U.S. High Tech Firms Move R&D to China

Some major U.S. high tech firms are moving not only manufacturing operation but their R&D from the U.S. to China. What would be the consequences of those actions?

Although the U.S. high tech firms claim that they would retain their R&D capacity in proprietary technology within the U.S., history has shown that the gradual transfer of technology occurs due to the intricacy between manufacturing and R&D. It is ironic that Chinese engineers who has obtained the best training in the U.S. has moved (would move) to China to work for the U.S. high-tech firms. Many of the MNCs abroad are subsidized by the U.S. government

The issue of technology transfer should be understood in the overall context of economy. For one, the U.S. is a debtor country while China is a creditor nation. The relevance of rising creditors shouldn’t be dismissed as history has demonstrated. Further, the international currency regime seems to be changing.

The U.S. may not stop the flow of capitals and the eventual technology transfer. As a matter of fact, the U.S. may be overwhelmed by its consequences of technology transfer.

The great game seems to be on.

From the New York Times:

For years, many of China’s best and brightest left for the United States, where high-tech industry was more cutting-edge. But Mark R. Pinto is moving in the opposite direction.

Mr. Pinto is the first chief technology officer of a major American tech company to move to China.

In addition to moving Mr. Pinto and his family to Beijing in January, Applied Materials, whose headquarters are in Santa Clara, Calif., has just built its newest and largest research labs here. Last week, it even held its annual shareholders’ meeting in Xi’an.

It is hardly alone. Companies — and their engineers — are being drawn here more and more as China develops a high-tech economy that increasingly competes directly with the United States.
A few American companies are even making deals with Chinese companies to license Chinese technology.

General Motors has a large and growing auto research center in Shanghai.

Intel has opened research labs in Beijing for semiconductors and server networks.

Now, Mr. Pinto said, researchers from the United States and Europe have to be ready to move to China if they want to do cutting-edge work on solar manufacturing because the new Applied Materials complex here is the only research center that can fit an entire solar panel assembly line.

Small clean-energy companies are headed to China, too.

NatCore Technology of Red Bank, N.J., recently discovered a way to make solar panels much thinner, reducing the energy and toxic materials required to manufacture them. American companies did not even come look at the technology, so NatCore reached a deal with a consortium of Chinese companies to finish developing its invention and mass-produce it in Changsha, China.

Applied Materials has greater challenges, including fighting technological theft, a chronic problem in China.

But none of that changes the sense that tectonic shifts are under way.

www.nytimes.com/2010/03/18/business/global/18research.html?pagewanted=1