The 3G standard setting strategy and indigenous innovation policy in China: is TD-SCDMA a flagship?

1. The 3G standard setting strategy and indigenous innovation policy in China: is TD-SCDMA a flagship? Yan Hui, PhD Student, Aalborg University, Denmark Globelics Academy, May, 2007 Lisbon, Portugal

2. Structure • Introduction • Theories • TD-SCDMA review and facts • Indoginous innovation and S&T technology policy • Conclusion

3. Theories • The interoperability of the network economy • David and Steinmueller (1996 ):highest priority of standard setting is interoperability • Technical standards do not flow “neutrally” from the best engineering practice, but reflect the full range of strategic behaviors

4. Theories • Network effects: Katz and Shapiro (1985) • consumer is affected by the total number of consumers • Installed base and switching costs • A larger installed base, associating with higher rates of adoption • the higher the switching costs, the higher loyal

5. Theories • Neo-techno-nationalism”: Atsushi Yamada, • expanded state commitments to promote technical innovation domestically; • reliance on the private initiative and the public-private partnerships; • openness toward foreign R&D entities; • expanded commitments for international rule-making and policy coordination

6. TD-SCDMA’s: the Chinese self-developed standard • A historical review of TD-SCDMA • Strong government support • gives vigorous support to TD-SCDMA • radio spectrum • Patent distribution vs. Installed base

7. Patent distribution vs. Installed base

8. An assumption of standard selection by different operators in China market:

9. TD-SCDMA and indigenous innovation • Why does this critical mission fall on TD-SCDMA ? • in the beginning 6 years will reach 75 billion USD • the R&D capacity is stronger than in other areas • the cycle of establishing and eliminating of a standard in telecommunications is longer

10. TD-SCDMA and indigenous innovation • A TD-SCDMA industrial alliance • A value chain from system to susbcriber • indigenous innovation ? • no more than 16 patents in the core 260 patents • core network of TD-SCDMA

11. Standard-setting: national science and technology policy • Why standard-setting? • huge market opportunities • economic restrictions based upon the standard setting arena which is dominated by other countries

12. The awkward situation • the rising bargain power of a huge market and booming economy • participation in the global economy is characterized as low level of technology participation, which is due to restriction of low technology level and the others-established international production networks.

13. Standard developer (Qualcomm etc.) Terminal chip developer (Motorola, Nokia etc.) Chip set companies (TI, Analog Device.) Terminal design company(Nokia, Motorola etc.) Terminal manufacturers (the Chinesemanufacturers) Distrubitor (national or local) Retailer (local) End User Mobile Terminal production value chain

14. A strategic response to globalization • interpret and implement an approach of standard • focuses on market power in the face of technological weakness, • to set innovation standards which can positively affect its international competitiveness • relevant mobile industries can be upgraded to a new technology level

15. More... • Existing standard system: • favorable framework for developed countries • capture value from their controlled system • Developing countries endure minor margin: patent trap • Deft execution: a government to steer • a narrow techno-nationalism (friction, resentment) • a marginalization of domestic production • internalize and absorb the process of developing technology and eventually enhance its own technology competency

16. Conclusion and further... • Flagship: • Artifical • Catch up in this industry and others? • Needs further thinking...