The rise of the tech industry in China is fueled partially by its increasing investment in development and research. According to a study released by Battelle Memorial Institute, Research and Development (R&D) spending in China this year is likely to reach $284 billion, up 22 percent from 2012. This compares to only 4 percent expansion expected in the United States for the same duration. China is expected to surpass Europe in R&D spending by 2018 and exceed the United States by 2022.
Huawei Technologies, the globe's second-largest equipment telecommunications supplier by revenue following Ericsson, has increased its annual R&D expenditures fourteen-fold in the past ten years, from $389 million in 2003 to $5.46 billion in 2013.
This past October, when Danish telecom carrier TDC announced it’s $700-million deal to substitute its existing Ericsson gear with Huawei's, Carsten Dilling, TDC’s Chief Executive Officer stated that he selected Huawei Technologies for its technical experience, not its costs—and added that Huawei was "very expensive."
In 2011, Glory Solutions Ltd., a global supplier of cash handling machines used by banks, opened up a research facility in Shanghai. The facility's engineers are creating enhanced sensor technology to discover counterfeit bills by identifying different security features embedded in bank notes, utilizing hardware engineering, software programming and scientific methods such as spectrometry.
Letting engineers work on state-of-the-art technology in China may risk losing them to local competitors, stated Paul Adams, the company’s chief executive officer. He added that engineers in the area are still bringing in fresh concepts to the company.
Also, China is moving up the technology curve within sophisticated areas such as processor chips, in which it once was absent. United States competitors such as Nvidia Corp. and Qualcomm Inc. are still far ahead, yet the Allwinner Technology Co. and Fuzhou Rockchip Electronics in China are boosting their presence within the rapidly-expanding marketplace for chips utilized in low-end tablets and smartphones. The government in China recently announced that they are prepared to spend nearly $5 billion in the country's microchip sector.
Related: How to Do Business in China
Few brands in China have succeeded in being global household names in consumer products space. Lenovo Group, a personal-computer maker, however, recently took over Hewlett Packard as the world's largest personal-computer manufacturer by sold units. It is also establishing an all-new precedent with its global smartphone expansion. According to research company Gartner, in the third quarter of 2013, Lenovo was ranked third for smartphone sales after Apple Inc. and Samsung Electronics.
Lenovo, which purchased International Business Machines in 2005, introduced its first smartphone in 2010 in China. During that time, its execs knew the business lacked most of the needed resources to compete globally in the smartphones market.
Since 2012, Lenovo has launched smartphones in overseas marketplaces such as Russia, India and Indonesia. In Indonesia, for example, it currently takes up over 10 percent of the smartphone market.
Tencent Holdings, which has the WeChat smartphone app, is bucking this trend. Released in 2010, the smartphone app dominated the Chinese mobile messaging marketplace and most of its 272 million month-to-month users are in China. In 2013, however, Tencent spent $200 million on overseas marketing campaigns to promote its smartphone app in markets such as Italy, Spain, South Africa and India. Tencent claims that WeChat has had over 100 million downloads overseas.
A few years ago, when conducting research on mobile dating application, Tang Yan, a Chinese entrepreneur, was shocked to discover that very few US-based dating apps had the capabilities of connecting individuals within close proximity. Tang, who is now chief executive officer at Beijing Momo Technology, thought such capabilities would become a trend in the United States.
Tang launched the dating app, Momo, in China in 2011 and it currently has over 35 million month-to-month active users. In the United States, Tinder, the most similar application, launched in September, 2012.
More players in China are starting to recognize that to possess sustainable expansion and maintain competitive advantages, they must innovate.
Related: 3 Ways to Kill a Deal in China