ArrowArtboardCreated with Sketch.Title ChevronTitle ChevronEye IconIcon FacebookIcon LinkedinIcon Mail ContactPath LayerIcon MailMenu BurgerPositive ArrowIcon PrintIcon SearchSite TitleTitle ChevronIcon Twitter
China tech

Chinese tech startups confident Made in China 2025 plan will carry on

Beijing still driving strategy that sparked trade war tensions with Washington

Attendees pass by a Huawei booth during the 2019 CES in Las Vegas last week. Chinese startup companies participating in the event believe Beijing's commitment to the "Made in China 2025" policy remains unchanged.      © Reuters

LAS VEGAS, U.S. -- Beijing’s “Made in China 2025” industrial plan to create a tech superpower is still being actively pushed by the government, despite suggestions last month the policy could be revised in an apparent bid to calm trade tensions with the U.S.

Chinese companies participating in the Consumer Electronics Show last week in Las Vegas told Nikkei Asian Review that they have seen no change in Beijing's generous support for their efforts to secure top talent and to dominate cutting edge technology.

Moreover, some companies said they were shifting procurement from the U.S. to Chinese suppliers in a move to support the development of domestic high-tech supply chains.

“Beijing does not talk about ‘Made in China 2025’ anymore, but things haven't changed much on the ground,” said a Chinese entrepreneur who enjoyed a fully-covered trip to the CES for learning the latest technologies. “I don't think that the Chinese government will ever pull back their support," he said. "After all, high-tech is vital for China’s future." 

The entrepreneur said his startup making chips for smart devices received roughly 10 million yuan ($1.5 million) in government subsidies last year. The 100-people startup, which already beefed up its team by 30% in 2018, plans to hire 30% to 50% more employees this year.

Another startup, specialized in mind reading wearables, is planning to open a global headquarters in Hangzhou, and intends to start mass production of smart prosthetic devices later this year. Their offices have been paid for by the Hangzhou authority, which is also funding research and development. There is also a house purchasing allowance of several million yuan for returning scientists and engineers who hold a Ph.D. degree from world-class universities, own patents in strategic technologies and meet other qualifications.

Not only have startups enjoyed the backing of the Chinese government, but established companies have also benefited. In December, Nikkei Asian Review first reported that top iPhone assembler Foxconn Technology is preparing to launch a chip factory worth $9 billion in Zhuhai. The new facility -- which is due to break ground in 2020 -- will be built largely with subsidies from the Zhuhai government, as chipmaking is one of China’s most needed technologies.

Beijing’s determination to transform the country into an advanced manufacturing power by targeting 10 strategic sectors including artificial intelligence and robotics has been a lightning rod for tensions between the U.S. and China, which last year flared into an all-out trade war. The Trump administration has imposed punitive tariffs on a total of $250 billion of Chinese imports in a bid to stop what it claims is unfair competition.

Beijing and Washington last week appeared to make progress on resolving the dispute, although no firm agreement has yet been reached. Market observers say the fundamental tensions between the two countries have yet to go away.

“The major change is that the [Made in China 2025] policy is not talked up directly as much...but the [Chinese] government is still working extremely hard to develop a modern design and manufacturing ecosystem,” said Benjamin Cavender, a senior analyst with Shanghai-based consulting firm China Market Research.

Added Cavender: “Their support is not likely to stop as this shift is seen as a must-win."

All the Chinese companies Nikkei Asian Review spoke with at CES agreed that Beijing will not ease back on its high-tech industrial development push. But those companies also said, with or without the government support, they will boost their in-house research and development efforts in a bid to reduce reliance on U.S. technology -- something that the Trump administration has often threatened to cut off.

An executive from a Shanghai-based auto company said that his firm has set up a research center in Silicon Valley shortly after the trade disputes emerged in March last year.

“Although we had this plan for a while, the trade war has motivated us to speed up the implementation,” the executive said. “The key technology of autonomous driving is at the hands of Americans and one can expect it would only become more difficult to access American technology in the future. So we have no choice but to develop our own technology.”

Meanwhile, Chinese companies have shored up the development of the domestic supply chain, either through direct investment or by increasing local purchases. The trend is particularly obvious in the chip industry, which was virtually non-existent in the country a few years ago but has now reached a scale of more than 1,000 companies according to some industry estimates.

“In the past, Chinese companies preferred to buy U.S. chips because they didn’t want to take risks of trying out domestic products. Now, they have realized they cannot survive and thrive without the co-existence of strong domestic suppliers,” said Xiang Jianjun, founder of the Chengdu Analog Circuit Technology which licenses chipmaking technology to Chinese factories. 

Xiang said the turning point came last summer when a U.S. ban on doing business with ZTE put the Shenzhen-based telecom equipment manufacturing giant’s survival in question. Since then, many companies in China have begun searching for alternatives at home and steering more orders to domestic chipmakers. That, in turn, has driven the demand for his chipmaking license service to double last year.

Some Chinese high-tech companies are also rushing to produce their own chips. Earlier this month, Huawei Technologies, the world’s biggest telecom equipment maker and a frequent target of the U.S. government, introduced a new core processor used in data center servers as an alternative to Intel’s chipset. And the country’s e-commerce titan Alibaba Group Holdings is due to start manufacturing its first self-developed AI chips in the second of this year.

“China is very good at commoditizing technologies,” said Chris Dong, global research director at technology advisory firm IDC China. “In some cases, China is great in leveraging worldwide open source foundations to create super strong things,” Dong said, citing Huawei’s full line of internally designed AI chips as one example.

Shen Qiang, a founding partner of Beijing-based Jiangmen venture capital firm which invests in both Chinese and American high-tech startups, said that Chinese companies can perform as well as their American counterparts in certain areas such as smart devices.

The country has still lagged far behind the U.S. in more sophisticated technologies such as self-driving cars and AI, Shen said. However, a slow start did not mean losing the race, he added.

“China had dreamed about developing high-speed railway technology since its debut, but it took us so many years to get there. But once we get there, look at where we are now,” he said.

Sponsored Content

About Sponsored Content This content was commissioned by Nikkei's Global Business Bureau.

You have {{numberArticlesLeft}} free article{{numberArticlesLeft-plural}} left this monthThis is your last free article this month

Stay ahead with our exclusives on Asia;
the most dynamic market in the world.

Stay ahead with our exclusives on Asia

Get trusted insights from experts within Asia itself.

Get trusted insights from experts
within Asia itself.

Get Unlimited access

You have {{numberArticlesLeft}} free article{{numberArticlesLeft-plural}} left this month

This is your last free article this month

Stay ahead with our exclusives on Asia; the most
dynamic market in the world
.

Get trusted insights from experts
within Asia itself.

Try 3 months for $9

Offer ends October 31st

Your trial period has expired

You need a subscription to...

  • Read all stories with unlimited access
  • Use our mobile and tablet apps
See all offers and subscribe

Your full access to the Nikkei Asian Review has expired

You need a subscription to:

  • Read all stories with unlimited access
  • Use our mobile and tablet apps
See all offers
NAR on print phone, device, and tablet media