Thanks to the burst of global R&D, innovative companies can now shop the world for intellectual property needed for new products. Cities such as Bangalore, Tel Aviv, and Seoul are starting to have flourishing Silicon Valley-like tech clusters nurtured by venture capital, tie-ups between science universities and industry, and a critical mass of inventors and entrepreneurs adept at selling their intellectual property worldwide.
South Korea, for example, is a trailblazer in next-generation digital displays, memory devices, wireless telecom, and electronic gaming. In Taiwan, long known for churning out me-too electronics products, R&D spending has leapt fourfold, to $7.5 billion, since 1990. The island now boasts some of the world’s most profitable chip and hardware designers. “Taiwanese companies used to be able to focus on low-end products and survive,” says spokesman David Chen of Novatek Microelectronics Corp., a leader in chips for liquid-crystal displays used in high-end TVs, notebook PCs, and digital cameras that earned $98 million on $333 million in sales in 2003. “Now intellectual property is a serious matter.”
To get an idea of how diffuse the innovation process has become, try dissecting your new PDA, digital cameraphone, notebook PC, or cable set-top box. You will probably find a virtual U.N. of intellectual-property suppliers. The central processor may have come from Texas Instruments (TXN ) or Intel, and the operating system from BlackBerry (RIMM ), Symbian, or Microsoft. The circuit board may have been designed by Chinese engineers. The dozens of specialty chips and blocks of embedded software responsible for the dazzling video or crystal-clear audio may have come from chip designers in Taiwan, Austria, Ireland, or India.
The color display likely came from South Korea, the high-grade lens from Japan or Germany. The cellular links may be of Nordic or French origin. If the device has Bluetooth technology, which lets digital appliances talk to each other, it may have been licensed from IXI Mobile Inc., one of dozens of Israeli wireless-telecom companies spun off from the defense industry. IXI has developed a package of software allowing users to wirelessly zap images, audio, and data from digital cameras to e-mail accounts to PCs. Among the products using IXI’s package is ATT Wireless’ new Ogo device for instant messaging.
This spreading out of R&D is a boon to innovation. By mobilizing global R&D teams around the clock, nimble companies can accelerate development cycles, bringing new technologies to consumers and industry faster, cheaper, and in more varieties. Multinationals can reach deep into once-cloistered university labs in Shanghai or Moscow for help in advancing everything from genetics and molecular research to alternative energy. Besides employing several thousand in India, France, Germany, and the U.S. to develop chip sets and software, Texas Instruments taps brains at 100 info-tech companies from Berlin to Bangalore. This has been vital to maintaining TI’s dominance in the $5 billion global market for digital-signal processors for cell phones and consumer electronics. “The more we can leverage outside talent and companies with great ideas, the more product we can get out,” says Doug Raser, who oversees TI’s global strategic marketing.