Henry Rowen:

In the second half of the 20the century the only country that competed with the USA in terms of mass-scale innovation that changed the daily lives of billions of people was Japan: the transistor radio (1954), the quartz wristwatch (1967), the pocket calculator (1970), the color photocopier (1973), the portable music player (1979), the compact disc (1982), the camcorder (1982), the digital synthesizer (1983), the third-generation videogame console (1983), the digital camera (1988), the plasma TV set (1992), the DVD player (1996), the hybrid car (1997), mobile access to the Internet (1999), the Blu-ray disc (2003), the laser television set (2008). However, Japanese innovation mostly came from conglomerates that were very old: Mitsubishi (1870), Seiko (1881), Yamaha (1887), Nintendo (1889), Fujitsu (1934), Canon (1937), Toyota (1937), Sony (1946), NTT (1952), etc.

With the exception of the media hub in Tokyo (mostly devoted to pop culture), there was no major industrial cluster in Japan that could compare with Silicon Valley. Tokyo's "high-tech" regions were the traditional industrial hub that grow around big companies, like Aichi, the location of Toyota's main plant and of many Toyota suppliers, Hiroshima, Sendai, Yonezawa. Later a sort of Silicon Valley emerged in Fukuoka, in the far south of Japan (Kyushu island) thanks to a cluster of universities (Kyushu University, Kyushu Institute of Technology, Kitakyushu University, the Institute of Systems & Information Technologies) and mostly for the semiconductor industry.

South Korea followed a similar path to high-tech innovation. Like Japan it relied mainly on well-established companies like Samsung (1938). Like Japan the environment was hostile to foreign companies. Like Japan there was little interaction between universities and industry, with professors more similar to government bureaucrats than to incubators of ideas or coaches of entrepreneurs.

However, South Korea also had two regions that looked a bit like Silicon Valley. In 1973 South Korea established the Korea Advanced Institute of Science and Technology at Daedeok, south of Seoul. This area began to attract R&D labs and eventually to spin off startups. It therefore came to be known as "Daedeok Valley" and officially as Daedeok Science Town. The software industry, instead, assembled around Teheran Road in Seoul (between Gangnam Station and Samseong Station), nicknamed "Teheran Valley", a three-km stretch that probably got the majority of South Korean venture-capital investment during the dotcom boom.

In terms of process, however, Taiwan was the real story. In 1973 Taiwan established the Industrial Technological Research Institute (ITRI) to develop technologies that could be turned into goods for foreign markets, an institute that would spawn dozens of semiconductor firms (starting with UMC in 1980 and TSMC in 1987), and then the pioneer of Asian state-founded high-tech parks, the Hsinchu Science-based Industrial Park, established in 1980 about 88 kms from Taipei near four universities. In 20 years more than 100 companies were formed by graduates of those universities. Taiwan was also the place where venture capital took off in Asia and was also the first place that implemented the feedback loop between university and corporate R&D typical of Boston and Silicon Valley. TSMC launched the independent silicon-chip foundry, that turned Taiwan into Silicon Valley's main destination for outsourcing chip manufacturing, and which in turn helped create a vibrant chip-design industry with companies such as MediaTek (1997) and NovaTek (1997).

Neither Japan nor Korea nor Taiwan attracted highly educated immigrants from elsewhere like Silicon Valley did. The only Asian country to do so was Singapore. It is not a coincidence that Singapore was also the country that invested the most in attracting foreign businesses (and their know-how). Singapore too developed an advanced venture-capital industry and fostered interaction between its universities and the private industry.

Neither of these countries created a vibrant software industry like Silicon Valley.

China was a late-comer and capitalized on its neighbors' many experiments, avoiding Japan's model because it simply did not have the kind of old established manufacturing and financial giants that Japan had. The idea of a "Chinese Silicon Valley" came to nuclear scientist Chen Chunxian of the Academy of Sciences after a 1979 trip to California. Back home in 1980 he tried unsuccessfully to start a privately-funded Advanced Technology Service Association just outside Beijing. However, the Academy took up his idea and began to play the role of incubator for high-tech startups, one of which would become Lenovo, most of them based along the ten-km Zhongguancun Street. The idea appealed to both staff and students of the two leading universities of Beijing, Peking University and Tsinghua University, who needed to make more money than the tiny government salaries and subsidies. Finally, in 1988 the government gave its blessing and the whole region came to be called Zhongguancun Science Park. In little over than a decade massive government incentives created thousands of new companies, the vast majority in software and telecommunications.

In 2008 the USA entered the Great Recession while Asia was still booming. Nonetheless in 2010 Asians overcame Hispanics as the largest group of immigrants to the USA. That is Asia's single biggest failure: people were still leaving the continent by the hundreds of thousands even at a time when Asia looked like a land of opportunities and the USA was widely considered on the way out as a world power. One has to wonder what it would take to reverse the tide if the biggest economic crisis in 70 years didn't do it.

The most important event in the modern history of Asian industry, however, may predate all of this. In 1953 Taiichi Ohno invented "lean manufacturing" (or "just-in-time" manufacturing) at Japan's Toyota. That was one of the factors that turned Toyota into a giant success story (and eventually into the largest car manufacturer in the world). More importantly, it created the mindset that the process is often more important than the product. When (in 1987) ITRI's president Morris Chang launched Taiwan's Semiconductor Manufacturing Company (TSMC), the first independent silicon-chip foundry in the world, to serve the "fabless" companies of the USA, he simply applied that mindset to the computer industry and realized that one could decouple the design and the manufacturing. That does not mean that only the design is creative: the design would not lead to a mass-market product (and possibly to no product at all) without a highly efficient manufacturing process that lowers the cost and improves quality.

From the point of view of the Asian suppliers, what was really revolutionary (and not just evolutionary) was the process, not the product. The fabless process and the offshore customer-service process were the real breakthroughs, not the new laptop model or the new operating system. Without significant progress in Asia in the industrial process many great success stories of Silicon Valley products may have not happened at all. The world viewed from Silicon Valley was a world centered on the place where a product was designed and marketed. The world viewed from Japan, Taiwan and Korea was a world centered on the industrial centers that could manufacture products based on whatever design, faster, cheaper and better. The world viewed from India was a world centered on the army of software engineers that could deliver software based on whatever needs, faster, cheaper and better. From the Asian viewpoint, it was the increasing evolutionary efficiency of the "builders" that allowed Silicon Valley to create "revolutionary" products and new markets. For example, despite being a relatively small economy and boasting virtually no invention that ordinary people can name, Taiwan rapidly became the fourth country in the world for patent filing (after the USA, Japan and Germany); and Japan rapidly became the country with the highest percentage of GDP spent in R&D.

That "evolution" stemmed from a mindset driven by incremental progress, the equivalent of new releases of an operating system, each one enabling a whole new range of features (and prices) for the next product to capture the headlines.

From the viewpoint of Asia, ideas for "revolutionary" products are actually easy. What is difficult is "making" those products, not imagining them.

Furthermore, it is debatable which region and system has yielded more "revolutionary" products. The argument that small companies and Silicon Valley rule is an opinion, not a fact. The perception is that in Japan innovation was driven only by big companies. That perception is true. What is not true is the perception that the source of innovation was significantly different in the USA. It is easy to forget that Silicon Valley has invented very little: most of the things that changed the high-tech world (from the transistor to the disk drive) were invented by big companies (like AT&T and IBM), and many of the really revolurionary ones (the computer, the Internet, the World Wide Web) were invented by government labs. Blaming Japan for relying too much on big companies and big government means not knowing what Silicon Valley actually does, which is not to invent the computer nor the Internet nor the transistor nor the smartphone. In fact, the rigid bureaucratic big-company system of Japan has invented a lot more than Silicon Valley. And it has arguably created more wealth for ordinary people, turning a poor country into one of the richest countries in the world.