China Law Blog

Considering how hard it's been to create another Silicon Valley in the United States, I'm not surprised that it's been so hard to create one elsewhere. There are a lot of high tech centers in the United States, but still nothing quite like Silicon Valley. The curious thing about Silicon Valley is that no one set out to create Silicon Valley, it just sort of happened.

I think it's a bad idea for China to create the "next Silicon Valley." It should create the "original thing that is as impressive as Silicon Valley but something different."

Dan,

You definitely know how to set up a discussion with an enticing blog post topic…:- ) I am with a company that makes semiconductor chips for China's domestic market. Our core engineering and product marketing is in Silicon Valley but everything else - sales, customer marketing, ops, support - is in China. I spend 3-4wks every quarter in China with customers and our own guys. So take my comment for what it is worth.

#1 - From a product marketing viewpoint, I have not really heard anything new or useful from our China customers (consumer electronics OEMs) that helps me either serve them better or to be ahead of the curve. This includes the rank and file product people and the customer senior/executive management. In other words, they will just look at what we've got NOW and simply ask for half the price NOW. In other words, forget strategy, it's all about tactics. I am not saying this is bad.
#2 - At first I thought only IDHs care less about quality and the branded China OEMs do care about quality. But during last year I am beginning to see that even branded China OEMs are cutting corners and preferring to go with "cheap, cheap, cheap," rather than quality. I will reserve my judgment though, still early yet.
#3 - During the past 2 years I am thinking more and more about what is the pattern/logic underlying this kind of behavior from China customer. At this moment my conclusion is that China customers attitude towards high technology is looking more and more like, "It's not about the technology but all about the experience that the technology delivers." In other words, whereas Silicon Valley people are perhaps used to equating innovative technology with superior technology and measuring by it, China customers appear to skip the technology superiority question and taking the attitude of "what can you do for my gift market today?" And I smile at this wisdom.

Broad statements like whether "China" needs to change to be like Silicon Valley seem to miss the real action that is changing the paradigm. I could be wrong. Perhaps I am already drinking China Kool-Aid, but…it is what it is.

Regards,
Crazyfinger

There used to be a saying about western visitors to China. Those who made the first visit come back shocked at how wrong their previous knowledge about China and Chinese people were. Those who have made a few trips feel confident that they can write a book or assay about China and Chinese way of doing business. But for those who had lived there for a good duration of time and had truely "mixed in" with the locals, then they often times don't feel they know enough to generalize on just about anything. It's a big country which only got pulled together economically over the last few decades in a great social and economical experiment the scale of which is unprecedented in human history. The only true commonality among the Chinese people is the written language which is, interestingly, loose in grammatical rules but rich in the meanings of each individual word.

I don't know much about China's financial development, but it seems to be a system radically different from ours. America seems to encourage technical development in ways that China doesn't. Because China has less freedom of expression, I think the development of things related to personal computers and the internet may be more limited than we would guess.

To explore whether China can has its own "Sillicon Valley", we need to understand what makes Sillicon Valley as it is.

I agree with Paul Graham, a venture capitalist, in that it takes 2 important factors for a place/city to become "Sillicon Valley":
1) a place where smart software developers LIKE to live/cluster together;
2) a place where very rich people (a.k.a VC) like to live and work.

In order to tell if China can nurture its own "Sillicon Valley", just compare a China city which you think is the most likely candidate with San Francisco (and the Bay Area at large) by the above two criteria.

I had some experience with IP workers (I can't call them professionals) trained in China. They are smart. They can find short cuts for anything. They are extremely diligent in the easiest way to claim success. Copying codes is their forte. Just don't expect them to do something creative, except in getting around thing, or do the least and stay employed. Needless to say, they don't last long in my employ.

One reason that it's probably not a huge priority for China to develop its own Silicon Valley is that there are so many Chinese in Silicon Valley.

The other thing is that Silicon Valley couldn't exist in its current form without China. Without a manufacturing center to create large amounts of cheap electronics, you don't have the cash to pay for designer and engineers.

I think that you'll only see a Chinese Silicon Valley when you have too many people that want to move to San Franscisco but can't, and in that situation what you'll end up with is probably a "virtual suburb" of SV rather than a replacement.

I'm actually in the process of evaluating several technology parks for a client. My take ...

The problem is that the money that is being tossed around is going into hard infrastructure, and not the soft. Let's look at education, for a firm to be innovative, it needs talented engineers with problem solving skills. Whilst nobody can deny the capability of chinese in maths/science, the education system is still too accepting of authority and accepted "wisdom". Hard to get the insight from truely breakthrough technologies.

Secondly is that the price-performance curve is still heavily skewed towards the low end, especially if they are OEMs or dominating the domestic market. This approach leads to some rather serious shortcomings with consequential brand erosion. Because of this, competition and trade secrets is the norm, and not always easy to get cooperation when trying to establish standards (government fiat aside).

Thirdly the business models tend to be derivative works (eg fast follower) rather than disruptive. Whilst it is a profitable strategy, it creates a risk-adverse mind-set. They can adapt to local demand and even expand to overseas equivalent markets but in Australia we have a saving, the nail that stands out gets hammered. Social conformity can be both good (pulling a dev team together as AliBaba did) but it can also be a blinker when mavericks want to do their own thing and ennunciate a need that the rest of the market hasn't realised yet.

I'd also point out that Silicon Valley is not the only model, Taiwan quite successfully used their combination of family-owed firms to occupy an IT niche without the capital intensive nature of Silicon Valley. I'd agree with the posts about try to create rather than organically grow a cluster. Malaysia is a classic example of what happens.

Silicon Valley and US VCs in general follow a model of investing in 10 projects, knowing that only 2-3 will come out as profitable enough for an IPO and one will be the home run.

Chinese VC groups may be more risk adverse and also may run into more outfits who tout their political connections because their product has significant drawbacks.

A few people have brought up the money issue. For all its big gains, China still doesn't have a) huge capital, so they can let people do useless stuff until they think of a way to commercialize it (a la Google) or b) a large reliable market, so when you do come up with something good, you know you'll get a real return on it.
If a Chinese firm develops a killer bit of hard/software, it's knocked off, reverse engineered and copied within weeks by unregulated dodgy firms in the backwaters. There's no scope to do major investment in R&D until they can be sure that they'll get big sales in the US, or that they'll be protected in China.

Silicon Valley is peculiarly American and until other countries start truly welcoming immigrants, there will be no duplicate.

Why are we even talking about China in this context, when China is much farther away from creating another Silicon Valley than Korea or Japan?