

:16:13.:16:16.

established in the home market with protection to build up the business

:16:17.:16:22.

to project narkally. So several issues. But in terms of overall

:16:23.:16:26.

economic development, that is a binding constraint when per capita

:16:27.:16:32.

income is $25,000 per person per year, not at about $6,000, where it

:16:33.:16:42.

is today. Do you think that they could have the success as Japanese

:16:43.:16:49.

companies who had medium tech, then movered into high`tech when they

:16:50.:16:52.

became more innovative? It is possible when they become more

:16:53.:16:56.

liberal in terms of the public sphere. The reason that Japan took

:16:57.:17:01.

off, was not just the technology but the fact that the brand was

:17:02.:17:05.

associated with a set of cool innovative values. That goes

:17:06.:17:07.

together. Could they come up with somebody who

:17:08.:17:11.

could produce something as cool as an iPod? Probably not. In 15 years'

:17:12.:17:16.

time, it could be a very, very different story. Look at Ali Baba

:17:17.:17:23.

and compare it to the internet companies in the US, it is an

:17:24.:17:27.

interesting story. Some would say that Robin Lee is a

:17:28.:17:31.

cool guy. Of course, that is the CEO of Bidou,

:17:32.:17:38.

who brought that search engine up quickly. What does it mean for the

:17:39.:17:44.

rest of the world if China succeeds in becoming innovative on the back

:17:45.:17:49.

of companies like ZTE or Huawei or Lenovo. Or any of these. Would it be

:17:50.:17:54.

a seismic shift when they think about global balance of power, for

:17:55.:17:58.

instance. A small question, Michael? I think that part of the crepe is a

:17:59.:18:03.

bit of a red herring. The tech focus and the high`tech industries, that

:18:04.:18:07.

is to me not where the action is or the disruption from China will come.

:18:08.:18:11.

Not in the medium`term. What we Wirral see and should see in China

:18:12.:18:18.

is more of a focus on improving operational efficiency, improving

:18:19.:18:23.

research, resource allocation and when that happens and Chinese

:18:24.:18:28.

companies are more knowledgeable about the international markets,

:18:29.:18:33.

then come in the mid` mid`technologies, the companies

:18:34.:18:37.

making the brands in the buck output in industry after industry.

:18:38.:18:40.

Companies coming out with China cash flows that they are able to use to

:18:41.:18:45.

fund global activities. But even in some of the sectors that you

:18:46.:18:50.

mentioned, with companies like ZTE Corporation and Huawei who win

:18:51.:18:55.

communications equipment, contracts in Scandinavia, against the

:18:56.:18:59.

Scandinavian companies, not by offering a 30% discount but maybe

:19:00.:19:05.

50% or 30% of the prices of the foreign companies, that's going to

:19:06.:19:10.

be disruptive. My view that the Chinese companies coming out over

:19:11.:19:16.

the next 15 years, mostly in mid`tech will be more disruptive

:19:17.:19:20.

than China's emergence as an export powerhouse.

:19:21.:19:23.

And also at some point in the future, not five but maybe ten,

:19:24.:19:29.

beyond, we will hear stories in the Chinese meeta but how the Americans,

:19:30.:19:35.

French, British are coming to China, stealing China's technological

:19:36.:19:39.

secrets and bringing it back to their homelands. That is when we

:19:40.:19:44.

will know that China has become an innovative RND power. We are not

:19:45.:19:50.

there yet but when that is taking place on Talking Business, we will

:19:51.:19:53.

know that the shift has really happened.

:19:54.:19:56.

You will be both back to talk to me about it then. Thank you very much.

:19:57.:20:05.

That was Michael Enand Ron Emmeter of Oxford University. How

:20:06.:20:10.

competitive are Chinese handset makers like ZTE Corporation against

:20:11.:20:15.

Samsung and Apple? I have come to check out just where ZTE and Chinese

:20:16.:20:22.

mobile handsets sit in the global marketplace. To help me find out, I

:20:23.:20:27.

am joined by the managing director and head of China Technology and

:20:28.:20:32.

Telecommunications Research at Jeffries. So, Cynthia, handsets made

:20:33.:20:39.

by ZTE Corporation and the Chinese firms where do they sit in terms of

:20:40.:20:45.

the technology spectrum or desirability of handsets? I would

:20:46.:20:51.

say worldwide. From a volume and shipment it is top five. In terms of

:20:52.:20:55.

price, they are in the mid`to the low end.

:20:56.:20:59.

Why is that? This is driven by invasion, I would say.

:21:00.:21:04.

So for traditional reasons. So the features are not as good?

:21:05.:21:10.

Yes. But the Chinese vendors are good as commercialising and mass

:21:11.:21:14.

production in scale. I see. And in terms of the low end,

:21:15.:21:20.

this sounds like there is a lot of Chinese handset makers, so it is a

:21:21.:21:25.

crowded market. When I look around and see literally, as if there are

:21:26.:21:29.

dozens and dozens of Chinese brands that most people have never heard

:21:30.:21:33.

of, I would guess? That is true. True.

:21:34.:21:36.

So it is a very competitive market, I take it? That is why it is very

:21:37.:21:42.

difficult to make money in the low end on Chinese handsets. When I look

:21:43.:21:51.

here, I see Samsung, I see Sony, HTC it is secured in a box, do you think

:21:52.:21:56.

there is a chance that Chinese handset makers could dislodge these

:21:57.:22:01.

guys any time soon? I think one or two are possible. But the vast

:22:02.:22:04.

majority will not be able to for many years to come. But the top

:22:05.:22:08.

ones, one or two. OK. Thank you very much.

:22:09.:22:15.

That was Cynthia gong. There is no question that the Chinese handset

:22:16.:22:19.

market is competitive. How do companies ensure the quality of

:22:20.:22:23.

their products? I wanted to see for myself how they stress test their

:22:24.:22:28.

phones. I have been given rare access to

:22:29.:22:33.

peak behind the scenes at the quality testing facility of one of

:22:34.:22:37.

the biggest telecommunications companies in the world. Before a

:22:38.:22:41.

mobile phone make it is to the shop it has to first make the cut.

:22:42.:22:50.

We want our phones to be lightweight and technologically innovate Ivan

:22:51.:22:56.

Lendl but we also want then to last `` innovative and we also want them

:22:57.:23:00.

to last. I will conduct my own test... OK. This one survived. Now,

:23:01.:23:12.

this is the ultimate test. How many of you have done this before...

:23:13.:23:25.

Still in one piece. All of this testing is intended to help

:23:26.:23:28.

demonstrate the quality of a product which can make a huge difference for

:23:29.:23:33.

a company in a globally competitive marketplace.

:23:34.:23:38.

This success of Chinese tech companies like ZTE Corporation will

:23:39.:23:46.

determine weather Shenzhen can surpass Silicon Valley. If they

:23:47.:23:51.

succeed it would mark a real shift in invasion from West to East and a

:23:52.:23:55.

new era for China on the world's stage. That is all we have time for.

:23:56.:24:00.

Check out the website and me on Twitter.

:24:01.:24:05.

And join us the next time for more Talking Business with me, Linda

:24:06.:24:13.

Yeuh. Hello there. Good evening. It has

:24:14.:24:19.

been a lovely day for many, despite the sunshine being hazy at times.

:24:20.:24:20.

Download Subtitles

SRT

ASS