(Post 2 of 5)
Zhongguancun Veered Off Track
Nothing happens without a reason. If Zhongguancun’s loss of orientation towards technological innovation is the “result,” there are many aspects to the “reason” for Zhongguancun veering off track.
With the rise in the price of land, costs have increased, “squeezing” many small- and medium-sized enterprises (SMEs) out of Zhongguancun. At the same time, the spendthrift top 500 worldwide companies have been setting up shop one after another. At the 6th Zhongguancun Computer Festival in September, 2003, a report pointed out that “the Zhongguancun Software Park alone has attracted Siemens and six other world-renown global companies.”
Microsoft, IBM, Cisco... Favorable land and tax policies have been pawned by Zhongguancun for this type of company. Meanwhile office-style buildings bring endless admiration. Zhongguancun seems to have flourished.
But remember the saying “do not forget what make you success [sic, in English]” (don’t forget what made you successful). For Zhongguancun, excessive attention to attracting the world-renown top 500, even engaging in the economics of [regional] headquarters, will only bring short-term increases to GDP. The successes on the report cord will be attractive but this will destroy Zhongguancun’s “ecology” and the cost will be its original feature. The entrance of IT giants will bring rising real estate prices and a dense commercial atmosphere. This pushes small innovative companies directly off into the abyss, and it traps small- and medium-sized enterprises in positions of dependency on large companies. SMEs can only make profits on the margins, making their progress difficult and losing their innovative capacities.
In the end is it the increase in GDP or the cultivation of small companies with innovative capacities?
While investigating Zhongguancun, this reporter heard an open expression of the viewpoint, from a member of a certain science park in Zhongguancun, that: if a science park wants to be high-quality, it must attraction international companies so as to encourage local companies to internationalize and improve technology. The blueprint is very macro.
However, the IT industry in China is adolescent in comparison with international monoliths. Competitiveness is not even on the same scale. If the two are crudely grafted together, it is difficult to imagine how a fruitful end will result.
Moreover, the IT industry will never realize the daydream of exchanging markets for technology. For example, cellular phones, consumer electronics, and computers have already achieved widespread consumption in China. The core technology is chips, and are there any of our companies that have mastered this? “With no R&D to support them, Chinese enterprises will always follow others” said Zhang Zhongning, director of the Central Science & Technology Committee of the 93 Society, who has tracked Zhongguancun for many years.
Exchanging markets for technology has been a nightmare for China’s automotive industry. That should be enough to wake up the IT industry.
Luckily, among the 14,000 enterprises in Zhongguancun, multinational companies are still few and far between. How can these companies survive?
A person familiar with the situation of Zhongguancun enterprises these days told this reporter that Zhongguancun has no “result-less” companies, and if it does, those companies are having a hard time. “Ten years ago, a couple of buddies could get together and assemble a company to make money--now it is impossible.” The “result” here refers to different kinds of backing, which is to say that many companies could depend on developing government resources to get projects and survive. Projects were the lifeline of these companies.
So these companies did not need much to use much gongfu [kung-fu] on their R&D. Whoever had the resources would get the project and build a temporary office or subcontract to others. This meant that funds were surging and people rested easy. What should be noted here is that this type of development pattern created space out of rented power. Clearly, expecting this type of enterprise to carry out technological innovation is unrealistic. The end result of this over a long period has been that Zhongguancun’s SMEs have had an abnormal development path.
In Zhongguancun, high-tech enterprises have another mode of survival: relying on universities and academies of science to create enterprises. In terms of transforming the results of experiments into products and industrializing, enterprises formed by schools have certainly been successful. Because of the special status of enterprises formed by schools, despite the fact that the gong and drum of system-conversion have sounded loud enough to shake the heavens, and they have been threatened with “being cut off,” they still maintain a special advantage in comparison to ordinary enterprises run by individuals. They continue to receive the support of schools and the state, which includes a hefty amount of capital.
For the SMEs starving for capital, this should be a good thing. But since many of this type of enterprise are parasitical upon birth, they have become “abusive” parasites. When they are out of money they stretch out their hand wanting more, while the pace of their technological R&D is slow and passive.
Aside from this, in a high-tech incubator, many enterprises formed by schools become famous for a time, after which the government subsidizes them. And yet it may be this type of overemphasis that actually ends up smothering enterprises and talent.
Song Cheng is a software engineer at a certain famous enterprise formed by a school. When he recalled the grand times of the company, he is still overwhelmed by the amount of support from the government and by the endless reporting from the media. All at once, the company became a star and its founder a celebrity. However, the face-pace of the government created many problems for a company that had not yet found its feet. For example, internal management could not adapt quickly and subsequent development was difficult. In the short space of three years, almost all of the original employees had left the company. Currently it has gone from bad to worse and may not continue to exist much longer.
With this type of incident in mind, one could say that Zhongguancun has almost no enterprises that engage in true company business. Zhongguancun has lost the soil and ecology that allow SMEs to survive.
It is said that Shanghai will combine Silicon Valley, U.S.A. with Tsinchu, Taiwan to form an IT triangle. In this golden triangle, Zhongguancun has been eliminated.
Who smothered the innovative energy of Zhongguancun? Who changed the flavor of Zhongguancun?
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