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China to lead innovation

Week 45, 2010

Also, China is projected to lead in patent activity by 2011, according to a detailed intellectual property analysis recently published by the IP Solutions business of Thomson Reuters. The projected growth in Chinese patent activity is based on analysis of the total volume of first-patent filings in China, Europe, Japan, Korea and the US. China experienced an annual growth rate of 26.1% in total patent volume from 2003-2009, as compared to its closest rival, the U.S., with a 5.5% growth rate. With such a growth, patent filings in China will outpace Japan and the US in 2011.

In our secure transactions industry, we are used to seeing innovation coming from the traditional European, and to a lesser extent American, players, and so far have not seen a huge stream of innovation coming from China. We all have in mind the story of the RF-SIM, announced as a Chinese alternative to NFC, using a 2.6 GHz frequency that could be adapted onto any handset. However, after months of hesitation, the prime supporter of the technology, China Mobile seems to have abandoned it, as the technology is not mentioned in its latest Planning Document and is reverting to NFC support (cf. Smart Insights Weekly #10-23 and 10-39).

The Chinese government has set up a series of innovation incentives, R&D tax deductions, etc. to make innovation a sustainable asset of the Chinese economy. The top five largest technologies in Chinese invention patent applications are now “Digital Computers”, “Telephone and Data Transmission Systems”, “Broadcasting, Radio, and Line Transmission Systems”, “Natural Products and Polymers”, and “Electro-(in)organic Materials”. Our industry stands at the crossroads of four categories out of five! For instance, in “Digital Computers”, Chinese domestic patent applications, which accounted for 24% of the total in 1998, now represent 58% of the total.

Under these conditions, the structure of the Chinese smart card industry is evolving. Chinese smart card vendors are no longer simply plants able to glue silicon into plastic, but have expanded their R&D centers that develop the operating systems and software components necessary to set up, develop and implement large smart card projects, even in mature economies. So far, major mobile network operators in Western Europe and in North America are resisting Chinese SIM offers. For how long?

Thierry Spanjaard

Chief Editor

Smart Insights