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1. Competing in Artificial Intelligence Chips: China’s Challenge amid Technology War

Author:
Dieter Ernst
Publication Date:
03-2020
Content Type:
Working Paper
Institution:
Centre for International Governance Innovation
Abstract:
This special report assesses the challenges that China is facing in developing its artificial intelligence (AI) industry due to unprecedented US technology export restrictions. A central proposition is that China’s achievements in AI lack a robust foundation in leading-edge AI chips, and thus the country is vulnerable to externally imposed supply disruptions. The COVID-19 pandemic has further decoupled China from international trade and technology flows. Success in AI requires mastery of data, algorithms and computing power, which, in turn, is determined by the performance of AI chips. Increasing computing power that is cost-effective and energy-saving is the indispensable third component of this magic AI triangle. Research on China’s AI strategy has emphasized China’s huge data sets as a primary advantage. It was assumed that China could always purchase the necessary AI chips from global semiconductor industry leaders. Until recently, AI applications run by leading-edge major Chinese technology firms were powered by foreign chips, mostly designed by a small group of top US semiconductor firms. The outbreak of the technology war, however, is disrupting China’s access to advanced AI chips from the United States. Drawing on field research conducted in 2019, this report contributes to the literature by addressing China’s arguably most immediate and difficult AI challenges. The report highlights China’s challenge of competing in AI, and contrasts America’s and China’s different AI development trajectories. Capabilities and challenges are assessed, both for the large players (Huawei, Alibaba and Baidu) and for a small group of AI chip “unicorns.” The report concludes with implications for China’s future AI chip development.
Topic:
Energy Policy, Science and Technology, Sanctions, and Artificial Intelligence
Political Geography:
United States, China, Asia, and North America

2. From Catching Up to Forging Ahead in Advanced Manufacturing—Reflections on China’s Future of Jobshina's Evolving Role in Latin America: Can it Be a Win-Win?

Author:
Dieter Ernst
Publication Date:
03-2016
Content Type:
Working Paper
Institution:
East-West Center
Abstract:
This paper explores what we know about possible employment effects of the 10-year plan, issued by the State Council on May 19, 2015, entitled Made in China 2025. MIC2025 was designed to address China’s emerging labor shortage challenge. To achieve this goal, the plan seeks to boost labor productivity through an increased use of robots and through network-based upgrading of the entire industrial value chain and related services. How might the projected increase in labor productivity affect the creation and quality of jobs in China? Will China’s push into advanced manufacturing now move the country’s manufacturing employment closer to the pattern of “employment de-industrialization” observed in the US and other industrialized countries? How China will cope with the advanced manufacturing challenge for employment will have major implications not only for the US and other industrialized countries, but also for emerging economies and, most importantly for the majority of developing countries that are still struggling as latecomers to labor-intensive industrial manufacturing. The paper lays out objectives of the MIC 2025 plan and highlights a failure of Chinese policy makers to take into account employment effects and other labor market issues when they design their grand visions of industrial policy. The paper finds that until 2014, manufacturing has acted as an employment absorber in China. However new data on unemployment, labor force participation and income inequality signal that China may now be moving towards an “employment de-industrialization” pattern, unless enough knowledge-intensive service jobs will be created in China’s growing information economy. The paper concludes with implications for policy and further research.
Topic:
Economics, International Political Economy, Markets, and Labor Issues
Political Geography:
China

3. Global Strategic Patenting and Innovation—Policy and Research Implications

Author:
Dieter Ernst
Publication Date:
02-2015
Content Type:
Working Paper
Institution:
EastWest Institute
Abstract:
As an exclusionary property right, patents invite their use as a strategic weapon to shape markets and to reap monopoly rents through patent monetization. The increasing variety and global reach of strategic patenting strategies pose new and under-researched challenges for the international distribution of innovation gains. This think piece explores the proliferation of strategic patenting strategies, and highlights the growing complexity and uncertainty of the international patent system that result from the increasing use of patents as market deterrents and as a new asset class. Part One of the paper introduces four manifestations of strategic patenting that are well documented in the literature, i.e. the use of standard-essential patents (SEPs) as entry deterrents; aggressive patent infringement litigation that has galvanized the smart phone wars, with Apple as the pioneer; the proliferation of patent monetization services; and the use of cross-border patent licensing as a tool for corporate transfer pricing and tax planning. While existing research provides important insights into the drivers, we lack systematic theoretical and empirical research on how strategic patenting affects the international distribution of innovation gains. Part Two seeks to shed light on two recent forms of strategic patenting which need both theoretical and empirical case study research, i.e. the rise of Sovereign Patent Funds (SPFs), and first signs of patent-avoiding latecomer strategies, with China's Xiaomi as the most prominent example. The paper concludes with questions for policy and further research.
Topic:
Defense Policy
Political Geography:
China

4. Upgrading India's Electronics Manufacturing Industry: Regulatory Reform and Industrial Policy

Author:
Dieter Ernst
Publication Date:
02-2014
Content Type:
Policy Brief
Institution:
East-West Center
Abstract:
India faces a fundamental puzzle. The country is a leading exporter of information-technology services, including knowledge-intensive chip design. Yet electronics manufacturing in India is struggling despite a huge and growing domestic market and pockets of world-class capabilities. To examine this puzzle the World Bank commissioned this study in May 2013 on behalf of the Chief Economic Advisor, Government of India, Raghuram Rajan (now the governor of the Reserve Bank of India). Drawing on extensive survey questionnaires and interviews with key industry players (both domestic and foreign) and relevant government agencies, this study identifies major challenges India-based companies face in engaging in electronics manufacturing. The analysis culminates in detailed policy suggestions for regulatory reform and support policies needed to unblock barriers to investment in this industry and to fast-track its upgrading through innovation.
Topic:
Development, Economics, Globalization, Industrial Policy, International Trade and Finance, and Science and Technology
Political Geography:
South Asia and India

5. Trade and Innovation in Global Networks-Regional Policy Implications

Author:
Dieter Ernst
Publication Date:
05-2014
Content Type:
Working Paper
Institution:
East-West Center
Abstract:
This Think Piece explores how integration into international trade through global networks of production (GPNs) and innovation (GINs) might affect a region's innovation capacity. As regions across the globe are progressively integrated into those global networks - some certainly more than others - these regions are all faced with a fundamental challenge: How might progressive integration of its firms into GPNs and GINs affect learning, capability development and innovation? Will network integration unlock new sources of industrial innovation? Or will it act as a poisoned chalice that will sap and erode the region's accumulated capabilities?
Topic:
Economics, Globalization, International Trade and Finance, and Labor Issues

6. From Catching Up to Forging Ahead? China's Prospects in Semiconductors

Author:
Dieter Ernst
Publication Date:
10-2014
Content Type:
Working Paper
Institution:
East-West Center
Abstract:
China's new strategy to upgrade its semiconductor industry (outlined in the "Guidelines to Promote National Integrated Circuit Industry Development," June 24, 2014), seeks to move from catching-up to forging ahead in semiconductors, by strengthening simultaneously China's integrated circuit (IC) design industry and domestic IC foundry services.
Topic:
Economics, Globalization, Industrial Policy, Markets, and Science and Technology
Political Geography:
China and Asia

7. Industrial Upgrading through Low-Cost and Fast Innovation—Taiwan's Experience

Author:
Dieter Ernst
Publication Date:
09-2013
Content Type:
Working Paper
Institution:
East-West Center
Abstract:
This paper examines the forces that drive Taiwan's new strategy of "Upgrading through Low-Cost and Fast Innovation." The first section highlights characteristics of Taiwan's traditional "Global Factory" innovation model and examines the role of innovation policy in that model. Section 2 reviews fundamental weaknesses that define the requirements of Taiwan's new innovation strategy. Section 3 explores Taiwan's new strategy of "low-cost and fast innovation through domestic and global innovation networks." Finally, section 4 examines the role of government and key policies and initiatives in the IT industry.
Topic:
Government, Industrial Policy, and Science and Technology
Political Geography:
Israel and Taiwan

8. Standards, Innovation, and Latecomer Economic Development—A Conceptual Framework

Author:
Dieter Ernst
Publication Date:
09-2013
Content Type:
Working Paper
Institution:
East-West Center
Abstract:
Little is known about the impact of standards on the economic development of countries which are latecomers to industrial manufacturing and innovation. Standardization is regarded primarily as a technical issue, and hence receives only limited high-level policy support.
Topic:
Development, Diplomacy, Health, Industrial Policy, and Labor Issues

9. Is the Information Technology Agreement Facilitating Latecomer Manufacturing and Innovation? India's Experience

Author:
Dieter Ernst
Publication Date:
11-2013
Content Type:
Working Paper
Institution:
East-West Center
Abstract:
A defining characteristic of today's international trading system is that plurilateral trade agreements like the Information Technology Agreement (ITA) are gaining in importance relative to the gridlocked Doha round of multilateral trade negotiations. These more selective trade agreements pose new and so far little understood challenges for the governance of the international trading system, especially with regard to the distribution of liberalization gains among participants which differ in their stage of development, their institutions, and their resources and capabilities.
Topic:
Development, Economics, Industrial Policy, International Trade and Finance, and Science and Technology
Political Geography:
South Asia

10. Global Technology Sourcing in China's Integrated Circuit Design Industry: A Conceptual Framework and Preliminary Findings

Author:
Barry Naughton and Dieter Ernst
Publication Date:
08-2012
Content Type:
Working Paper
Institution:
East-West Center
Abstract:
The paper examines the role of global technology sourcing, and its drivers and impacts in China's integrated circuit (IC) design industry. IC design is one of the priority targets of China's innovation policy, as codified especially in the ―Strategic Emerging Industries‖ initiative. At the same time, however, China's IC design industry is deeply integrated into the vertically disintegrated global semiconductor industry, through markets, investment and technology. The paper highlights a fundamental challenge for China's innovation strategy: How can China reconcile its primary objective of strengthening indigenous innovation with the benefits that it could reap from its deep integration into international trade and into global networks of production and innovation?
Topic:
Economics, Industrial Policy, International Trade and Finance, and Science and Technology
Political Geography:
China and Israel