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China slips behind US in technology innovation stakes

Silicon Valley back on top as UK struggles with image problem

Internet Security Threat Report 2014

China may be driving much of the global economy, but a survey of global technology executives believes the good old US of A will be the source of the next big disruptive technology breakthrough.

KPMG is the source of this assertion, which it makes after interviewing over 800 leaders of entities that range from start-ups to large enterprises and included VC firms. All were asked to identify key trends in innovation.

While China tied in first place with the US in 2012, this year’s Global Technology Innovation survey found the States clearly ahead. Some 37 per cent of respondents said they believed it would foment the biggest breakthroughs, with China down to 24 per cent.

The stats are reflected in the fact that fewer execs (33 per cent) than in 2012 (44 per cent) believe the innovation centre of the world would shift away from Silicon Valley to another country in the next four years. Even those respondents in China who thought a shift was likely fell from 60 per cent to 49 per cent.

The China innovation story is a complicated one. On the one hand firms like Huawei, Lenovo, ZTE and Tencent (which owns Whatsapp-like service WeChat) are looming large on the global stage having dominated their domestic market.

They’re certainly ploughing billions into R&D efforts and have the backing of the Communist Party, which wants China to become an “innovation-oriented country” by 2020.

However, analysts have remained sceptical about whether they can be genuinely disruptive – after all, many Chinese technology firms have built their fortune by copying Western rivals.

In a clear sign of where the balance of power still lies there, search giant Baidu recently opened a deep learning lab in Cupertino, while an IEEE report from last December found Chinese firms sparsely represented on its annual Patent Power scorecard listing the size and quality of US patent portfolios.

Nevertheless, KPMG claimed the Middle Kingdom’s technology firms are still innovating at “impressive speed”.

“We believe that domestic consumption in the country will drive the majority of new innovation. China will innovate for China’s sake. This is supported by Chinese consumers who are driving the desire for local brands, which are unique to this market,” said KPMG China partner Egidio Zarrella, in a canned statement.

“We see Chinese organisations increasingly establishing innovation hubs where their research and development can thrive. We believe this will also help to bridge any gaps where Chinese brands may face difficulties when looking to expand into the global market.”

India came in third after China with 10 per cent, followed by Israel and Japan tied on six per cent. The UK was down in ninth place with a disappointing one per cent of business leaders believing it could make an impact.

KPMG Head of Technology Europe, Tudor Aw, put a brave face on the result, claiming that the UK’s technology prowess is better than the stats suggested and that more needed to be done to market its world-leading capabilities in areas like mobile chip design and graphene research. ®

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