A History of Silicon Valley

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These are excerpts from Piero Scaruffi's book
"A History of Silicon Valley"


(Copyright © 2016 Piero Scaruffi)

The Rest of the World

India's Silicon Valley

The history of India's involvement with computers started with the five Indian Institutes of Technology (IITs), established in Kharagpur (1950), Mumbai (1958), Chennai (1959), Kanpur (1959) and Delhi (1961), and supported by five different countries from both the democratic and communist worlds (Kanpur was the USA-affiliated one). Meanwhile, the Indian families that could afford it were sending their children to graduate in Britain and in the USA. The Indian-born historian Peter James Marshall at Cambridge encouraged Indian students to become entrepreneurs not academics because he saw that as the most pressing need for post-independence India. The main destination in the USA was the MIT and the Indian graduates from the MIT mostly remained in the USA, but they created a network that provided the first link between the high-tech industry of the USA and India. In 1972 MIT-graduate Narendra Patni founded the software enterprise Data Conversion (later renamed Patni Computer Systems) with offices both in Boston (USA) and Pune (India). In 1981 some of Patni's engineers (mostly from the MIT too) founded Infosys in Pune. Meanwhile, the government had decided to install high-speed satellite communications in Bangalore, the site of the Indian Institute of Science (founded in 1909 thanks to steel industry magnate Jamsetji Tata. Because of that decision, in 1985 Texas Instruments opened a software laboratory in Bangalore. Within a few years Infosys and Wipro too moved their operations to Bangalore. Bangalore had several advantages over other cities. To start with, it was a center of the defense industry (Bharat Electronics, Hindustan Aeronautics, the National Aeronautics Laboratory, the Aeronautical Defence Establishment, the Electronics and Radar Development Establishment) as well as the home of several strategic industries (the Indian Telephone Industries, the Gas Turbine Research Establishment, and the Central Power Research Institute, Hindustan Machine Tools). In 1988 a private venture capital company had already been established, the Technology Development and Information Company of India (TDICI). Soon the city opened several industrial parks, including Electronics City and the Peenya Industrial Estate (the largest in India). In 1986 Patni obtained the first contract from a USA company (Data General) for offsourcing software to India. By 1990 India could already boast 3 million scientists and engineers graduating from 80 universities, and more than 200 research institutes specializing in electronics. Meanwhile, in 1991 India liberalized its protectionist economy, that had long been influenced by anti-capitalist precepts. During the 1990s Infosys enjoyed double-digit growth rates. By 2010 it would become one of the largest software companies in the world, with over 100,000 employees. However, Infosys well represented the problem, not the solution: by 2010 this industrial colossus had been granted only twelve patents in the USA Microsoft had fewer employees, but had passed the 5,000 patent mark already in 2006.

High-tech spread from Pune and Bangalore to other cities; notably in 1998 Hyderabad opened the Cyber Towers, nicknamed "Cyberabad", the first phase of the Hyderabad Information Technology and Engineering Consultancy (HITEC) project.

In general, graduates from the IIT lacked the counterculture spirit that was pervasive in the Bay Area, the passion for nonconformist behavior (and ideas), the curiosity about nontechnical topics (literature, philosophy, visual arts, history, etc), the push to innovate rather than just execute orders. Many graduates from the IIT did extremely well around the world (and notably in Silicon Valley) but many more became simple hired hands in the software industry, and the vast majority held humble (if well-paid) jobs back in India contributing little in terms of imagination. Most of them were trained to be not intellectuals but skilled craftsmen; not the successors to the great philosophers of India but the successors to their grandparents' world of religious sculptors and shoemakers.

The Asian Miracle

East Asia is a more complex story.

Asian economies managed to progress from starvation in the 1960s to the top tier of development and wealth. In 1981 East Asia still had the highest poverty rate in the world, higher than Africa. In 2011 two of the top three economies in the world were from East Asia, and very soon they might have three out of four including the number one.

There is no single cultural/political explanation for the Asian miracle because the countries of Asia spanned a broad spectrum of philosophies (Confucian, Shinto, Buddhist, Hindu, Muslim) and of political systems: fascism (South Korea, Singapore, Taiwan, Thailand), communism (mainland China), socialism (India), democracy (Japan, Hong Kong).

There were actually two Asian miracles. The first Asian miracle was low-tech and largely based on cheap labor and loose business regulations. The first Asia miracle relied on a simple business plan: do what the West does but do it cheaper and possibly better. This became an art in itself. It also caused the rapid Westernization of all US allies in Asia (that until World War II had largely held on to their traditions). The second Asian miracle was high-tech and based on improving Western high technology. By this time Asia had become very Westernized and, in particular, democracy had become widespread.

The first Asian miracle was largely the consequence of the Cold War between the USA and the Soviet Union. The USA helped the Asian (and Western European) economies develop in order to create stable and strong defenses against the communist world. The USA encouraged trade with its oversea allies, and tolerated that they competed unfairly with US-based manufacturers by keeping their currencies very low.

Government intervention was crucial to the development of these economies: they all boomed under the supervision of a benevolent dictatorship that nurtured and guided the private sector.

Most of the political leaders of the first boom came not from the aristocracy but from the very poor class. These leaders were interested in copying Western industrial methods but ignored Western economic theory: they used common sense and traditional values. They nonetheless became enlightened leaders who somehow made mostly good choices to turn their starving countries into economic tigers. They in fact greatly improved the economies of their respective countries.

All the early boomers lacked natural resources. In order to pay for them, they had to focus on exporting. The big open market was the USA. Therefore it was natural that they focused on exporting to the USA. The USA also provided the military protection that helped these countries focus only on the economy. Security was guaranteed and paid for by the USA. What these early boomers had in common was not a cultural or political background but that they were all allies of the USA during the Cold War.

The first "Asian tigers" were Japan, South Korea, Taiwan, Singapore and Hong Kong. They embodied different philosophies (Shinto, Buddhist, Confucian) and came from different histories: Japan was already westernized, Taiwan partially (as a Japanese colony), Korea never was, Hong Kong and Singapore were British colonies The role of the state varied from ubiquitous (Japan) to totalitarian (Singapore, South Korea, Taiwan) to indifferent (Hong Kong). The governments were run by people who were mostly of humble origins and uneducated. A widespread figure was the "benevolent dictator", whose main goal was not his own wealth or a dynasty but the good of the country. East Asian countries lacked natural resources. To pay for imports, they exported cheap goods to the USA. They developed a knack for understanding Western consumer behavior and social trends. The USA de facto paid for their development . The geopolitics of the Cold War (need to contain the Soviet Union) de facto drove the early Asian boom. What they had in common is not cultural or political background but that they were allies of the USA during the Cold War. In these countries technological progress remained largely in the hands of large national conglomerates. Singapore, however, established a unique model: it favored foreign investment by multinationals over nurturing national conglomerates. They ignored Western economic theories and used common sense and traditional values. They also ignored social and economies ideologies of the Third World. Centralized economies enabled long-term planning and short-term decisions. The government rewarded with favors the companies that achieved world-class results. Asian people demanded economic growth before democratic growth. These were not "nice" places to live in: they were overcrowded and poor for a long time. Nor did they benefit from high education: relatively few people were able to obtain a computer-science degree (or a science degree in general) unless they were able to pay for an education abroad.

The second Asian miracle was largely the consequence of the end of the Cold War. The collapse of the Soviet Union and of its communist block turned the whole world into one colossal capitalist market. The Asian countries applied their learned skills on a larger scale to a larger market. Globalization favored Asian products over the more expensive products from Western Europe and the USA. However, by now Asia had learned sophisticated industrial and business methods, and was not restricted to cheap goods. Its factories had developed into high-tech factories by serving US manufacturers, but the know-how could now be recycled internally to create factories that served Asian manufacturers. Therefore Asia found itself capable of competing with the West in the much more lucrative high-tech field.

This second Asian miracle introduced two colossal players. Mainland China simply followed the path of Western imitation that had been tested by the old "tigers". India, however, could also sell a widespread knowledge of the English language and Western-style universities that graduated scores of mathematically-inclined students, two factors which created an opportunity for the service industry. Again, the natural customer was the USA, in this case the booming computer and Internet industry. The USA, again, provided the military protection that helped these economies grow in a world largely at peace. West of Pakistan, Asia was relatively at peace. The real trouble was in the Middle East and East-Central Asia, i.e. in the Islamic world. The USA and its Western allies of NATO were busy maintaining some kind of order there, which also provided for safe trade routes. Even mainland China, that quickly became the USA's main rival on the world stage, relied on trade routes from Africa and the Middle East that were guarded by the mighty military of the USA.

The second generation of "Asian tigers" (in the 1990s) includes China, India, Thailand and Malaysia. Again, they came from different philosophies: Confucian, Hindu, Buddhist, Muslim. The role of the state was significant in that liberal reforms reduced the power of the state (especially in China and India). Their government was mostly run by well-educated technocrats.

Of the two Asian colossi, China probably had the better infrastructure. India had the disadvantage of poor transportation and electricity infrastructure. That, combined with restrictive labor laws, discouraged the kind of labor-intensive sectors that were booming in its eastern neighbors. While Taiwan, Singapore, South Korea, etc, China capitalized on cheap labor to capture offsourced jobs from the USA, India capitalized on English-speaking, college-educated and cheap engineers to capture offsourced jobs from the USA. The USA lost blue-collar (low-paying low-skills) jobs to East Asia and ended up losing white-collar (high-paying high-skilled) jobs to India.

A popular joke is that in China the conglomerates succeeded because of the government, whereas in India the conglomerates succeeded despite the government. Indian conglomerates had to aim for self-sufficiency. Jindal produced steel and power through backward integration from its own captive coal and iron-ore mines. Gautam Adani bought port and coal mines, built a power plant and a railway. Unlike China's labor-intensive exports, India became an exporter of capital-intensive items that require skilled workers

 

Asia's High-Tech Industry

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.

When it came to software platforms, Japan and South Korea were more interesting for their sociological and psychological attitudes than for their innovation. For example, in the 2000s Japan witnessed the boom of textboards and imageboards. And South Korea, the country with the fastest Internet in the world (the USA did not even rank in the top 10 as of 2018), and where the top three mobile service providers would roll out 5G services in April 2019, became the most social-centric nation via the social-networking platform Cyworld (launched in 1999, way before Facebook, by Dong-Hyung Lee and other students of KAIST), the social search engine Naver (started in 1999 by Hae-jin Lee), and the messaging app Kakaotalk (launched in 2010 by Beom-soo Kim, the former CEO of Korea's largest Internet provider, NHN).

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 had to wonder what it would take to reverse the tide if the biggest economic crisis in 70 years didn't do it.

The Importance of Process and of Evolution

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.

The Western Contribution to the Success of Asia's High-tech Industry

Part of the success of Asia was obviously made in Silicon Valley: the fiber-optics boom of the 1990s helped collapse the cost of a leased telecom line between California and Bangalore, and then the Voice Over IP technology of the early 2000s made it irrelevant. Without this simple improvement in the cost of communications India's software industry would not have picked up the way it did. The dotcom boom introduced dozens of online services that eliminated the distance factor and therefore helped remote firms compete with local firms. Even the passion for industry standards that has always been a peculiarity of the USA ended up favoring those abroad who wanted to create critical mass for their services of outsourcing.

The government of the USA has indirectly been proactive in creating opportunities for Asian firms. When Bell Labs invented the transistor, it was under government pressure that its owner AT&T decided to license transistor technology at a low price to anybody who wanted it, including the company that later became Sony. It was under government pressure that IBM decided to "unbundle" the software applications from its mainframe computers, thereby spawning a software boom worldwide. It was the government that created and funded the Arpanet, that went on to become (as Internet) the backbone of the global outsourcing movement.

The biggest gift of the West to Asia was perhaps the revolution in management that had started in earnest in the 1920s but got a phenomenal boost in the 1990s with the collapse of the communist world and the boom of free trade. The USA boasted the most advanced class of business administrators in the world in terms of maximizing profits (at least short term), and their discipline almost inevitably took them to outsource both manufacturing and services. One of the tools that they used was also a Western invention: ERP software to manage complex sophisticated distributed supply chains.

And, of course, it was the USA and its allies that had taught Asia to speak English: India, Hong Kong and Singapore had been British colonies, and Taiwan, South Korea and Japan had been militarily occupied by the USA in one fashion or another. The language turned out to be an important factor in leapfrogging ahead of the Europeans.

Another, less obvious, reason why it was so easy for Asian companies to do business with Silicon Valley is that Silicon Valley (and the high-tech industry in general) was in reality being less innovative than it appeared to be to consumers: both software and hardware (consumer) products tended to follow a predictable evolutionary path that it was easy for suppliers to anticipate with the required building blocks and services.

Of course, we don't mean that Asia was just a lucky beneficiary of some Western policies. These various forms of indirect "help" from the West would not have worked without native factors that were already in place. In brief, those successful regions of Asia had traditionally valued higher education (and now also and especially in engineering and science), enjoyed enlightened state planning (that, for example, placed emphasis on electronics while Europe was still focused on cars and appliances), boasted world-class work ethos (that guaranteed quality and reliability) and were largely non ideological (they didn't view capitalism as evil, like large segments of the European public, and did not harbor religious/ethnic hostilities towards Westerners).

The Missing Ingredients in Asia

However, nothing like Silicon Valley has emerged in East Asia. One simple reason for this is that it is not only startup founders who have to be visionary in order to achieve technological breakthroughs: venture capitalists have to be visionary too. In Singapore, for example, they are government bureaucrats. Asia has a tradition of keeping the money in the hands of trusted (and prudent) bureaucrats. The USA has a tradition of letting the (reckless) successul self-made man be the one who funds the next big thing.

However, that cannot be the whole story. For example, Japan never created a vibrant software industry. But it would be unfair to blame it only on the economic and political system: very few startups in Silicon Valley were founded by Japanese immigrants, despite the fact that the number of Japanese engineers working in Silicon Valley has always been significant. Compare with the incredible percentage of Indian and Chinese immigrants who started companies. And this despite the fact that Japanese education is routinely ranked higher than Indian and Chinese education.

It might look surprising that a country like Singapore, that appears to be a lot more "modern" than the San Francisco Bay Area, contributed less to technological innovation than Silicon Valley. Singapore is a model of urban design and management. Silicon Valley is decades (if not a century) behind Singapore, meaning that it would probably take a century for Silicon Valley to catch up with Singapore's infrastructure projects, not to mention to match Singapore's architectural wonders (compared with Silicon Valley's none). It's not only the subway and the quality of roads that is superior in Singapore: the Singaporean citizens are way more "high-tech" than their peers in Silicon Valley. Singaporeans had cell phones when they were still a rarity in Silicon Valley. Silicon Valley still has to match the Internet speed that Singaporeans have been enjoying for years. People in Silicon Valley got the first taste of mobile payment a decade after it became commonplace in Singapore. However, hard as it may have tried, Singapore produced no Apple, no Oracle, no Google and no Facebook. The reason might be the very concept of what high-tech is. In Silicon Valley people need just a cubicle to work (and a car to get there, given the third-world public transportation). They are perfectly happy living in a culturally poor place of ugly buildings and restaurant chains`. In Singapore people expect a town that is comfortable; a nice place to live in. High-tech is a means to an end just like concrete and plastic. It is part of the urban fabric. It is one of the elements that contribute to making Singapore a model of urban design and management. In Silicon Valley people are willing and even excited to be worked to death like slaves for the privilege of being part of the high-tech world that designs the tools of tomorrow (and for a tiny chance of becoming the next billionaire). In Singapore there is nothing particularly prestigious about working in high tech: the prestige is in using it to do something that is relevant to society. Silicon Valley assumes that one can change the world just by releasing a new device or a new website that will spread virally. Singapore assumes that one can change the world by adopting whichever the best available tools are at the moment, and it is largely irrelevant who invented them; just like it's irrelevant who makes the blue jeans or the shoes that became popular after independence.

The single most visible advantage that Silicon Valley had over the rest of the world is immigration. The exodus of brains from India and China did not stop during their boom years. No matter how many billionaires were created by the booming high-tech industry in China, there were still thousands of Chinese students willing to work as salaried employees in Silicon Valley rather than return to China's land of opportunities. In 2013 more than 350,000 Chinese returned home after graduating abroad, which was 17 times more than the number for 2003, but in 2013 more than one million Chinese were studying abroad, 11 times more than in 2003.

 

China's High-tech Industry

The story of China's software industry borders on the incredible because it was born so late in time that it basically coincided with the "dotcom boom" in the USA. Whereas in the USA the World-wide Web represented yet another generation of software, in China it pretty much represented the first one. Chinese software was born online.

China's software industry first emerged out of the primitive enterpreneurial culture fostered in the provinces bordering Hong Kong. This was the heroic era. Several of the pioneering programmers (some of them self-taught) became legendary like the heroes of China's martial arts.

Kau Pak Kwan, hailed as "China's first programmer" (or, better, the first one to become rich and famous), who in 1989 had created the the first Chinese wordprocessor (later renamed WPS) while working for Hong Kong-based PC clone manufacturer JinShan, founded Kingsoft and developed an entire Microsoft-compatible office automation suite. (Kingsoft in 2012 even introduced its own browser, Liebao).

Ufida (later renamed Yonyou), founded in 1988 by two veterans of the Ministry of Finance, Wenjing Wang and Qipiang Su, developed Chinese accounting software and then became China's reigning ERP company. Its main domestic rival was Kingdee, founded in 1991 by Shaochun "Robert" Xu, a former software engineer in a government agency.

Neusoft was founded in 1991 by Jiren Liu, one of the earliest Chinese graduates in computer science. The company was an offshoot of the pioneering software lab that he had established in 1988 at Shenyang's Northeastern University. In 1996 Neusoft became the first listed software company in China.

The hardware industry had gotten an earlier start. China's fiber-optics industry had originated in the late 1970s at the Wuhan Research Institute of Post and Telecommunication. The area surrounding it was nicknamed "Light Valley". In 1984 Liu Chuanzhi of the Chinese Academy of Sciences had founded a privately-run but state-owned company, Legend (later Lenovo), to sell IBM's personal computers in China. In 1997 Lenovo passed IBM to become China's main vendor of personal computers.

Huawei was founded in 1988 in Shenzhen Shenzhen (that borders with Hong Kong) by Zhengfei Ren, a former telecommunication engineer for the Chinese army, to make cheap copies of Western private branch exchange (PBX) switches for rural towns. In 2001 Huawei posted the first sales to Western countries (wireless routers). Lower prices and customized solutions helped Huawei (it also helped that it illegally copied Cisco's products), and by 2012 it had overtaken Sweden's Ericsson to become the world's biggest telecom-equipment maker.

Another telecom giant, Zhongxing Semiconductor (later renamed ZTE) was founded in 1985 also in by the Chinese aerospace ministry. In 1996 it began expanding outside China but mainly in developing countries like Indonesia and Pakistan. It entered the Western market in 2005. ZTE too leveraged low-cost equipment and customized solutions, and by 2010 it had become the worldÎéÎ÷s leader in the CDMA market. Both companies were helped (if not outright established) by the Chinese government.

In 1991 Zhidong Wang, who had already created the first Chinese-language platform for personal computers, founded Suntendy Electronic Technology and Research (later renamed Stone Rich Sight or SRS) to develop a Chinese version of the Windows operating system (RichWin, launched in 1993). His partner was a legendary self-taught computer scientist of the National Research Institute, Yanchou Yan, who had designed China's first computer systems and developed a Chinese-language version of Microsoft DOS. In 1998 venture capitalists encouraged the merger of his company with Sinanet, a platform developed in 1995 by three Taiwanese-born Stanford graduate students (Hurst Lin, Jack Hong and Ben Tsiang) to post news from Taiwan on the Internet using Chinese characters. Thus Sina was born. The power of the Internet was demonstrated to the Chinese public in 1999 when the USA accidentally bombed the Chinese embassy in Belgrade: government propaganda paled in comparison with the deluge of both live news and outraged opinions posted on Sina's website. Thanks to that crisis, Sina became the largest Internet portal in China. For the record the previous bump in traffic (when Sina was still called SRS) had come from China's participation in the 1997 qualifying games for the soccer world-cup. In 2009 Sina launched Weibo, China's Twitter equivalent.

Its main competitor, Sohu, launched in 1996 as Internet Technologies China (ITC), an offshoot of Boston's MIT where its founder Charles Zhang had created a Chinese search engine. That soon became China's most popular search engine.

In 1998 Yueqiao Bao, who had become famous for developing the MSDOS-compatible operating system PTDOS (originally created in 1992 while working in a rubber factory and later renamed UCDOS), founded OurGame, China's premiere online gaming platform.

William Ding, a former Sybase engineer, founded Netease in 1997 and created the first bilingual email system.

Jiangmin Wang became rich and famous thanks to the antivirus company he had founded in 1996, Jiangmin Science and Technology (also known as New Science & Technology).

In the 1990s the southern city of Shenzhen became the epicenter of the Shanzhai phenomenon: illegal replicas of Western electronic products, and, in particular, mobile phones. At one point Shanzhai shops may have manufactured as much as 20% of the world's mobile phones. The creativity of these amateur engineers was impressive. For example, phones with two SIM cards were common in Shenzhen (and sold all over the world) way before Nokia's spinoff Benefon relased the Benefon Twin in 2000.

In 1998 Shenzhen University's graduates Huateng Ma and Zhidong Zhang founded Tencent (originally called Tengxun) to develop the instant messaging platform Open ICQ or QQ. By 2010 Tencent had become the world's third-largest internet company by market capitalization.

In 1995 Jack Ma, an English teacher with no computing training started China Yellowpages, one China's earliest dotcoms, and in 1999 he founded the portal Alibaba, that in in 2003 launched a consumer-to-consumer marketplace, Taobao, borrowing ideas from both eBay and Amazon. In 2014 Alibaba's IPO set a new world record.

In 2000 Robin Li and Eric Xu realized that there was an opportunity for a Chinese search engine and founded Baidu. The opportunity was both political and social: the Chinese government was keeping a tight control over Western search engines and those search engines were not designed for Chinese characters. The main brain behind Baidu was Li, who in 1996, while working of a Boston-area aggregator of financial data, invented a page-ranking algorithm for search engines that would later inspire the Google founders, and who had then joined Infoseek in Silicon Valley. Baidu quickly became the second search engine in the world by number of users, and expanded to provide a sort of Wikipedia for the (highly censored) Chinese nation. And Li became one of the richest people in China.

Baidu's founder was influential in infiltrating the Silicon Valley style into the old-fashioned business world of Beijing. Baidu would remain a symbol of casual office environment, flat organization, no honorific titles, no formal dressing and so forth (even a "no smoking" policy in a country notorious for chain smokers). The median age at Baidu would still be a record-setting 25.8 in 2015 when Baidu would have grown to 50,000 employees. Ditto for Sina and Sohu, also founded by returnees. This generation of "returnees", who founded the early Internet startups in China, created a virtual link with the startups of the USA even without formal business affiliations.

Between 1988 and 2003 high-tech ventures in Beijing's Zhongguancun grew from 527 to more than 12,000. Success stories kept multiplying throughout the decade. For example, Qihoo 360, founded by Zhou Hongyi and Qi Xiangdong in 2005 in Beijing, counted on half a billion users of its antivirus software by 2016. Instead the semiconductor foundry Semiconductor Manufacturing International Corporation (SMIC) was founded in Shanghai's Zhangjiang High-Tech Park. By 2013 it had become the fifth largest in the world after Taiwan's TSMC, Silicon Valley's Globalfoundries (formerly AMD), Taiwan's UMC and Samsung.

In 2005 Xing Wang created Xiaonei, a Facebook clone for university students, in Beijing. In 2006 he sold it to Yizhou "Joseph" Chen, a Stanford and MIT graduate, who renamed it Renren. In 2007 Xing Wang then founded Fanfou, a Twitter clone, but it was shut down in 2009 by the government. (Wang would go on to found Meituan, a Groupon clone and Dianping, a Yelp clone).

In 2009 the Chinese government had blocked access to Facebook, and soon Twitter and Youtube were banned too. In January 2011 Tencent released the social networking platform Weixin/Wechat, designed by Allen Zhang, which simply integrated the features of all those social networking platforms, and also provided a sort of digital walkie-talkie (verbal instant messaging, very popular in a nation whose complex language is not friendly to texting). Within three years it had 300 million users, growing faster than Facebook, and by 2014 WeChat had almost 500 million monthly active users; one of the greatest success stories of the Internet Age.

Tencent managed to dominate both age groups. QQ targeted the younger generation and made money with games, especially second-life games. Wechat targeted older users, especially professionals. By 2015 WeChat was also becoming the Chinese equivalent of Paypal, providing online banking and payment. Founded at the end of 2005 in Beijing by Jinbo Yao, 58.com, better known as Wuba, was the Chinese clone of Craigslist.

Companies that pioneered online shopping in China included: Dangdang, founded in 1999 in Beijing by Peggy Yu and Li Guoqing; Joyo, spawned off by Kingsoft in 2000 and acquired in 2004 by Amazon; and Alibaba's Taobao.

Then in 2004 Qiangdong "Richard" Liu launched the online website www.jdlaser.com for Jingdong Mall, later renamed 360Buy.com (and later renamed again JD.com) from Beijing's Zhongguancun to sell an increasingly broader range of goods and to deliver them via a fleet of motorcycles. The delivery part was not negligible: China did not have anything like FedEx and UPS. In 2007 JD.com emulated Amazon by creating its own logistics network that enabled it to deliver goods in less than 12 hours in many cities.

China was even more successful in developing an international greentech industry. Zhengrong Shi was raised and trained in Australia, at the University of New South Wales, where Martin Green had pioneered silicon solar cells. After working for Pacific Solar, a spin-off of Green's laboratory, in 2001 he moved to Wuxi, near Shanghai, and founded Suntech, at a time when China's total solar capacity was two megawatts. Suntech opened its first solar-panel factory in 2002. By 2009 China's solar panels accounted for about 50% of world shipments. In 2016 China would produce 4,000 megawatts of solar energy, and five of the ten largest solar-panel manufacturers in the world would be based in China.

The 2010s saw the globalization of China's high-tech industry, particularly with the success of WeChat and Alibaba. At this point the Internet industry was dominated by three big companies, collectively known as the "BAT" (Baidu Alibaba Tencent).

Nonetheless, more success stories came out in social media. Notably, in 2012 Zhang Yiming founded ByteDance in Beijing, originally to launch the news aggregator Jinri Toutiao that in 2016 already counted 600 million users, but ByteDance's real hit was the video-sharing app Duoyin, launched in 2016 and renamed TikTok in 2018 for the international market after the 2017 acquisition of Shanghai-based video-sharing platform Musical.ly. TikTok was basically a Chinese version of Twitter's Vine, and came out just when Twitter had decided to abandon Vine. ByteDance realized the opportunity presented by the fact that Instagram and Snapchat were banned in China. At the same time, ByteDance itself had to be careful of Chinese censorship. In April 2018 China’s media regulator, the State Administration of Radio and Television (SARFT), seemed to wage a war on humor and fun: it cracked down on multiple social-media apps for jokes and home-made videos, including Bytedance's joke-sharing app Neihan Duanzi and Bytedance's video-sharing app Huoshan. Toutiao itself was temporarily unavailable, as were some online videogames, gossip blogs and live-streaming services. Zhang publicly apologized (“The product went astray, and content appeared that did not accord with core socialist values”). By then ByteDance had already become the most valuable unicorn in the world. ByteDance's strategy was to completely separate the (Chinese) users of Douyin and the (international) users of TikTok. Another factor played into ByteDance's favor: Tencent’s messaging app WeChat had become so widespread as a work tool that young people increasingly identified it more with work than with fun.

Alibaba finally had a real competitor, Pinduoduo (originally called Shanghai Dream Information Technology), founded in 2015 in Shanghai by former Google engineer Colin Huang.

The heroes of the past were being replaced by sophisticated teams. For example, Xiaomi, founded in 2010 in Beijing by Jun Lei (Lei is the last name), which in 2014 passed Samsung to become the leader of China's mobile phone market (and third globally behind Apple and Samsung), had been founded in 2010 (just four years earlier) by a team comprising: Kingsoft veteran (and soon to be billionaire) Jun Lei, former Kingsoft engineer Wanqiang Li, former Motorola executive Guangping Zhou, former Google and Microsoft executive Bin Lin, former Microsoft executive Jiangji Wong, Google engineer Feng Hong, Chuan Wang, founder of two hardware companies, and De Liu, founding director of the Industrial Design Department at Beijing University of Technology. Xiaomi introduced its first phone in August 2011 and used only the Internet to market it and sell it (mainly the Twitter-like platform Weibo). The big leap forward came with the Redmi model in 2013. Xiaomi was unique in the entire world: it was the first successful smartphone startup. All the other success stories (Apple, Samsung, Nokia, etc) were already big before they ventured into smartphones. Xiaomi was born to make smartphones.

Another giant of China's smartphone industry was Bubugao/ BBK, the corporation founded in 1995 by Yongping Duan in Guangdong after Duan had become rich with the “Subor” gaming console, a competitor to the Nintendo Entertainment System. BBK mainly manufactured CD players, MP3 players, Blu-ray players and DVD players; and in 1999 split into three corporations, two of which ended up specializing in smartphones: Mingyong "Tony" Chen's Oppo launched the Find X903 in 2011 and the N1 in 2013 (the world’s first smartphone with a rotating camera), Wei Shen's Vivo introduced its ultra-slim smartphone in 2011. Both targeted the middle-range price. In 2016 Oppo had the fastest growth of any major smartphone maker in the world, mainly because it opened 200,000 retail stores (as opposed to Xiaomi whose models were only available online). By 2018 the three top Chinese makers of smartphones were second only to Samsung and Apple: Huawei had a market share of 10.5%, Xiaomi 7.4% and Oppo 7.3%. If one combined the sales of Oppo and Vivo, BBK would be second only to Samsung. In addition, Oppo fully owned the Shenzhen-based smartphone manufacturer OnePlus (Yijia Keji) that introduced a high-end model in 2014 available only online and targeting the foreign markets.

Chinese companies were now being designed to be global players from the start.

Note that China had succeeded where Japan, Taiwan and South Korea had failed. Neither of these original "tigers" managed to create a vibrant software industry comparable to the one experiencing exponential growth in the USA. China, a late comer whose software industry was born during the Internet era, managed to create just that kind of software industry in a very short period of time.

There were several factors that made China's companies unique. First of all, they could not rely on advertising as the sole source of revenue like Yahoo, Google and many others did in the USA. Chinese portals needed to "move goods", and get a cut on the transaction. Secondly, those goods had to be cheap: these companies had to specialize in selling cheap goods to cheap people. Thirdly, they had to create a degree of trust between user and provider that was much higher than anything needed in the USA where mail catalogs have been the norm for more than a century. In particular, Chinese companies needed to provide real customer service. Customer service in the Microsoft era had decline to a "you are on your own" level: go online and see if anyone has found a solution for your problem. Chinese companies, instead, strived to provide excellent customer support. Compare the dedicated customer support provided by Taobao, WeChat and Xiaomi with the non-existent customer support provided by their Silicon Valley counterparts eBay, Facebook and Apple.

There was a fundamental difference between the Chinese model and the Silicon valley model. The typical startup in Silicon Valley started out by catering to a relatively small section of society, i.e. to the people or corporations that were willing to spend money on untested ideas/products/services: tech-savvy and high-income individuals or Fortune 500 corporations. The privileged individuals who belonged to this section of society could use their mobile phones to improve their lives in a plethora of ways. The rest of the world had to wait until these ideas/products/services had been tested and had generated a profit (sometimes when competitors from abroad had already started offering clones for much less). Many tech companies served that tiny minority that could afford their services. That minority de facto subsidized the Silicon Valley startups and corporations that were working on the next big (expensive) thing, The Chinese model, instead, was the exact opposite. The Chinese startup tended to target the lower middle class first. If Apple embodied the "higher-income-consumer-first" business model, Xiaomi embodied the "mass-market-first" business model; ditto for Uber versus Didi Dache. (India's Flipkart and Snapdeal were following the Chinese model).

By the same token, the Chinese Internet companies were more likely to invest in O2O ("online to offline") than their Western counterparts. Delivery was cheap in China, and the overworked Chinese consumers, armed with smartphones, could easily afford the price of home delivery. China also had a more fragmented business world of "mom and pop" stores. Solving the issue of "multipoint to multipoint" logistics was not terribly expensive in China compared with the Western countries.

China launched the Internet+ initiative in 2014 to bring online the countless small businesses who still weren't. An entire street of Beijing's Zhongguancun district (now affectionately known as "Z-Park") was renamed Innoway in 2014. A traditional hub of bookstores, it was turned into a hub of startup incubators, each disguised as a coffeehouse. Garage Cafe had already opened in 2011. Z-Park, home to success stories such as Baidu, Lenovo, JD and Xiaomi, incubated 13,000 new startups in 2014 alone, bringing the total to about 20,000 for a combined revenue of $500 billion. Other Chinese cities followed suit, especially those, like Hangzhou, that were blessed with a top-notch university. In 2009 Cyril Ebersweiler, a US software engineer who had designed the first ecommerce website for retail in China, founded the first Chinese startup accelerator in Shanghai, Chinaaccelerator, and two years later he founded in Shenzhen the hardware accelerator Haxlr8r (later renamed Hax). This high-tech corridor, running from Beijing to Shenzhen, began to replace the old centers of export-led manufacturing, the Pearl River Delta and the Yangtze River Delta.

In 2015 there were more than 500 million smartphone users in China. In 2014 Chinese smartphone users downloaded 185 billion apps (mostly gaming and shopping), 59% of all downloads worldwide.

Venture capital too was growing rapidly in China. In 2014 it grew more than 300% to $15.5 billion. Up until the mid 2010s there had been little motivation for Chinese startup to succeed in the USA because they had access to plenty of capital in China, because of the fast growing e-economy in China, and because of the high valuations for tech startups in China compared with Silicon Valley. In any case, venture capitalism was a young science in China. The Chuang Yeban, the Chinese equivalent of the NASDAQ index, had been inaugurated only in 2007. Before 2007 high-tech companies were de facto owned by the government. It was still a young science because venture capitalists were de facto discouraged from investing abroad: the government limited currency exports. Investments abroad were mainly carried out by large companies, most notably Lenovo's acquisitions of IBM and Motorola business, but also Alibaba invested in Tango, Lyft, Shoprunner, search engine Quixey and mobile gaming publisher Kabam; while Tencent invested in Snapchat and design website Fab, and LeTV invested in Atieva, a designer of electrical cars.

China was swept by a bitcoin mania that peaked in 2018. It started in a rather simple (if lucrative) manner with companies that specialized in "mining" bitcoins. Canaan Creative, founded in 2012 in Hangzhou by Nangeng Zhang, was the first company to manufacture ASIC chips for bitcoin mining (notably the Avalon chip). Their main competitor, Bitmain, was founded in 2013 in Beijing by Jihan Wu and Micree Zhan. Canaan and Bitmain rapidly became unicorns and provided a large share of the world's bitcoin mining.

Artificial Intelligence was very popular in China. iFlytek, originally founded in 1999 in Anhui province by Qingfeng Liu from the University of Science and Technology, became the leader in voice recognition ("China's Siri"). Megvii (short for megavision), founded in Beijing by Tsinghua University graduates (Wenbin Tang, Mu Yang and Yin Qi) launched Face++ in 2012, a tool for face recognition that was adopted by major platforms. In 2016 the Chinese government launched a program to make China the leader in A.I. This started a frenzy of A.I. startups such as iFlytek for voice recognition and Megvii for face recognition. In 2017 Chinese teams started winning most of the world's A.I. competitions. For example, in 2017 YITU, founded by Leo Zhu and Lin Chenxi in 2012 in Shanghai placed first in four of six categories of the Face Recognition Vendor Test (FRVT), organised in Silicon Valley by the National Institute of Standards and Technology (NIST). In 2018 SenseTime, founded in 2014 in Hong Kong by Tang Xiaoou, a professor at the Chinese University of Hong Kong, became the most valued A.I. company in the world.

At the end of the 2010s the biggest "next thing" in China was blockchain technology. Depite the fact that in 2017 China had banned all ICOs (initial coin offerings) and shut down all cryptocurrency exchanges, in the following two years China became the world's main champion of the blockchain. In April 2018 the city of Hangzhou established China's first blockchain-centered industry park. In May, China's president Xi personally endorsed blockchain at the annual conference of the Chinese Academy of Sciences, and at the same time China's state council ordered the provincial and municipal governments in the country to accelerate implementation of blockchain technology. In August the Chinese Communist Party website published a primer on blockchain technology, while the Bank of China announced plans to aggressively invest in blockchain technology. In September, China's central bank endorsed a blockchain-based trade finance platform. by November, China was leading the world with 263 active blockchain projects, and by the end of the year there were 615 blockchain startups in China. By June 2019, Chinese mining pools controlled over 70% of bitcoin mining. In October 2019, China's president Xi reiterated his desire that the country accelerate investment in blockchain technology. Of course, startups multiplied: Matrix AI Network, founded in 2016 in Hong Kong by Tsinghua University's computer scientist Steve Deng, combined artificial intelligence and blockchain; Hyperchain (or Hangzhou Qulian), founded in 2016 in Hangzhou by Li Wei and others, developed enterprise blockchain products; Jixin Blockchain, founded in 2018 in Hangzhou by Jianxiang Mo and Deng Feng, develops digital wallets; and Blockchain Academy, launched in 2018 in Hangzhou by former Alibaba scientist Jianxiang Mo and former Baidu scientist Haiyang Xu, offered blockchain training.

While China's success stories in software were many, the hardware industry was a different story. In the late 2010s, no Chinese firm (neither Innotron, founded in 2016 in Hefei, nor JHICC/ Fujian Jinhua Integrated Circuit Co, founded in 2016 in Fujian) could yet compete with Idaho-based Micron in DRAMs; no Chinese firm could compete with Intel in NANDs (China's most advanced NAND technology was made by YMTC/ Yangtze Memory Technologies Co, founded in 2016 in Wuhan, and it was comparable to Intel's NAND technology of a decade earlier); no Chinese firm (neither HiSilicon, founded in 2004 in Shenzhen, nor Rockchip, founded in 2001 in Fujian) could compete with Nvidia in A.I. chipsets (in 2018 Nvidia’s Tesla V100 GPU was capable of 120 trillion computations per second versus the 2.4 trillion of the best Chinese GPU); and China had no nanomanufacturing equipment comparable with KLA Tencor's and Applied Materials’s ones. Nonetheless, Cambricon, founded in 2016 in Beijing by two scientists of the Chinese Academy Of Sciences (Chen Yunji and Chen Tianshi), rapidly became a unicorn after it introduced the chip 1A, marketed as "the world’s first commercial chip for deep learning".

Self-driving cars became a hot topic after Google's A.I. system AlphaGo beat champions of weiqi (2016). Roadstar.ai was founded in 2017 in Shenzhen, Momenta was founded in 2016 in Beijing, and Plus.ai in Suzhou. TuSimple was founded in 2015 in Beijing to make self-driving trucks.

China's passion for electric vehicles dates to the early 2000s. In 2008 BYD (which stands for "Build Your Dreams"), founded in 1995 in Shenzhen to make rechargeable batteries, introduced the world's first mass-produced plug-in hybrid car. Weltmeister was founded in 2015 in Shanghai, Future Mobility (later renamed Byton), started by Daniel Kirchet, who used to lead Infiniti China, and Carston Breitfeld, who used to lead BMW's i8 program, opened in 2016 in Nanjing. In 2018 the Chinese government announced the national NEV (New Energy Vehicles) plan. Startups multiplied. By 2017, China was producing 50% of all electric vehicles made in the world (EU 21%, USA 17%, Japan 8%, South Korea 3%) China's production of battery cells for electric vehicles was 11 times that of the USA. By 2018 NIO, founded in 2014 in Shanghai by William Li and originally named NextEV, owned all the records of speed for electric cars.

Despite the similarities between Zhongguancun and the Bay Area, the culture shock couldn't be bigger when it came to the investors. Chinese venture capitalists liked what had already been successful: they invested in the copycats. Chinese venture capitalists liked what sold in China, which could be replicated only in immature markets. China's evaluations were astronomical, fueled by investors who had made money in other industries and who did not understand the technology.

The main drawback to Internet applications in China was the very slow speed of Internet connections (China ranked 82nd in the world at the end of 2014, according to Akamai), but slow Internet speeds in China were blamed on the "Great Firewall of China", the vast apparatus of censorship put in place by the government of mainland China mainly to fight (quote) "Western hostile forces", and not on technological backwardness. The Great Firewall of China, introduced in 2003 after five years of work (officially known as the "Golden Shield Project"), was blocking or at least limiting just about every Western social media (Facebook, Twitter, etc), the most popular Western search engines (such as Google), and many portals of general knowledge (from YouTube to Slideshare), not to mention millions of ordinary websites, thus depriving the Chinese population of valuable sources of information.

China was also the only country in the world that was successful at creating a domestic clone of whatever succeeded in the USA: Baidu instead of Google, Renren instead of Facebook, WeChat for chatting, Weibo instead of Twitter, Alibaba's Taobao instead of Amazon and Ebay, Didi Kuaidi instead of Uber, YouKu instead of YouTube, LeTV (founded by Yueting Jia) instead of Netflix, MoMo instead of OK Cupid, Tmtpost instead of the Huffington Post, and so on. Viewed from the outside this seemed like a grotesque show of copycats, and even the Chinese joked that the main high-tech business in China was C2C ("Copy to China"), but it had created bigger software companies than Europe or the rest of Asia ever dreamed of. The "X of China" syndrome had worked so well that the motivation for Chinese venture capitalists to back truly innovative startups was virtually zero.

A Timeline Of Asia's High-Tech Industry


1949: Japan's MITI is established as an architect of industrial policy
1954: Sony's transistor radio
1954: Fujitsu enters the computer market
1958: The USA forces Taiwan's regime to abandon plans to recover the mainland and focus on economic development
1959: Hitachi builds its first transistor computer
1961: Shigeru Sahashi becomes director of the Enterprises Bureau at Japan's MITI
1964: South Korea launches plan to improve exports
1965: Chinese physicist Kuo-ting Li becomes Minister of Economy in Taiwan ("the father of Taiwan's economic miracle")
Dec 1966: Taiwan's Ministry of Economy establishes an "Export Processing Zone" (EPZ) in Kaohsiung, whose tenant companies enjoy privileges but must export all their output
1967: Sony introduces the Video Rover, the first portable videotape recording system (the first "portapak")
1967: Japan's Casio introduces the first programmable desktop calculator, the AL-1000
1968: Singapore's plan to woe foreign multinationals
1968: Japan's Epson introduces the first digital printer, the EP-101
1969: Texas Instruments, National and Fairchild open plants in Singapore
1969: Shih Ming and Andrew Chiu found Taiwan's first semiconductor company, Unitron
1969: Japan's Seiko introduces the world's first commercial quartz wristwatch
1969: India's Tata appoints Faqir Chand Kohli in charge of computer services
1970: Japan's Sharp and Canon introduce the first pocket calculators
1971: Unitron's engineer Stan Shih designs Taiwan's first desktop calculator
1971: Busicom introduces the LE-120A Handy, the world's first pocket calculator
1972: Indian-born MIT-graduate Narendra Patni founds Data Conversion (later Patni) in the USA with back-office operations in Pune
1973: Taiwan establishes the Industrial Technological Research Institute (ITRI) to develop technologies that can be turned into goods for foreign markets
1974: Tata obtains a software contract from Burroughs, the first major software project offsources by the USA to India
1973: Japan's Canon introduces the first color photocopier
1973: Ichiro Kato's team at Waseda University in Japan unveils the first full-scale anthropomorphic robot in the world, Wabot-1
1973: South Korea establishes the Korea Advanced Institute of Science and Technology at Daeduk
1974: Tai-Ming "Terry" Gou founds the plastic factory Foxconn in Taiwan
1974: Japan's Hitachi produces its first IBM-compatible mainframe computer
1975: Azim Premji's Mumbai-based Wipro starts selling the first computer made in India
1976: Stan Shih and his wife Carolyn Yeh found the calculator maker Multitech (later Acer) in Taiwan
1977: 57 foreign firms, including IBM, dclose down their Indian plants rather than meet Indian demands for some degree of Indian ownership
1978: Deng launches economic reforms in mainland China
1978: Karnataka State's agency Keonics establishes Electronics City in Bangalore, India
1979: Mainland China sets up a Special Economic Zone (SEZ) in Shenzhen to experiment with foreign investment and export manufacturing
1979: Japan's Sony introduces the portable music player Walkman
1980: Japan's Sony introduces the double-sided, double-density 3.5" floppy disk
1980: Japan's Yamaha releases the first digital synthesizer
1980: Wipro, to fill a gap after IBM left India, hires Sridhar Mitta who sets up offices in Bangalore to make computers
1980: Taiwan's ITRI spawn the first startup, UMC
1980: The USA grants mainland China most-favored-nation status, i.e. access to US investors, technology and market
Dec 1980: Taiwan's minister Kuo-ting Li establishes the Hsinchu Science Park
1980: The largest semiconductor manufacturers in the world are: Texas Instruments, National, Motorola, Philips (Europe), Intel, NEC (Japan), Fairchild, Hitachi (Japan) and Toshiba (Japan).
1981: Taiwan's Multitech (later Acer) introduces its own computer, the Micro-Professor MPF-I
1981: Infosys is founded in Pune, India, by Patni employee Narayana Murthy
1981: Japan's Sony introduces the video camera Betacam, the first camcorder
1982: Japan's Sony introduces the compact disc
1982: The first biotech drug, Humulin, is approved for sale
1983: Japan's Sony releases the first consumer camcorder
1983: Japan's Nintendo launches the videogame console Nintendo Entertainment System
Dec 1983: Taiwan's Multitech (Acer) introduces one of the earliest IBM-compatible personal computers
1983: Japan's Seiko introduces the Data 2000 watch, the world's first smartwatch
1984: Stan Shih of Taiwan's Multitech (Acer) founds the research firm Suntek in Silicon Valley
1984: Fujio Masuoka at Japan's Toshiba invents flash memory
1984: Japanese firms introduce the 256K DRAM chips
1984: Liu Chuanzhi of the Chinese Academy of Sciences founds a privately-run but state-owned company, Legend (later Lenovo), to sell IBM's personal computers in China
1985: Taiwan hires US-based semiconductor-industry executive Morris Chang to run the ITRI
1985 Texas Instruments opens a software laboratory in Bangalore, India
1986: Taiwan's Acer, leveraging its supply-chain optimization strategy, releases the world's second computer based on Intel's 386 microprocessor (one month after Compaq)
1986: The Japanese government founds the Advanced Telecommunications Research Institute International (ATR)
1987: ITRI's president Morris Chang founds Taiwan's Semiconductor Manufacturing Company (TSMC), the first independent silicon-chip foundry in the world, to serve the "fabless" companies of the USA
1987: Ren Zhengfei founds the telcom-equipment maker Huawei in mainland China
1987: The largest semiconductor manufacturers in the world are Japan's NEC, Japan's Toshiba and Japan's Hitachi
1988: Foxconn opens a pioneering factory in China's experimental city Shenzhen
1988: China sets up the Zhongguancun Science Park outside Beijing
1988: Japan's Fujifilm introduces the world's first fully digital consumer camera
1988: Barry Lam founds Quanta Computer in Taiwan
1989: Singapore's Creative Technology introduces the Sound Blaster card for personal computers
1990: China's Lenovo introduces its first homemade computer when the market is dominated by IBM, HP and Compaq
1991: Wipro wins a software contract from a US customer that interacts via the Internet
1993: American Express outsources the management of its credit-card business to its Indian office led by Raman Roy, the first major project of business-process outsourcing to India
1991: The Indian government sets up the Software Technology Parks of India (STPI) to promote software exports and opens the first park in the Electronics City of Bangalore
1991: Japan's Sony releases the first commercial lithium-ion battery
1992: Japan's Fujitsu introduces the world's first mass-produced plasma display
1992: South Korea's Samsung becomes the largest producer of memory chips in the world
1993: Japan's Fujistsu introduces the fastest supercomputer in the world, the Numerical Wind Tunnel
1994: Japan's Sony introduces the PlayStation
1994: Alpha and Frank Wu found the contract manufacturer AmTran Technology in Taiwan
1996: Japan's Toshiba introduces the first DVD player
1996: Japan's Sony introduces the chip FeliCa for RFID technology
1997: The Octopus card in Hong Kong pioneers contact-less credit cards
1997: Japan's Toyota introduces the Prius, the first mass-produced hybrid vehicle
1997: Lenovo passes IBM to become China's main vendor of personal computers
1997: Japan's Panasonic introduces the first flat panel television set
1997: Cher Wang, the richest woman in Taiwan, founds HTC
1998: South Korea's SaeHan Information Systems introduces the first mass-produced mp3 player, the "MPMan"
1998: Tencent is founded in China by Huateng Ma and Zhidong Chang to develop the instant messaging platform Open ICQ or QQ
1998: A merger creates China's Sina and China's Tencent is founded
1999: Jack Ma founds Alibaba in China
1999: Singapore's Creative Technology introduces the Nomad line of digital audio players
1999: Japan's NTT DoCoMo ("Do Communications over the Mobile network" introduces the "i-mode" service that allows mobile phones to access a broad range of Internet services
1999: Alibaba is founded in China by Jack Ma, an English teacher with no computing experience
1999: South Korea's Samsung introduces the SPH-WP10, the world's first watch phone
1999: Lucent Technologies announces the first optical network switch
1999: Apple incorporates the first Wi-Fi card (made by Lucent) into a computer
2000: Japan's Casio introduces the WMP-1, the world's first watch capable of playing MP3 files, and the WQV, the world's first watch to include a camera
2000: Robin Li and Eric Xu launch the search engine Baidu in China
2000: Japan's Sharp introduces the J-SH04, the first mobile phone with a built-in camera
2000: Japan's Honda introduces the humanoid robot ASIMO
2000: Almost 50% of Japanese who access the Internet do so via a cell phone
2000: The foundry Semiconductor Manufacturing International Corporation (SMIC) is founded in Shanghai's Zhangjiang High-Tech Park
2001: South Korea's Hyundai spins off its electronics division as Hynix
2002: South Korea's Samsung is the second semiconductor manufacturer in the world after Intel, and Japan's Toshiba is third, passing Texas Instruments
2002: China's Suntech, founded by Zhengrong Shi, opens its factory of solar panels
2002: There are more than 2,000 startups in Seoul's Teheran Valley, and 69% of them are in IT
2002: Vizio is established in the USA to sell AmTran's television sets
2003: Between 1988 and 2003 high-tech ventures in Beijing's Zhongguancun grew from 527 to more than 12,000
2003: Sony introduces the first Blu-ray disc player
2003: Hitachi and Mitsubishi create the joint venture Renesas Technology specializing in microcontrollers (embedded chips)
2003: Asia produces about 40% of the world's IT goods and consumes about 20% of them
2003: Japan accounts for 21% of all patents awarded worldwide
2004: South Korea's Samsung is the world's largest OLED (Organic Light-Emitting Diode) manufacturer, producing 40% of the OLED displays made in the world
2004: Japan's Epson introduces the mirrorless camera
2004: Japan's Casio introduces the GWS-900 G-Shock, the world's first watch capable of mobile payment
2005: Taiwan's companies produce 80% of all personal digital assistants, 70% of all notebooks and 60% of all flat-panel monitors
2005: Lenovo acquires IBM's personal computer business
2005: Joseph Chen founds Renren in China
2006: Between 1993 to 2006 the number of new science and engineering PhDs increased by 24% in the USA, by 189% in South Korea, and by more than 1,000% in mainland China
2007: The world's largest vendors of personal computers are HP, Dell, Taiwan's Acer, China's Lenovo and Japan's Toshiba
Aug 2007: Taiwan's Acer acquires its US rival Gateway
2007: Japan's Hitachi releases the Deskstar 7K1000, the first 1 TB hard disk drive
2008: Japan's Sony unveils the world's first OLED tv set, the XEL-1, the world's thinnest tv set at just 3 mm
2008: China's BYD introduces the world's first mass-produced plug-in hybrid car
2009: Asia employs 1.5 million workers in the computer industry while the USA employs only 166,000
2009: Vizio, whose products are made by Taiwanese company AmTran, becomes the main tv-set brand in the USA
2009: South Korea's Samsung announces mass production of 512 Mbit phase-change memory
2009: Chinese solar panels account for about 50% of total shipments
2009: Taiwan's Foxconn (Hon Hai Precision Industry), becomes the world's largest manufacturer of electronics with revenues that dwarf Apple's and Intel's, employing 800,000 people
2009: India's Infosys sets up the largest corporate university in the world at Mysore
2009: China's Sina launches Weibo
2010: China's Tencent is the world's third-largest Internet company by market capitalization
2010: Xiaomi is founded in China
2010: Renesas acquires NEC's semiconductor division, becoming the world's largest manufacturer of microcontrollers (embedded chips) and the world's fourth largest semiconductor company
2010: Japan's Sony demonstrates a rollable OLED display
2010: Taiwan's Quanta Computer is the largest manufacturer of notebook computers in the world
2010: South Korea's Samsung introduces the smartphone Galaxy S
2010: Taiwan's HTC introduces the world's first 4G smartphone, the EVO
2011: Tencent releases the social networking platform Weixin/Wechat
2011: Tencent releases the social networking platform Weixin/WeChat for smartphones
2012: China's Huawei overtakes Sweden's Ericsson to become the world's biggest telcom-equipment maker
2012: Taiwan's Acer introduces the world's thinnest notebook, the Aspire S5
2012: China's Huawei overtakes Sweden's Ericsson to become the world's biggest telcom-equipment maker
2012: South Korea's Samsung sells twice as many smartphones as Apple and five times more than Nokia
2012: South Korea's Hynix merges with SK Group to form the world's second-largest memory chipmaker after Samsung
2012: The Tokyo Institute of Technology creates a robot that learns functions it was not programmed to do (based on Osamu Hasegawa's technology)
2013: South Korea's Samsung introduces the world's first mobile phone with flexible display, the Galaxy Round
2013: China's Tianhe-2 is the fastest supercomputer in the world
2014: China's Xiaomi is third behind Apple and Samsung in the mobile phone market
2014: China's Xiaomi doubles its revenues in just one year
2014: China's Alibaba sets a new world record with its IPO
2015: Japan's Sharp introduces the in-cell type touch display that combines LCD and touch sensor
2015: Softbank introduces the robot Pepper
2016: China's Sunway TaihuLight is the fastest supercomputer in the world
2016: Japan's Softbank acquires British ARM
2016: China's largest home appliances manufacturer Midea acquires Germany's leading industrial robotics manufacturer, Kuka
2017: Softbank sets up a a $100 billion fund to invest in AI and purchases Schaft and Boston Dynamics from Google,
2017: China's electric vehicle production is 50% of global production

Silicon Valleys in Time

If a historian specializing in technological evolution had examined the world a century ago, s/he would have never bet her money on a primitive, underpopulated and underdeveloped region like the San Francisco Bay Area. She might have picked a place in the USA (most likely Boston, New York or Philadelphia), but more likely a place in Western Europe, probably somewhere between Oxford and Cambridge. With 20/20 hindsight everybody has a theory about why it all happened in "Silicon Valley" (that for our purpose is really the broader Bay Area) but most of those theories are easily disproven if one studies other regions of the world: the same conditions existed somewhere else and to an even greater degree.

One needs to spend more time analyzing the previous cases of economic, technological and cultural boom. Three obvious candidates are Athens in the 5th century BC, Firenze (Florence) of the Renaissance and the eletrical Berlin of a century ago. There was little that made Athens truly special. Other cities might have succeeded better than Athens, particularly the ones on the coast of what is today Turkey that were the cradle of Greek civilization. However, Athens was probably the nicest place to live: the attitude of its citizens was different, somewhat eccentric for those times. Eventually it was that attitude that led to the invention of democracy and capitalism. I would argue that it was also that the real protagonist of Athens' renaissance was that attitude (harder to pinpoint than the wars and political upheavals that historians describe in detail).

It may have been easier to predict Firenze's (Florence's) ascent given that the city had been getting richer since at least the 12th century. However, who would have bet on a city state within a peninsula (Italy) that was mostly famous for endemic warfare? And if you had to pick an Italian city-state why not Venezia (Venice) that was creating a little empire (not surrounded by dozens of city-states like Florence was in Tuscany) and that constituted a crucial link between the superpower (Constantinople) and Western Europe? Again, what stands out is the attitude of the Florentines: if you liked adventure and innovation, it was nicer to live in Florence than in greedy, narrow-minded Venice, and eventually Florence did produce more liberal regimes and enlightened dictators instead of Venice's faceless dogi.

The "electrical Berlin" of the early 20th century came out of a black hole: Germany did not even exist 30 years earlier. Germany was the last place in Europe that was still politically divided in tiny medieval-style states the late 19th century. When Germany got unified, the spirit of unification certainly fueled nationalistic pride but, again, there was hardly anything special about German science and technology up to that point (there was indeed something special about German philosophy and German poetry, but one can argue it actually went against progress). What was unique about Berlin at that time was the enthusiasm of its population: the attitude, again, was indeed unique. In all three places it was the attitude (the spirit) of the population that was markedly different from the norm. In all three places that attitude rewarded the independent in ways that were not the norm, and it instituted a stronger degree of meritocracy than elsewhere.

The same might be true also for the San Francisco Bay Area. The great universities, the mass immigration and the venture capital (knowledge, labor and money) came later. What was already there was the spirit of the Frontier, the spirit of the eccentric independent explorer that later would become the hobbyist and the hacker.

 

Silicon Valleys in Space

There have been many attempts to recreate Silicon Valley in other countries. It was worth examining the ones in Western Europe that at the time led the world in universities, immigrants and capital.

France created Sophia Antipolis, a technology park in Southern France. First of all, it was created by the French government with a socialist-style centralized plan. The region has become a magnet for foreign IT companies that want a foothold into Europe, but hardly the creator of domestic startups that the Bay Area is in the USA. There are a few factors that make a huge difference: there is social pressure to join big corporations, not to start small companies; if you do open your own company, failure is terminal; very few foreign talents have been (permanently) attracted to the area; on the contrary many of the French talents trained there have emigrated to the USA where they did start the kind of company that they would not start in France. Note that, by all accounts, the quality of life in southern France matches if not surpasses the quality of life in California.

The Munich metropolitan area in southern Germany has become another high-tech hub. In this case the German government did not quite plan a Silicon Valley per se: it was the defense industry that brought advanced manufacturing to the area in ways not too different from how the defense industry bootstrapped Silicon Valley's high-tech industry. The advanced manufacturing that led to the success of companies like BMW transformed an essentially rural community in Bavaria into a high-tech hub. Here there are also excellent educational institutions: the Fraunhofer Institute and the Max Planck institute, that provide world-class public education. The quality of life is quite high by European standards (and the weather is much better than in most of Germany). The socialist underpinning here is represented by the fact that the main "venture capitalist" has been Bayern Kapital (an arm of the state government). The region has indeed spawned a varied fauna of infotech, biotech and cleantech startups just like in Silicon Valley. The region has also avoided the brain-drain that consumes most of Western Europe: relatively few German entrepreneurs and engineers have moved to the USA. However, this region too has failed to attract significant numbers of foreign talents.

Four factors made Germany completely different from the Bay Area. First of all, Germany's fundamental problem was the high cost of its labor (about ten times the cost of labor in China in 2010). Therefore the whole nation was engaged in a collective distributed project to devise ever more efficient ways to manufacture goods. Therefore both universities and corporations focused their research on innovating the manufacturing process, rather than innovating the products made through those processes. The German system is biased towards perfecting existing technology rather than creating new technology. RWTH Aachen spent billions of euros to create a technology park that specializes in just manufacturing techniques. Stanford's technology park was never meant for just one specific application of technology. Secondly, the relationship between industry and academia has always been different in Germany than in the USA. German corporations fund academic research that is very specific to their needs, whereas universities in the USA receive money that is generically for research. This means that the transfer of know-how from academia to industry is much smoother and faster in Germany than in the USA, but at the same time the students are raised to become workers and then managers in the existing corporations rather than start new creative businesses. Thirdly, Germany's big success story could also be a curse: Germany achieved an impressive degree of distribution of high education, spreading world-class research institutes all over its territory (the Max Planck Institute had 80 locations in 2010, the Fraunhofer Society had 60), but this also means that most of the bright scientists, engineers and entrepreneurs don't need to move to another city, as they can find a top-notch technological centers right where they live. Silicon Valley was mainly built by immigrants (from both other states of the USA and from abroad). It was one place where everybody converged to do high-tech because most of the rest of the country did not have the conditions that are favorable to the high-tech industry. Germany provides them almost to dozens of regions, therefore none of them can become the equivalent of Silicon Valley. Finally (and this is true for all of continental Europe), German industry has to deal with a strong anti-technological and anti-capitalist sentiment that was created over the decades by an alliance of socialists, environmentalists, hippies, philosophers, psychologists and so forth.

So far the main success stories of Europe have come from these regions: SAP (Heidelberg), ARM (Cambridge) and Nokia (Oulu). The European region that came closest to resembling Silicon Valley (although at a much smaller scale) was Oulu in northern Finland, where more than a thousand startups were born in the 2000s, most of them in wireless technology, but also in biotech, cleantech and nanotech.

Israel was, actually, the country with the highest venture capital per person in the entire world ($170 compared with $75 in the USA in 2010). Its startups focused on the military, communications, agricultural and water technology that were essential for the country's survival. Many of these startups were acquired by Silicon Valley companies. None of these startups managed to grow to the point of becoming an international player.


(Copyright © 2016 Piero Scaruffi)

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