Independent IPRs vital to (China) tech industry
February 11,2003
Author: (MU ZI)
Chinese telecoms and electronics manufacturers are facing increasing calls to develop Chinese-owned core technologies given the increase of Sino-foreign intellectual property rights (IPR) disputes.
"Owning independent IPRs and winning the initiatives in setting industrial standards should be top priorities for domestic manufacturers," said Zhang Qi, director general of the Ministry of Information Industry's (MII) Department of Electronics and information technology (IT) Products.
"Without independent IPRs, domestic makers are vulnerable to patent disputes and will be in a very unfavourable position when competing with their foreign counterparts," Zhang said.
Domestic manufacturers must seek partnerships in technology research and development to better compete with foreign players, Zhang added.
Her remarks last week coincided with the lawsuit filed by US telecoms gear maker Cisco Systems against Shenzhen- based Huawei Technologies, China's top telecoms equipment vendor.
Cisco's suit, filed in the United States, alleges Huawei violated at least five of Cisco's patents, and that Huawei copied Cisco's Internetwork Operating System (IOS) source code.
Cisco claims the IOS was used in the operating system of Huawei's Quidway routers and switches.
Cisco seeks injunctions prohibiting Huawei from selling or distributing versions of its Quidway routers and servers, and unspecified financial damages.
Some industry analysts suggest Cisco filed the lawsuit to try to stall Huawei's aggressive expansion in both the Chinese and overseas markets.
With its successful marketing and low-price strategies, Huawei has become one of Cisco's top rivals.
Huawei's exports in 2002 totalled US$500 million, Zhang said.
IPR disputes in the telecoms and electronics industries are increasing as domestic makers are eroding foreign rivals' dominance, Zhang said.
Chinese DVD player makers have been locked in a protracted dispute with foreign patent holders over royalties. The dispute has hurt exports of Chinese DVD players.
The dispute shocked MII officials and prompted the ministry to consider providing more concrete support for the research and development (R&D) of home-grown, cutting-edge technologies, Zhang said.
More foreign companies will seek to collect royalties on their IPRs in an attempt to curb the expansion of domestic firms, she added.
Chinese handset makers, for example, have in recent years been rapidly catching up with foreign rivals.
Domestic makers at the end of last year held a combined 35-per-cent share of China's handset market, Zhang said.
However, they still have to buy their core technologies from foreign players.
US-based Qualcomm, for example, collects royalties on sales of CDMA-standard network gear and handsets.
China, which has millions of code division multiple access (CDMA) users, has become a major contributor to Qualcomm's revenues.
Indicators suggest some countries are considering using IPR disputes to block Chinese firms from exporting global system for mobile communications (GSM) handsets, said Ge Chen, executive president of Eastcom, a leading domestic handset maker based in Hangzhou, East China's Zhejiang Province.
He declined to give more details.
Chinese companies, stung by their lack of core technologies, have increased their R&D efforts.
Beijing-based Vimicro, a digital imaging and communications technology provider, last week launched a new chip with Chinese IPR. The chip is used for multimedia messaging service (MMS) handsets.
Foreign firms previously monopolized the manufacturing of chips for MMS handsets.
The home-grown chip is expected to help domestic handset makers catch up with their foreign rivals, and cash in on the surging popularity of MMS mobile phones.
Several leading domestic handset makers have pledged their support for the new chip.
While calling for domestic companies to develop technologies and products with Chinese IPRs, Zhang said MII will help form various industrial alliances among domestic manufacturers to gain the upper hand in setting industry standards.
Domestic manufacturers recently formed a digital imaging industrial alliance.
More than 10 domestic flash memory card makers formed an alliance this month to tackle the patent dispute with Israel-based M-System.
The Israeli firm claims it owns the patents for flash memory products, and says it might try to collect royalties from Chinese makers.
MII officials organized a TD-SCDMA industrial alliance to rally around the Chinese standard for 3G (third-generation) mobile telecommunications.
TD-SCDMA, or time division synchronous code division multiple access, is a rival to Qualcomm's CDMA and the Japan-and Europe-backed wideband code division multiple access (WCDMA) standard.
The alliance's purpose is to give domestic telecoms equipment manufacturers a "chance" to compete with their foreign rivals.
"The global telecoms downturn and the delayed roll-out of the 3G network ... have offered domestic manufacturers a good opportunity to catch up," Zhang said.
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