Silicon China

America prides itself on technological and innovation leadership and subconsciously assumes it will always be number one because such leadership is uniquely American.

Well, maybe America should guess again, according to a survey by KPMG Consulting. The global questionnaire of 668 top executives worldwide concluded that China will surpass Silicon Valley in high-tech innovation by 2016. That means that in three years we’ll be saying goodbye Google, goodbye Facebook, goodbye Apple and hello Huawei, hello Baidu, and hello names you’ve never heard of.

I’m always a bit skeptical of these kinds of surveys, particularly because there is always a kind of favor the underdog sentiment that expresses itself in responses to the questionnaire. America and Silicon Valley have been on top so long and have bragged about being on top so long that there is a longing in much of the world to see them knocked down a peg or two. Still, I don’t think Silicon Valley is going to blow away in the next three years.

Nevertheless, the weakness of the United States is that it constantly underestimates the efforts and capabilities of its competitors. This means there will be surprises because China is making tremendous efforts and has tremendous talents. Over the past twenty years, its investment in R&D has doubled from .73 percent of GDP to 1.77 percent and the plan is to reach the European level of 2.5 percent by 2020. Just in the past decade, the volume of Chinese investment in R&D has grown by more than 600 percent, according to Professor of Technology and Innovation Management at IMD in Lausanne, Switzerland, and Professor Marc Laperrouza of the Evian Group at IMD, HEC, the University of Lausanne, and the Swiss Federal Institute of Technology. As a result, they say, China will soon go from being the world’s biggest factory to being its biggest laboratory.

They also note that China is graduating more than 700,000 engineers annually compared to about 60,000 in the United States. Of course, numbers like these can be misleading. What is an engineer? The standards vary greatly from country to country. We must also keep population sizes in mind when making comparisons. If we ask what percentage of students around the world are earning degrees in science and engineering, the answer in Europe , Asia, or the United States, the answer everywhere is 10-13 percent, according to former MIT President Charles Vest.

If we ask the same question solely about engineering, however, the answer is quite different. Across Asia about 21 percent of students are earning engineering degrees. In Europe the number if 12 percent, and in the United States it is only 4.5 percent. This could be problematic for the America’s future competitiveness.

China has nearly 700 incubators that provide facilities, financing, and advice to start-up businesses. About 70 of these are tied to key universities and form part of the government’s Torch program that is aimed at promoting high tech industries. The incubators and other support programs also attract foreign investors. Thus some 800 non-Chinese companies have established laboratories in China. These include such firms as Nokia, Intel, Alcatel, and Organge. Particularly in telecommunications, China has shown innovative capacity by developing its own TDSCDMA standard for 3G mobile communications. Beyond this China’s Tianke 1A supercomputer has broken the world record for computing power and with massive investments in nano-technology, Beijing is aiming to surpass the United States in this field by 2020.

China is also rapidly developing world class capabilities in life sciences at universities in Shanghai/Suzhou and Guangzhou and Beijing. It is also now the dominant force in green tech with its companies holding more than 40 percent of  the world market for voltaic solar panels.

So while I don’t anticipate the demise of Silicon Valley, I can easily anticipate the rise of Silicon China.