TOKYO -- Young Chinese technology companies are powering a sharp jump in Asian research and development, while in Japan most big R&D investors come from traditional industries, according to a recent survey by international consultancy PwC.
China's investment in R&D is also growing much faster than in western countries such as the U.S., although it continues to lag significantly in terms of value, according to PwC's latest "Global Innovation 1000" report. The survey analyzes R&D investment by 1,000 publicly traded companies with the largest R&D budgets.
In all, R&D spending by big companies in the six Asian economies jumped 12% to $228 billion during the 12 months to June. China saw growth of 21% to $57 billion, fueled by the government's push to develop cutting-edge technologies. U.S. companies showed a 9% increase to $328 billion, while Japan delivered 6% growth to $116 billion.
Of the 1,000 largest corporate investors in R&D worldwide, 379 are from Asia, the survey found. They contributed nearly 30% to global R&D spending, which totaled $782 billion.
China's tech leaders, with Alibaba Group Holding at the top, were the country's biggest R&D spenders. The e-commerce company spent nearly $4 billion on R&D, an increase of nearly $1 billion from the previous year. Tencent Holdings, ZTE, and Baidu followed, spending between $1.9 billion and $2.6 billion each.
The shift from conventional manufacturing toward higher value-added industries, such as internet-based services and advanced manufacturing, is a driving force in China's economic growth. The government is pouring huge sums into such areas as artificial intelligence and quantum computing.
China's R&D spending is likely to continue rising, said Mitsuru Toizaki, who advises executives in high-tech industries for PwC's strategy consulting group. "[China's] large population and economic expansion allows many domestic companies to grow without relying on foreign consumption," Toizaki said, lowering their risk. "The issue will be how quickly these companies can sharpen their competitiveness, while for China's old economy, it will be whether they will be able to maintain earnings," he said.
The trade war between Washington and Beijing has recently dampened Beijing's economic outlook, however. According to an analysis by Mizuho Research Institute, China's economy is beginning to stagnate. If tensions escalate and the conflict is prolonged, Chinese companies' investment plans could be upended.
Japanese companies, meanwhile, continue to be a force in global R&D. Japan had 160 companies in the top 1,000, the survey found.
Unlike China, Japan's top spenders were mostly older companies in established industries such as automaking. Toyota Motor topped the list, with an R&D budget of $10 billion. It was followed by Honda Motor and Nissan Motor.
Japanese carmakers are investing a vast amount of cash in electric vehicles. Toyota hopes to have more than 10 all electric models worldwide by the early 2020s. Japanese manufacturers, especially those in the auto sector, are also investing aggressively in artificial intelligence and autonomous driving technology, helped by strong sales.
But most Japanese companies remain cautious R&D investors. One factor holding them back is a lack of human resources. Consultancy KPMG International found in its survey of 1,300 CEOs in 11 countries that in Japan, over 70% are struggling to keep up with the pace of innovation.
"Japanese companies should work toward absorbing knowledge and skills by investing in startups," said Keita Kubota, investment director at Aberdeen Standard Investments Japan. "It will be even more important for companies to balance between long-term returns and costs" in the future, he added.
South Korean and Taiwanese companies also pumped more money into R&D. South Korean companies spent $33 billion, an increase of 19% on the year, while their counterparts in Taiwan boosted spending 14% to $15 billion. Top spenders in both places, as in Japan, tend to be companies with longer histories. Among the biggest R&D investors in South Korea are conglomerates such as Samsung Electronics, and big carmakers such as Hyundai Motor. In Taiwan, where the chip industry plays an important economic role, companies such as Taiwan Semiconductor Manufacturing and Hon Hai Precision Industry are the big spenders.
In the U.S.,more than 300 companies ranked in the top 1,000. Tech juggernauts Amazon and Alphabet (parent company of Google), Microsoft and Apple were among the top five U.S. investors in R&D.
Amazon was the top spender worldwide for the second year in a row, with an R&D budget of more than $20 billion, an increase of 41% from 2017. The online retailer has devoted resources to new services such as Alexa, its smart speaker system, and computer vision systems for its unmanned Amazon Go stores. With companies focused on leading a digital transformation, AI, the internet of things, and fintech have attracted much investment.
In the U.K., 37 companies were in the top 1.000, with their R&D spending climbing 7% to $25 billion. Pharmaceutical companies GlaxoSmithKline and AstraZeneca were the top spenders. Along with traditional drugs, many companies are putting resources into biopharmaceuticals. A rapidly aging population has spurred investment in drug discovery, AI and data science.