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Archive for the ‘Globalization’ Category

Some excerpts from a great article comparing Indian and Chinese M&A, “Dancing “Dragon” and Running “Elephant” on the Stage of M&A  by Mark He at Zero2IPO Research.

*** Excerpts Begin (emphasis mine) *** 
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An interview by Cherry Zheng from last September (with a nice photograph to boot!):

*** INTERVIEW BEGINS ***

European venture capital firms universally hold a prudent attitude towards the entry into Chinese market. As a result, only a few of them entered China. On the other hand, quite a large number of them, which include Amadeus Capital Partners Limited (“Amadeus”), are always observing the Chinese market actively and forming relationships with local VCs and major corporations

Amadeus invests venture capital in new technologies from offices in London and Cambridge, UK.  Since its inception in 1997, Amadeus has backed more than 60 companies in the UK and continental Europe, covering computer hardware and software, mobile and fixed communications technologies and medical technologies. Amadeus manages a total of GBP288 million of assets, raised through five funds including two seed-stage funds.

In his role as Business Development Partner for Asia at Amadeus, Shantanu Bhagwat (“Shantanu”) has 18 years of broad international experience in the broad technology sector, in Europe as well as in Asia, where he once worked in Japan and India. Shantanu has already visited China several times and continues to find opportunities to get familiar with this country and understand the developments even better.

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…here it is.

From “Who Captures Value in a Global Innovation System?” – The case of Apple’s iPod, this table that details “the geography of $190 of the captured value in a single $299 video iPod” (Thanks, Jason).

Apple iPOD Innovation 

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and from “Dreamliner 101: All About the Boeing 787“, this picture showing where the parts for 787 come from.

Boeing 787 Parts

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This is a long overdue post but the points made are, I think, still relevant.

Earlier this year, Richard Wallace, Mike Clendenin and Sufia Tippu writing in the EE Times about India’s potential to become a “silicon superpower” concluded that: “It’s a tall order. India has the brainpower to pull it off, but China won’t easily concede its lead.”

Some excerpts from the original article:

“…Can India, like China, become the next silicon success story? This seemingly simple question has given birth to a debate that’s roared across the global electronics industry since India unveiled broad new financial incentives designed to lure chip makers to the subcontinent last month.

Some call India “the last frontier for semiconductor manufacturing,” and believe it will it be a magnet for companies like TSMC, AMD and Intel, the U.S. semiconductor giant whose fab site decisions–like the recent one to manufacture in China–can turn the fate of an industry.

“No way,” insist other industry watchers, pointing to India’s infrastructure shortcomings and late start in the chip-manufacturing sweeps. As the title of a recent JP Morgan Report puts it, “India and semiconductors: It’s too late; just don’t bother.”

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A few weeks back, I came across the second part of Eye on the Tigers series in which Tosh talks about the strikingly different approaches to development/globalization being followed by India and China and how awareness about these changes continues to be very low in Europe.

He starts his analysis by noting that in spite of Indian companies now controlling “three European
Icons” (Arcelor, REpower and Whyte & Mackay), “awareness about India among Europe’s policymakers is feeble”.

But the really interesting bit (IMHO), is the part where Tosh analyses the differences between the Chinese and the Indian approaches to development.

In his own words:

“As perplexing at the Brussels Asia-Europe conference was a pictorial tsunami of Chinese technology parks – sprouting by day, sometimes by night. There was no analysis, for instance, of why China chose an Indian majority partner for its first offshore IT park, or the absence of windows at Intel’s high-security Bangalore operation.

Missing too were numbers, such as the American stock-market capitalisation of the large Indian software firms, each of which outranks ‘giant’US rivals Accenture and EDS, and have revenues higher than China’s entire offshore IT industry.

Though globalisation is principally about India and China, blurring the differences is unwise.

China is driving up the value chain, very visibly, from low-cost, ultra large-scale foreign-invested manufacturing. Its technology parks may well be needed in the future; but they could also share the fate of Malaysia’s much-hyped ‘Multimedia Super Corridor’.

India is driving in the opposite direction – down the value chain from technology services. This ride is carefully calibrated to global market forces. In effect, India is harnessing its technology/management skills to add value to emerging frontiers in manufacturing –such as rapid prototyping and mass customisation.

On the flip side, unlike the US, Europe’s rich but fragmented patchwork of SMEs offers would-be buyers easy targets to ‘plug and play’ in tomorrow’s global supply chains.

… waiting in the wings are others like Tanti (Suzlon’s CEO). India’s bottom-heavy but world-class stock markets already boast 150 companies with over $1 billion valuations.

This is the global/European face of tomorrow’s India Inc., bankrolled byAmerican capital and soldiered by Indian-American managerial Merlins co-opted from McKinsey, Bain and the like.

Such wholly-new trends surely require some assessment….”

Sadly, “the state-of-play within the European Commission, its listening posts and sounding boards, is that of Rip Van Winkle waking up and seeing a new emperor’s new clothes.

I am very interested in comments – particularly from those with insight into (or experience of) policy-making in Europe and UK.

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chatham-house-logo.jpg        A few weeks ago, I attended a fascinating talk at Chatham House by Professor Wing Thye Woo who teaches Economics at the University of California on “The Real Challenges to China’s Continued High Growth”

He identified three important factors which might lead to the “crash of a speeding car” aka the “Great Chinese Growth Engine”:

  • Hardware failure: “right tire burst” = collapse of a crucial economic mechanism
  • Software failure: “fight within car” = social disorder
  • Power supply failure: “no petrol” = limits from ecological barrier or external sanctions

He also cited several interesting statistics in his presentation of which the two below particularly stood out for me:

  1. “Social Disorder”: 1994 had 10,000 mass incidents involving 730,000 persons; in 2004 the number had gone up to 74,000 mass incidents involving 3.7 million people.
  2. China’s GINI coefficient has almost doubled from .24 in ’78 to .47 in 2005

The China Policy Institute, which made it all happen, wrote its own report on the talk which can be accessed here.  The report nicely summarised the key points. I would recommend it and the slides to everyone who is watching China and its impact on the global economy.

A few excerpts:

“…China had enjoyed the highest sustained economic growth rate of any country in recorded history, he said, and it was probable that this high growth model would succeed.

But it was important to examine the factors most likely to disrupt the high growth rate from continuing…

…Professor Woo said that perhaps the greatest challenge to China’s continued high growth in China would be future global disputes over resources and the environment, following what he called the unravelling of the global consensus for free trade in the United States, which was making the atmosphere ripe for protectionism.

As China and India moved up the value chain in manufacturing complexity, he said, Western countries were being forced to make painful adjustments as more and more jobs were lost. At the same time they would be faced with demands to help pay for the environmental improvements needed in countries like China and India to curb carbon dioxide emissions, he said.

…The best way to reduce CO2 emissions was to ensure that the new power generation capacity installed in China and India made use of modern, clean coal technology, he said, but this would mean that the richer countries would have to offer to pay for this in order to enjoy the benefits.

This made the atmosphere also ripe for what he called a coming global clash over the “Global Commons” not just air but also water as well. Asia, he said, faced a looming water crisis as China made plans to divert the flow of water to rivers such as the Bramaputra and the Mekong that flowed into India and Southeast Asia…”

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In its latest “Index of Failed States“, Foreign Policy magazine has ranked India (at # 110) way ahead of China (and Russia – both at #62) in terms of stability while Pakistan jostles for a position in the “Top 10” (at # 12) with North Korea (at # 13) – both nuclear armed for good measure.

and yet the report describes China in words that could have almost been written for India:

“…the growing divide between urban and rural, as well as continued protests in the countryside, reveals pockets of frailty that the central govenment is only just beginning to address”.

rankings-up-fs2007.gif For the curious amongst you, the top 3 places in the Index go to Sudan, Iraq and Somalia.

Related posts:

Why India will* overtake China – II

China, India and the “3D Advantage”

India, China and the next decade…

Of Googlies*, Cricket, India and China

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