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Toyota leads Japanese charge into tie-ups with Chinese startups

Hitachi and Kyocera also jump in as country becomes magnet for 'open innovation'

These robots developed by a Shenzhen startup use Intel's chips -- an example of increased collaboration between Chinese ventures and big foreign corporations. (Photo by Shuhei Yamada)

TOKYO -- Top Japanese manufacturers including Toyota Motor and Hitachi are forging ties with Chinese startups, following Western giants like Airbus and Intel that have already harnessed innovation coming out of the world's No. 2 economy.

Toyota is looking to develop devices for connected vehicles, while Hitachi is on the hunt for fintech opportunities. Their moves are the latest sign that China is becoming a new focus of "open innovation," whereby companies cross industrial and national boundaries in pursuit of fresh technologies.

Until recently, such endeavors had largely centered on Silicon Valley in the U.S.

Earlier this month, Toyota tied up with IngDan, a Shenzhen-based company that supports the development of "internet of things" devices. The Chinese company, established in 2013, is working with about 15,000 companies and has access to a vast supply chain in Shenzhen, known as the factory of the world.

Toyota intends to pick partners from among IngDan's suppliers and customers, as it seeks to create IoT-capable electronic devices or parts for cars. On top of uncovering new technological possibilities, Toyota hopes to reduce the cost of producing autos for the Chinese market.

Also in Shenzhen, Kyocera is to open an office this Thursday within a startup incubation center, run by an investment company affiliated with China's prestigious Tsinghua University. The company, together with Chinese ventures, intends to study ways to utilize its electronic parts.

Daikin Industries plans to set up a facility in Shenzhen for joint development of IoT air conditioning products.

As for Hitachi, the conglomerate held a contest in Shanghai in March, in which competitors pitched ideas based on the blockchain technology used for virtual currencies. Fifteen teams of startup staffers and students took part.

China is the second country in which Hitachi has sponsored such a contest, after the U.S. The company plans to work with the winning teams to turn their prizewinning ideas into fintech services. Hitachi organized the event with XNode, a Shanghai venture incubator founded in 2015, and other partners.

China's startup scene has exploded in the past few years, and features powerful players in fields ranging from ride-sharing to artificial intelligence. The country is home to an estimated 80-plus unicorns, or privately held ventures valued at $1 billion or more.

Large U.S. and European corporations have gone further in forming Chinese alliances, compared with Japanese companies. Airbus recently opened a research and development center in Shenzhen -- its second outside Europe after Silicon Valley. One project is to work on video equipment for passenger aircraft with Royole, a Chinese unicorn that produces organic light-emitting diode panels, and other companies. Royole gained global attention by beating Samsung Electronics and Huawei Technologies to launch the world's first foldable smartphone.

Intel teamed up with IngDan in 2016 and has since helped the Chinese company develop a startup that makes robots running on Intel chips. BMW and XNode held a contest last year to choose a startup to develop audio equipment for the German company's cars.

The Chinese government is actively encouraging foreign businesses to invest. In March, Beijing introduced a law strengthening protection of intellectual property rights held by international companies.

The tie-ups, however, could become a source of friction. The U.S. government, in particular, is wary of China getting its hands on American technology -- especially anything with potential security implications.

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