Silicon Dragon: Google's China Blues

Silicon Dragon: Sillicon Dragon: Google's China Blues

Sillicon Dragon: Google's China Blues

Commentary: Google's China Blues
Rebecca Fannin, 12.21.09, 06:00 PM EST
Will the search giant shutter its local operations in China?
Rumors have been flying about Google's future in China ever since the company's China head, Kai-Fu Lee, resigned in early September to start an incubator lab in Beijing. His departure seemed awfully abrupt.
Lee scurried to set up an office for his incubator, raise a fund and assemble a team from thousands of job seekers. Lee's PR reps in China and the Valley hyped his new project as his fulfillment of a dream to coach young Chinese entrepreneurs and support their best start-up ideas.
My venture investing sources in Beijing and Shanghai suspected then that there was more to Lee's departure than was being told. Maybe Larry Page and Sergey Brin want to exit China and Lee knew this, my sources speculated. Certainly, the rush to the exit door by Google staff in Beijing since September suggests that.
Indeed, Google has been trying to become the top search engine in China for nearly a decade, without success. Google hasn't said it is shuttering its local operations in China, but the company plans to power its Chinese search business from its Mountain View, Calif., headquarters.
Why did the mighty Google fail in China? For years, the company fumbled with inferior search results and unreliable service, not to mention censorship issues and that annoying upstart Baidu, which raced ahead with innovative technology that had a search algorithm for generating results that were more relevant in Mandarin.
To compete with Baidu head on, Google set up business on Chinese soil, recruited former Microsoft exec Lee, and began to gain traction. Lee hired more than 100 Beijing-based engineers and linguists. The effort moved the needle on Google's market share to 31% in 2009 from 21% in 2007.
But Baidu couldn't be crippled. The Chinese search company widened its market dominance of Chinese search to 64% from 58%. Not only was Baidu considered superior to Google for Chinese search, the team led by founder and CEO Robin Li proved nimble and innovative at introducing new popular features.
For example, Baidu began offering mobile search in China in 2006. It took Google nearly a year to catch up. Baidu also was first to use social media for conducing searches. It beat Google to the market with video clips too.
It shouldn't be all that surprising to see a big American brand being one-upped by a local competitor. Indeed, the story of a home-grown Chinese start-up triumphing over an iconic Internet rival is by now a familiar theme.
Just like Chinese search engine Baidu trumped Google, online bookseller Dangdang outsmarted Amazon in China with better merchandising skills while Alibaba-owned Chinese auction site Taobao took the lead from eBay by giving sellers a free listing of their goods and charging only for premium accounts.
In all three cases, astute local managers who were attuned to the culture and able to gauge consumers' buying and surfing habits on the Web were able to grab first place.
What helped was being on site to respond to China's fast-moving marketplace rather than in a faraway office on the other side of the Pacific.
But Google had the formidable Lee in China building a strong team. Still, the company's efforts proved too little too late to grab market share from Baidu.
Who could really blame Google for shifting gears? The censorship of the Internet in China has been a big enough headache for Google, let alone competing with Baidu. It was tough for top management to agree to Chinese government censorship in order to do business in China. Moreover, Google's standard, English-language Google.com site has continually faced blockages and search directs to other sites.
Google faces major challenges in China that are not going to disappear anytime soon. Stay tuned for the next chapter on Google's saga in China. I wouldn't be shocked to see Google retreat from China.
Rebecca A. Fannin is an internationally recognized author and journalist who has been writing about entrepreneurship and innovation for nearly 20 years. Her book, Silicon Dragon, was published by McGraw-Hill in 2008 and translated into several languages. During the height of the dot-com boom from 1999-2001, she was international news editor at Red Herring, later joining the Asian Venture Capital Journal as international editor and writing for several leading business publications, including Inc., The Deal, Worth, CEO and Fast Company. She also authored "A New Dawn" for KPMG in 2009. Fannin has lectured at several universities in Asia and the U.S., and has made numerous public speaking appearances worldwide.
See Also:
The Man Who's Beating Google
Google China Will Lose Head, Gain Bodies
Why China Will Win The Web

Silicon Dragon: Turning Down Google

Silicon Dragon: Turning Down Google

Turning Down Google

Commentary, Forbes.com
What entrepreneur in his right mind would turn down an acquisition offer from Google? Nguyen Xuan Tai, the chief executive of Vietnamese-language search site Socbay, did. He is 26 years old and has no regrets. The self-described PC addict and programming whiz who grew up poor in northern Vietnam has made the gutsy decision to compete with Google.
The way Tai sees it, Eric Schmidt offered him about half what his start-up, formed in 2006 with classmates from the Hanoi University of Technology, is worth. He figures Google may eventually come back with a better deal as a short cut to developing a Vietnamese-language site.
Socbay isn't profitable yet, and operates out of a spartan office in an unfinished building in Hanoi alongside home-made servers. (See photo of Tai with Silicon Dragon's author.) Tai and his venture investors are betting that Socbay can break even within three years by focusing on search over the mobile Web--an area that Google doesn't dominate in Vietnam--and by refining Vietnamese-language search as local content on the Internet expands.
Tai has a chance. Doing local language search isn't simple, as Google discovered in China. And Chinese entrepreneur Robin Li of Baidu beat Google in the mainland. He too turned down an offer from the giant rival, back in 2005, before taking his start-up public.
The tech entrepreneurial spirit in Vietnam reminds me of the super-charged scene I've witnessed in China over the past decade. Many of the same forces--a young, switched-on population, a dedicated group of venture capital investors eager to fund enterprising start-ups, and a fast-expanding marketplace newly opened to commerce--provide a good base.
A digital communications revolution is underway today in formerly war-torn Vietnam. Of the country's 86 million people, a relatively high 26% have access to the Internet, 3 million surf the Web with broadband, and 32 million have a cellphone--with third-generation mobile service coming soon.International venture capital firms naturally have arrived to finance the same kinds of Internet, mobile and gaming start-ups they profited from during the earlier dot-com boom in China (including Baidu, Alibaba, Tencent, Focus Media, Shanda).
Since IDG Group Chairman Patrick McGovern opened IDG Ventures Vietnam in 2005, his firm, which made millions from investing in scores of China start-ups at an early stage, has backed 40 Vietnamese start-ups--including Socbay--from a $100 million fund. (See photo of yours truly with IDG's Henry Nguyen in the Ho Chi Minh City office.) Two other investors from well-known groups busily seeding Vietnamese start-ups with capital are Softbank China & India Holdings and DFJ VinaCapital Technology.I recently had lunch in Hanoi with CEO Nguyen Hoa Binh, 28, a programming ace who started online marketplace Peacesoft in 2001 as a second-year undergrad student at Vietnam National University in Hanoi and later earned a master's from Osaka City University. His fast-growing business, funded by IDG and Softbank, has more than 500,000 registered users, with a goal of 1 million by next year--boosted by an escrow-based online payment service in a market where credit cards and bank transfers aren't common. He was traveling the next day to Shanghai for a meeting with eBay about a possible investment deal to follow up on the partnership they'd formed the year before.
In a Ho Chi Minh City office near the Saigon River, I interviewed another Vietnamese entrepreneur with a story that has echoes of China start-ups in it. Nguyen Thanh Van An, 37, is the chief executive and founder of Internet bookstore Vinabook.com, a clone of China's online bookseller Dangdang.com--itself a version of Amazon.
He's grown Vinabook to 200,000 customers in five years, and following the lead of Dangdang, aims to become his market's leading online retailer, selling not just books but also software, movies, music and calendars. He's dealing with logistics and deliveries headaches, and handling them in similar ways to Dangdang. Books are delivered by moped, and most customers pay by cash.
Next stop: VinaGame, a $50 million in revenues, profitable business that runs the country's leading gaming and social networking sites. It's being geared to become Vietnam's Tencent or Shanda, two runaway success stories from China's early start-ups.
An avid gamer, Le Hong Minh, 32, started VinaGame in 2004 with other players after getting an undergrad degree in finance from Australia's Monash University and giving up his investment banking career. His start-up, housed in a warehouse decorated with colorful posters of VinaGame's blockbuster hits, (see photos) is upbeat and reminds me of the funky spaces I've seen among leading Web businesses in China. The culture is based on Silicon Dragon entrepreneurship--it has venture capital funding, all employees have stock ownership and the team is like a family, even going on annual camping expeditions together.
The next step? Of course, Le says he's going to take the company public within a few years, ideally internationally so he can benchmark with the best in the business globally.
To go to Forbes column, click:
http://www.forbes.com/2009/12/09/vietnam-google-socbay-intelligent-technology-fannin.html

Why he said no to Google: See YouTube

Watch the video interview I did with the founder of Socbay, Vietnam's Google. Hear why the gutsy entrepreneur who turned down an acquisition offer from the search giant. Click: http://www.youtube.com/watch?v=-hhp6rerk8Q

Why VCs like their veggies in China

My latest column in Forbes examines why venture capitalists prefer "veggies" in China.
Enjoy: http://www.forbes.com/2009/11/23/silicon-valley-china-intelligent-technology-venture-capital.html

Silicon Dragon: 3 variations on a Hong Kong hotel theme

Silicon Dragon: 3 variations on a Hong Kong hotel theme

3 variations on a Hong Kong hotel theme

Silicon Dragon keeps exploring new frontiers and continues to come up with new hotels to recommend--this time for executive travelers on a budget to the jet set on an expense account. The most recent explorations took place in Hong Kong.
Let me start with the low end and work up. The newly opened Harbour Plaza 8 Degrees makes up for its out-of-the way location in Kowloon (close to the old Kai Tak airport) with hospitable service, starting with marketing communicatons manager CeCe Hoang (pictured above, who pinch hits as duty manager as she was when I stayed there. And talk about going beyond the call of duty! She bought my book and asked me to autograph it. Back now to the hotel, which is still working out some kinks, like designer-ish faucets that send water sprays over the top of the equally designer-ish sinks. There's also some raised number lettering on the doors that is so sharply easeled it can cut. These are minor issues in an otherwise sleeky designed hotel, and CeCe assures me they're being fixed. In fact, she's making a list of all the guests' feedback to send to the hotel management. One thing that definitely does not to be fixed is the plentiful breakfast and dinner buffets here at the ground-floor cafe. Some highlights of the hotel include a hideaway terrace bar overlooking an outdoor pool with a waterfall and the well-equipped fitness center. The executive lounge wasn't opened yet when I was there, but work was underway for completion soon. Once the old Hong Kong neigborhood gets more developed--and it will now that the airport has been moved to Lamma Island--the Harbour Plaza will be an excellent affordable choice. Until then, the hotel's shuttle service to the nearest ferry, metro and commercial area will do just fine.
Next stop was the Mira Hotel, also in Kowloon but in the heart of Tsimshatsui. More for the fashion crowd, the Mira is over-the-top with design elements. My first impression wasn't so good when I was put in a smoky-smelling room with no view. But a word with the club lounge staff and presto, I found myself in a smoke-free room with a view of Kowloon Park, where I watched Hong Kong'ers doing morning tai chi. One irk: housekeeping staff who didn't observe do not disturb signs.
Many rooms forget that executives traveling on business need to have comfortable desk chairs, but not the Mira, thankfully. It was fun staying at the Mira and commuting by Star Ferry to business meetings across the harbour.
I am saving the high-end option for last--the recently refurbished landmark Mandarin Oriental hotel. What can top a spacious room with a view of Victoria Harbour, a rendezvous in the Clipper Lounge, or the old-world British flavor of the place--down to afternoon tea or a night-cap of whiskey and cigars at The Chinnery. That's why the place continues to attract the well-heeled from all points of the globe. A check of the spa upstairs showed it hopping with both male and female guests who didn't mind splurging a bit more on themselves. Another great thing about the hotel: the fact that you can access the elevated walkways that lead directly into Hong Kong's finest designer boutiques. Of course, shopping isn't for everyone, and I prefer to use the walkways as a short cut to the in-town flight check-in and the 22-minute express train to the airport. You can't beat Hong Kong for mass-transit infrastructure.

Silicon Dragon: Why 3 VC investors still love China

Silicon Dragon: Why VC investors still love China

Why NEA, IDG and WI Harper still love China

Let me count the reasons why venture investors love China. Or better yet, hear it directly from Scott Sandell, David Lam and Hugo Shong. I caught up with them at AVCJ's annual forum.
Here's Hugo Shong of IDG explaining why he's keen on the new RMB funds that are rapidly emerging in China.
http://www.youtube.com/watch?v=DXaAOEFzBC4

And David Lam of WI Harper describing two of his firm's hot cleantech deals in the Mainland.
http://www.youtube.com/watch?v=DGv7emcakqU

Here's Scott Sandell of NEA chatting about why he may move his family from Silicon Valley to Shanghai for a year or two. It's not just to advance his career!
http://www.youtube.com/watch?v=dF9FE_nkDPw

I recorded these videos with my Flip camera -- thanks goes to Jim Boettcher of Focus Ventures for introducing the cam to me. Jim was an investor in Flip and made a lot of $ with that deal!

Silicon Dragon: Tell-tale signs of tough times

Silicon Dragon: Tell-tale signs of tough times

Tell-tale signs of tough times

It's been a tough year in the Asian private equity community, and it shows! The AVCJ awards dinner at the China Club was a time to celebrate those who survived and achieved against all odds. But the mood was not very uplighting.
Stephen Roach of Morgan Stanley Asia set the tone with a speech about how a V-shaped economic recovery will be hit by four headwinds: the remaining half of the toxic assets still to be written down, the breadth of the downturn globally, an inability of China and India to boost the global economy by making up for a slowdown in U.S. consumer spending, and China's continued reliance on a boom to bust export-led economy. He encouraged those gathered to enjoy the night's food and wine because "it's not going to get any better soon."
On with the show: awards for best in the business, with a few asides. Picking up an award for private equity professional of the year, Jean Eric Salata of Baring Private Equity Asia took a look at his photo displayed on the screen, and couldn't help but remark about his thinning hair line. George Raffini of HSBC, collecting an award for lifetime achievement, also commented on his photo, where he sported brown hair, not the mostly grey today. It could be that photos used were out of date. But I think it's probably just a sign of how tough the business has been over the past 18 months.
Moving on, the venture capital of the year award went to Andy Yan of Softbank Asia Infrastructure Fund. It's interesting to note that three of the five contenders for this trophy have Softbank in their careers. I think this says a lot about the venture empire that Softbank's maverick investor Masayoshi Son has built.
PS: Dan Schwartz (photo above) did not leave the event empty-handed. Though a nominee for the lifetime achievement award for his "lifetime's work in Asian private equity," the former publisher of AVCJ got a trophy, naturally enough, for publisher of the year. That brought smiles to those gathered, including those insiders (AVCJ publisher Allen Lee, for one) who master-minded the show. It's always good to have some light-hearted fun at these industry events, as Qiming's Gary Rieschel, who was taking bets on the winners, knows all too well.

Forbes: Beware Sand Hill Road

In case you missed this, here's my debut Forbes commentary on tech. Here, I comment on how Sand Hill Road is losing its thunder to Chinese tech hotspots--and why. After more than 10 years covering emerging tech trends globally, I'm bound to have formed some opinions and viewpoints. So here goes. Click on
http://www.forbes.com/2009/11/06/china-kaixin-baidu-intelligent-technology-fannin.html
As usual, turn to the Asian Venture Capital Journal, better known as AVCJ, www.avcj.com, for my regular news coverage of tech and venture (and some other topics too!).
Happy reading! Rebecca

Silicon Dragon: Kai-Fu Lee & Peter Liu

Silicon Dragon: Kai-Fu Lee & Peter Liu

Kai-Fu Lee & Peter Liu

Now that many venture capitalists in China are no longer funding young companies, it's little wonder that there's room in the market for initiatives like Kai-Fu Lee's Innnovation Works. The incubator lab will seek to identify and nurture winning ideas among young Chinese entrepreneurs, and the best among them will have a chance to be funded by Innovation Works and its backers, which include Chinese venture capital firm WI Harper. Wonder if we will see more types of companies like Maxthon, the China-based web browser that Peter Liu of Harper funded a few years ago? I'm also wondering how the link-up with Harper will impact the lab's ability to work with other venture firms to tap the best startups.
Lee has considerable connections and knowledge of the Chinese entrepreneurial scene, and his backers -- Liu as well as Steve Chen of YouTube and others entrepreneurial leaders -- are equally well suited for the task. But amid all the press and PR about the new venture, questions continue to swirl around about what Lee's move means for Google China, and why he's leaving now. The fact is that he was not able to move the market share needle much against local search competitor Baidu. Even so, his departure from Google China is likely to mean Baidu may gain an even stronger advantage.

Silicon Dragon: China lessons

Silicon Dragon: China lessons

China lessons

After following venture investor Lip-Bu Tan of Walden International for more than a decade now, I found it interesting to hear him talk about how he might have done things differently. At a recent China 2010 panel discussion at the Churchill Club, Tan says the number one lesson he learned in 20+ years of Chinese dealmaking is the importance of going local. These days, Tan is spending one week every month in Beijing. He's also made sure to hire local Chinese who can get into the inner circle with other dealmakers and importantly, government officials. Interestingly, Tan found that bringing in talent from Hong Kong or Taiwan didn't work well in China. But, hiring a Caucasian manager who could speak Chinese DID work. Tan surmised that's because there's a fascination in China with westerners who can speak the language better perhaps than even he -- a native Singaporean -- can. This made some folks in the crowd wondering what role they might have in China. See CNReviews post by Silicon Valley mover and shaker Elliott Ng.
PS: Tan is looking noticeably relaxed despite the fact that he now holds two jobs at the same time. Not only does he still lead the team at Walden, but he's the head of Cadence Design Systems.

Silicon Valley Takes Off its Blinders

Silicon Dragon: Silicon Valley Takes Off its Blinders

Silicon Valley Takes Off its Blinders

It’s taken a long time, but Silicon Valley has finally taken off its blinders and recognized that there are other tech clusters out there. Today, nearly every venture capital firm along the famed Sand Hill Road is in China, India – or both. Bring up the topic of Asia tech today in the Valley, and it’s no longer an instant conversation stopper.
It’s with good reason that Valley investors are no longer in denial. Chinese and Indian startups offer venture investors an opportunity to cash in big. Over the past four years, 14 Chinese tech startups have gone public with market valuations of more than $1 billion on the NYSE, NASDAQ and the Hong Kong Stock Exchange. That compares with 11 tech startups in the same league from the U.S. India, meanwhile, is coming up fast, with recent bull runs and acquisitions of its Internet and mobile communications startups.
Venture capitalists may be optimists but they look at hard numbers to gauge where to place bets. An analysis recently shared with me by a top-tier venture firm made this telling point: it takes 12 times more dollars and five times more deals to generate the same investment returns from U.S. startups as it does with China startups.
Talk of Asia tech is no longer a turn-off in the Valley for another key reason – China and other Asian upstart nations are emerging as innovation powerhouses. Consider that China moved to 6th in the world in 2008 – up from 10th place just three years ago -- for the number of new patents applications, with a Chinese company, Huawei Technologies, in the lead spot last year among all corporations globally. Moreover, India too is in the running, and already ranks third among developing countries on the patent scale.
So it’s little wonder that these two giant Asian economies also capture the bulk of venture capital investment in Asia. In fact, China weighed in with 41 percent of the $23 billion that venture capitalists invested in the region last year, while India captured 38 percent.
Now I’m not saying that Asia has a lock on future innovation. Far from it. In fact, the U.S. still reigns as the biggest patent force in the world – with about one-third of all new patent applications. And the U.S. remains the biggest venture investment market globally, too – with nearly $29 billion invested in startups businesses in 2008.
But as innovation goes global, the U.S. lead is being chipped away. Suddenly, the talk is about whether Silicon Valley still has “legs.” Sure it does, but America’s share of global investment has slipped to 68 percent of $42 billion in 2008, from 71 percent in 2005.
The venture capital business in the U.S. now faces a low point. Investment returns have dropped by 58 percent, as few startups go public or get acquired in the tough economy. Venture firms are downsizing, and the industry is in meltdown as fewer players can raise new funds – with their own investment backers such as the giant pension funds struggling with massive declines in net assets.
The silver lining of this downturn is that it’s a good to invest. Microsoft and Apple came out of the mid-1970s recession, and major new tech brands will emerge from this bleak period too. Just don’t be too surprised to see some of tomorrow’s new brands developing from China and India.
China and India already have passed the copycat stage – where Chinese and Indian versions of eBay, Google, Monster, Yahoo, Amazon, Travelocity, Facebook and MySpace were launched. China’s trading site Alibaba and the $3,000-priced Tata Nano car are but two examples of Asian brands that have global impact. Now, investors from Silicon Valley are looking not just to the U.S. tech hotspots but also China and India to generate the next double-digit investment returns – from clean tech and biotech to new types of ‘killer aps’ on mobile phones.
The stakes are high. Just consider this one fact alone: superstar startups Microsoft, Apple, Google and Starbucks created 10 million jobs for the U.S. economy. Today, technology from China and India is an engine of their own nation’s growth – one more indication of a shift in economic power to the east. – Rebecca A. Fannin

Forbes, WSJ shine on Silicon Dragon

Silicon Dragon: Forbes, WSJ shine on Silicon Dragon

Forbes, WSJ shine on Silicon Dragon

The fog has lifted and the sun is shining in the San Francisco Bay Area. Check out the Forbes Q&A interview: Silicon Dragon reawakens. And the Wall Street Journal link to the post too:

Silicon Dragon: VC scoop-thanks, Joe

Silicon Dragon: VC scoop-thanks, Joe

VC scoop-thanks, Joe

Veteran Chinese dealmaker Joe Zhou sent me an email to share news that his new China fund, Keytone Ventures, has raised $200 million--in the wake of a challenging fund raising cycle that has spread to once over-heated China, with first-half 2009 funds at $1.8 billion, down from the $6.6 billion raised during the first six months of 2008.
I've been closely covering Joe's career moves for more than two years now since he opted to team up with Kleiner Perkins China in 2007, and then bailed in early 2008 over incompatible deal-making styles. Joe already has seven investments in the Keytone portfolio, deals that he originally sourced while at KP China. UPDATE: The fund has 20 limited partners, Joe tells me, and one-quarter of them overlap with those at KP China. Also, China-focused fund of funds Jade Invest is one of the limited partners. So is European pension fund Industriens Pension. Interestingly, one-quarter of the LPs overlap with those at KP China's inaugural fund of $360 million.
Keytone is one of the few foreign capital funds without a link to a top-tier firm from Silicon Valley. That is probably a good thing, since many of the Valley funds in China--Sequoia Capital included--are struggling. KP China, meanwhile, has been rebuilding its team and portfolio.

Silicon Dragon: Taiwan tech tour-Southern style

Silicon Dragon: Taiwan tech tour-Southern style

Taiwan tech tour-Southern style

The next episode of the Taiwan tech tour takes place in the Southern Taiwan Science Park. I arrived at the Tainan train station by high-speed rail from Hsinchu (the science park to the north) and a 20-minute highway ride past factories. Only operating for six years, the southern park is newer and smaller than Hsinchu. It's also pursuing a different area of tech--cleantech. Even so, the park is home to 13 integrated circuit companies, 48 optoelectronics producers, 23 in the biomedical area, and 48 in precision machinery along with numerous government-backed research and development centers.
In the lobby of the science park, I had a chance to check my email and do some twittering before I was treated to a Chinese dinner by the Director-General of the park, Dr. Chen Chun-wei and his staff (see photo).
We talked about his goal of attracting more greentech companies to their site, which is in the countryside between Tainan and harbour city Kaohsiung. Among the lures are low-interest bank loans, no business taxes on exports, and a five-year income tax exemption for certain products deemed strategic. Since the park is new, there isn't much of a community base here, though there is a shopping mall and some restaurants.
For lodging, it was to Tainan city, where I checked into the contemporary Tayih Landis Hotel. Spacious rooms, free Internet, a tasty breakfast buffet and to top it off, a fully equipped gym situated on the fifth floor of an atrium. Not much time to work out though. After filing some stories in the early morning, I did a little sightseeing of Tainan's historic sites--the old fort, the ancient building covered in tree roots and limbs--and paused long enough for a tasty luncheon at a joint known for its shrimp rolls. See my plate. I ate nearly everything too, and wasn't hungry for a day afterwards!
Ok, next stop--Motech Solar. Here, I met with the general manager, Chang Kuo-en, for a briefing on the company's progress.And it has been substantial! Motech Solar, which started in Tainan in 1999, is today's the world's eighth largest solar cell manufacturer in the world. It was ranked sixth just last year, but Mainland Chinese producers are coming up fast. Besides its four plants here, Motech also has a so-called "fab" near Shanghai. With revenues nearing $800 million for 2008 and sales evenly divided among the U.S., Europe and Asia, Motech is Taiwan's top solar cell producer with a 51 percent market share. It also owns a plant in Pennsylvania (the former US Steel factory turned into an alternative energy command post!) that I will drive by on my annual trek to Ohio for July 4th festivties and fireworks. Having mastered vertical integration, naturally the company's next goals are to drive down costs and build up power efficiency to as much as 1 Giga-watt (per cell?) As a going away gift, I got a nifty business card holder with a cover design of a solar panel. Before departing, I also had an opportunity to shake hands with the company's chairman and CEO, Dr. Simon Tsuo. Final note: does every tech exec in Taiwan have a PhD?

Taiwan Hot Springs

The weekend before my tech tour of Taiwan began, I luckily got to experience the hot springs at the Hotel Royal Chiao Hsi, in the northeastern village of I-lan. Here, just an hour drive and a 14-kilometer tunnel passage from Taipei, I recovered a bit from jet lag, and also found a way to write stories from a Zen-like resort that doesn't offer a writer's chair or desk. It's decorated in Japanese futon style so you can imagine the kind of arrangement I had for writing. I was up Sunday morning at 5 for a delightful hike along the mountain stream that feeds the hot springs--and spotted these locals photographed taking a refreshing swim. Only some stray dogs along the path cut my journey short. I was the only westerner there among the tourists, but that just added to my R&R. The resort, which is newly opened, also offers a spa and a ladies' only bathing spot, but no time for that, unfortunately. I'll be back, I promise!

Silicon Dragon: Taiwan Tech Tour-Hsinchu

Silicon Dragon: Taiwan Tech Tour

Taiwan Tech Tour-Hsinchu

I've recently returned from a wonderfully productive trip to Taiwan, where I had the opportunity to check out what this island nation is contributing to our tech future.
Not only did I meet with CEOs of some of the leading technology companies in Taiwan--semiconductor giant UMC, networking equipment company D-Link and PC maker Inventec-- but I also had the chance to interview several entrepreneurs of up and coming companies.
Did I find much original breakthrough technology? Some. Indeed, the venture capitalists that I interviewed--from YK Chua from WI Harper and Ben Yang from Pacific Venture Partners--are finding it difficult to find new startups to support financially. Many venture capitalists in Taiwan have started to invest in deals across the straits instead, in Mainland China. Still, I did get to visit with two entrepreneurs who claim they have breakthrough discoveries in the field of light-emitting diodes.The first, photographed here, is Jeffrey Chen, CEO of NeoPac Lighting. My driver had a tough time finding the firm, on a side street of Chubei City near Hsinchu Science Park--Taiwan's equivalent to Silicon Valley. But once there, I was treated to a bright display of the firm's LED lights, which shine for up to 50,000 hours with less power. By the way, Chen has a wall of patents in his office to show for his work.
It was unfortunate that we were rushed for time. I didn't want to keep the director-general of the Hsinchu Science Park, Dr. Randy Yen, waiting. He told me that today the science park houses the two largest semiconductor producers in the world, TSMC and UMC, in addition to leading IT design house Mediatek. But it wasn't always that way.In fact, in the early years of 1980s, Taiwan had intentionally copied the Silicon Valley tech model but had trouble attracting firms. It wasn't until 1989, Dr. Yen said, that the government adopted a policy to foster the development of the so-called integrated circuit business. Once the PC took off soon thereafter, the foundries ramped up quickly. Now that sales are slowing with the financial crisis, the science park is developing a biomedical campus, just a 15-minute drive away on the other side of the river. Right now, these companies generate less than 1 percent of the park's revenues, but Dr. Yen predicts it has "great potential to grow," developing new drugs and medical devices.
Later that same day, I interviewed another entrepreneur--Trung Doan--whose firm SemiLEDs has figured a way to make LEDs on copper, not the typically costly material, sapphire. The company has more than 60 patents for the process, which makes those little LEDs relible, high quality and and low cost, according to Doan. Strange but true that this startup has $10 million in funding from the Simplot family of Idaho potato fame! How? Chips and chips? No, not really. Well, Doan tells me he immigrated to the states in 1975 from Vietnam to earn an enginneering degree from UC-Santa Barbara and work at a series of tech firms in the U.S. and Europe, and eventually settled in Boise, working at Micron (which got its start thanks to Simplot). Doan said he chose Taiwan to base his current operation because of the goodies that were offered--no tax for the first five years, and great infrastructure at the Hsinchu Science Park. So far, so good. The company is selling 5 million units per month and chalked up revenues of $16 million last year with a team of 230 people.

Silicon Dragon: treats in Beijing

Silicon Dragon: Silicon Dragon has fun in Beijing

Silicon Dragon has fun in Beijing

Ok, I admit to having a little fun during my recent trip to Beijing. For one thing, I had a chance to stay at the new Park Hyatt and check out the gym, the high-tech toilets (yes!), and even attend the opening of the hotel's spectacular new rooftop bar, Xiu. There I heard a Canadian band performing western rock tunes, in China. See photos. I wondered why the Hyatt didn't hire locally, but then again the band was superb and they'll be there for another few months.
What did I like about the hotel? The wrap-around, picture windows that offered a 360 degree view of Beijing--and on a long holiday weekend, when the air was exceptionally clear. I saw the mountains that ring Beijing! Stunning. I also liked having breakfast on level 66--that's the top floor of the Hyatt. The reception, by the way, is on the 63rd floor.
What is also great about the Park Hyatt is its location. It's at the intersection of two main thoroughfares in Beijing--the East Third Ring Road and Chang'an Avenue.
This is the most popular business meeting area in town, with convenient access to the airport from the newly opened Subway line 10. Several of the people I wanted to interview came to meet ME at the Park Hyatt, and we sat in the lounge chairs, chatting on the 63rd floor, undisturbed. I even did some video interviews there with Silicon Dragon subjects. I'm used to doing all the treks to their offices, so this was a pleasant change and could spoil me for future visits.
What I didn't like about the Park Hyatt is the elevators, or lifts. To get to my hotel room on the 46th floor, I had to take one bank of elevators to reception, round the corner and take another elevator down to reach my floor. Going to the main gym and spa requires similar maneuvers. Anyhow, it's not a big deal, but IS a time waster.
The rooms are light and airy with several special touches like the rain showerhead and the deep soaking tub, as it's called. I particularly liked the walk-in dressing room, the mood lighting and the electronically operated blinds--fully open! Everything with high-tech worked well in the room--flat-screen TV, high-speed Internet connections, DVD. I bring this up because usually there is a problem figuring out how everything works (or doesn't), even in a five-star luxury hotel.
Business guests who really want to wow a would-be client might consider inviting them to a meal in one of the level 5 private dining "suites"--some with their own terrace. Here, guests can select from traditional Cantonese cuisine, and be catered to by their very own butler. Talk about being spoiled!
Lest you think that's the only fun I had, I did venture out one summery night to have dinner at a new restaurant, aptly named The Meat and Wine Co. My taxi driver had some trouble finding the address, Ch'ien Men 23. Understandable, because it's the former site of the stately U.S. Embassy compound transformed into a restaurant and bar complex. Memorable tasting times: the New Zealand pinot noir and the extra-tender steak I just couldn't resist ordering.

Silicon Dragon: Nanjing: Life Science Valley?

Silicon Dragon: Nanjing: Life Science Valley?

Nanjing: Life Science Valley?

Most people know Nanjing as the site of the Japanese invasion during World War II and subsequent Nanking Massacre. But few realize that Nanjing, an eastern Chinese city of 8 million located along the Yangtze River, is today angling to be known as "the famous software city of China" - to quote promotional materials from the Nanjing Municipal People's Government. Granted, a lot of Chinese cities from Shenyang to Hangzhou are vying to become hubs for information technology, particularly cities like Nanjing and Shenyang that have long had industrial economies.
I recently had the opportunity to to make my own assessment of Nanjing's prospects as a Silicon Valley. Invited to join a delegation of business executives and investors traveling from the U.S. to check out the city's high-tech ecosystem, I spent several days in this historic city that has served as the capital of China through several periods, including when the Republic of China was founded in 1912 by Sun Yat-sen and later, in 1927, under Chiang Kai-shek and the Kuomintang.
I toured the Sun Yat-sen Mausoleum, climbing endless steps to reach its perch on Purple Mountain above a vast forested park. And I peeked in rooms of the Presidential Palace, situated downtown near an ultra-modern building that houses the city's library.
But most of the time in the city was spent exploring the Nanjing High-Tech Zone, which was established just 10 years ago, and a newly opened biomedical business development center there. See photo taken at the opening ceremony, held in the ballroom of the five-star Jin Ling luxury hotel, where we listened to a translated Chinese speech by Zhao Xiaojang, Nanjing's deputy mayor. At a Chinese luncheon banquet to celebrate the opening, seemingly endless ganbei toasts were made by party officials, high-tech execs and the visiting delegation - which by the way included some who's who firms in U.S. investment banking leagues. A charm offensive meant to facilitate more such exchanges was launched by both sides, with individuals circling around the tables, saying they are all friends and downing the potent Chinese liquor baijiu in one shot to show they meant it. One stand-out example of grace under pressure - particularly for a first-timer to China - came from New York businessman James Gomez who spoke of "cooperation for common benefit" and praised one party secretary in attendance for "great vision."
While most of the delegation was jet-lagged, having arrived on a flight from New York City the night before, we trudged off in the afternoon to tour the still-unoccupied offices of new anchor tenant - NJ Pharma Tech Corp. of Raritan, N.J. CEO Chuck Zhu showed us around. He told of the reasons why he decided to base his operation there, key among them the abundance of talent from 48 universities and colleges in Nanjing, including three even within the 82 square kilometer zone, to staff his budding operation. He has the company of 200 enterprises, including 50 high-tech outfits, that have already set up here. Indeed, the high-tech park is a miniature city with its own international school, two hospitals, three supermarkets, banks, a golf club, hotel resort, villas, gardens - and what else could you want (though Nanjing is known as one of the three furnace cities of China for its soaring summer temperatures). The high-tech park is so new that freshly planted trees look more like shrubs. While impressive compared to many such zones in the Valley, I must admit that it pales next to the mammoth software parks I've visited on the Pudong side of Shanghai. The Nanjing park could use better rail transport links to the city, which are coming by 2015, and some in the delegation pointed out the tech zone, at 50 kilometers from the airport and separated by bridges from the main part of the city, could be more convenient too.
That said, the highlights of the tour was yet to come. And one has to keep in mind that Silicon Valley took some 20 years to develop, while China has only begun to tap into this high-tech arena for economic development.Back to the tour, we got a glance at the research center of a facility that is seeking to standardize the process of using herbs in traditional Chinese medicine. See photos. The brains behind this operation is Zisheng Xu, a PhD in pharmaceutical sciences from Osaka University of Japan, who has just moved here from a research post at a Hong Kong university. Ok, it may not be a San Diego or Singapore Biopolis yet!
At what's called the Transportation Industry Park - one of three key areas of the zone - our delegation hopped on golf carts and proceeded through a sparkling clean plant that has the capacity to churn out 200,000 spiffy MG sedans. Yes, the Chinese have bought the assets of the former British automaker, though "Charles," the deputy general manager of the operation, tells me that the cars are still designed by engineers in the U.K. The cars cost $30,000 and 10,000 were sold last year in China. I'm pictured with a few classic MGs that the operation now owns.
What's more, we got a pitch about the Enterprise Park, one more element to fertilize entrepreneurship here. With funding from four governmental bodies, this initiative offers an attractive incentives package of tax holidays, free office space and free residential housing for overseas students returning home to establish a base here. More than 100 students have taken up the offer and founded 50 research enterprises here.
That night for dinner we feasted at a banquet with yet more toasts at the Pearl Spring Hotel, overlooking a tranquil lake that we could see from our picture windows. As 9pm neared, we called it a day and our delegation headed by police-escorted bus back to the Jin Ling Hotel, ready for a good night's rest.
Not finished yet! On the Sunday morning of the Dragon Boat weekend holiday in China, we listened to a speech by Zhu Shanlu, a "Standing Member of Jiangsu Provincial CPC Committee and "Secretary of Nanjing Municipal CPC Committee." His talked was peppered with phrases that were translated like this: "We appreciate that you have shown confidence in our cooperation." At a luncheon where I was seated close to the provincial party leader, I had the opportunity to 'gift' a copy of my book to him. Through a translator, we exchanged a few words. He likes my Silicon Dragon book title and said it reminded him that he wants Nanjing to be known as "Life Science Valley." Sounds like good branding to me, I said. It's connections like these that may have led to my sudden VIP-like treatment on my Air China flight back to the U.S. One has to wonder.

China outsourcing interviews

Few things are more fun for me than doing interviews in China with the new capitalistic group of business leaders. I love being "in the field," and out of the office, doing my journalistic work. Here are some photos taken during my interviews with the CEOs of China's leading outsourcing companies.


Dr. Liu Jiren, founder of Neusoft, China's leading outsourcing company. We met in the lobby of the China World Hotel in Beijing. What was remarkable is that he arrived solo, and left solo, with no PR handlers. This would not happen in the U.S.
Ben Wang, co-founder and CEO of Beyondsoft, one of the many "softs" in China's outsourcing universe. Beyondsoft does work for Microsoft.
Chris Chen, founder of NASDAQ-listed company Worksoft, with his translator. He spoke English well, though and didn't really need a translator. We met at the Beijing Airport. He was flying to Shanghai. I had just arrived in Shanghai. We met in a cafe at the airport.

China outsourcing

Some of my handiwork can be spotted in KPMG's recently released thought leadership report on China outsourcing. See "A New Dawn" in the Information, Communications and Entertainment section of the KPMG virtual library:
www.kpmg.com.cn
The report includes seven case studies based on interviews with CEOs of the leading Chinese outsourcing companies, including Neusoft chairman Dr. Liu Jiren (shown here with yours truly). Much of the research was done at site visits in Beijing, Shanghai and Hangzhou, where there was an opportunity to tour software parks and meet with government officials. There was even a dinner banquet with the deputy mayor of Hangzhou (see photo). Hangzhou is eager to attract more outsourcing companies to come join e-commerce leader Alibaba here.
What was interesting to me in doing the report was the close parallels I found between the rise of China outsourcing and the growth of "Silicon Dragon". These factors all point to China's push from "made in China" to "invented in China."
You only need look at the statistics to see a clear trend line in China's move from a manufacturing economy to a service economy. China has the fastest growth in the world in new patents applications, public offerings and venture capital investments. It also has the world's largest number of mobile phone users, Internet users and engineers.
If the trends continue, I have little doubt that someday China will have an outsourcing company that rivals Indian giants Infosys or Wipro. Certainly, there is a case to be made that China sourcing is "on the ascendancy," as Edge Zarella (pictured with deputy mayor Tong Guili), KPMG's IT "rock star," likes to say.

Ohio University Scripps visit

Today, I visited my alma mater -- Ohio University in Athens, Ohio. It was a pleasure to be there. I had the opportunity to share some of my many journalistic experiences with a group of students enrolled in an online journalism class. Thanks goes to Professor Robert Stewart for the invite. I hope to return to Athens soon!
On an added note, I have to say that I am glad I am not graduating this year. New grads face the difficult prospect of finding a job in a rapidly changing media landscape. Only the truly enterprising among them will emerge as winners.

University week

I'm just back from Harvard, and soon to be on my way to Ohio University -- both the Lancaster campus in my hometown and also the main campus in Athens. Did you know that OU is known as Harvard on the Hocking (River?) The campus does have similar architecture. Here's the scoop on the luncheon and lecture at Lancaster.
http://www.lancaster.ohiou.edu/pages/news-events/China%27s%20Tech%20Lead.htm

On Friday, I'm going to speak to some journalism students at the Scripps School. Professor Robert Stewart invited me. I'm looking forward to the visit!

Harvard China Review notes

Congratulations to the team at Harvard China Review who organized the 12th annual conference on the Cambridge campus. It was a terrific weekend of networking with a diverse group of people -- professors, students, venture capitalists, budding entrepreneurs -- who are all interested in China's future role in the world economy. I know conference organization can be quite trying, but the student organizers pulled it off with panache. Sessions were held in tandem at various Harvard halls, and expert speakers traveled from China to bring their messages, ranging from healthcare and education to the economy and enterpreneurship.
I was invited to moderate a panel on the new face of China's digital media. My fellow panelists were Mike Balaban of Xinhua Finance and Lyndon Cao of China Daily. They gave terrific case studies, just right for Harvard! I outlined the premise of Silicon Dragon and showed how Chinese e-media are gaining a foothold quickly due to China's uptake of the Internet and mobile communications.

EVENT: Harvard China Review

Here's a new event on the Silicon Dragon social calendar.
Harvard China Review 12th annual conference, April 10-12, 2009
Cambridge, Mass.
http://harvardchina.org/conference/conf2009
It will be fun to be at the Harvard campus again!
I'm an invited speaker, and I'll be talking about how technology is impacting media in China. My fellow panelists are Lydnon Cao, president of China Daily USA, and Mike Balaban, principal of Balaban Associates and associate director of Parkview Ventures.
It promises to be an action-packed weekend, with a VIP dinner Saturday evening with the other speakers. I better learn more Mandarin fast. Thankfully, a lot of these speeches will be translated.

Silicon Dragon: Silicon Shanghai

Silicon Dragon: Silicon Shanghai

Silicon Shanghai

Here's some photos from the Shanghai Zhangjiang Hi-Tech Park that I recently visited. While the place doesn't have the palm trees and sunshine of Silicon Valley, it scores high on facilities. Take a look at those tennis courts and even a canal. It's a little peculiar that the design theme is remniscent of Versailles, but hey you can't argue with success. This 25 kilometer square park houses several large semiconductor companys including SMIC, insurance company Ping An and Wipro, among dozens of tech, digital media and biomedical firms.
I can't say that I saw a lot of people milling about outside, like you might see on a typical day on the Yahoo, EBay or Google campus. It was in fact rather lifeless. But maybe that's because it was a little chilly and who knows? Maybe they were all inside, working hard to fulfill that master goal to make China a tech innovator.

Silicon Valley Ghost Town II

Here’s some reasons why Silicon Valley is losing its edge in technology innovation – and why Asia is chipping away at its lead.

America’s share of research and development spending slipped to 30.1 percent in 2008 from 32.7 percent in two years’ time while Asia’s share rose to 40.8 in 2008 from 36.9. Battelle-Global R&D Report

America still tops all nations for the most patent applications annually – 53,521 of nearly one-third the total in 2008. But that percentage has slipped from 35 percent in 2004. World Intellectual Property Organization

In 2008, South Korea ranked 4th globally with 7,908 patent applications, an increase of 12 percent and a big improvement over 10th place 15 years ago. China placed sixth, applying for 6,089 patents in 2008, a hike of 11.9 percent. China has steadily climbed the charts, from the 7th spot in 2007 and 8th in 2006. WIPO

Last year, venture capital investment outside the U.S. increased 5 percent to $13.4 billion. The U.S. is still the top venture market, but international now accounts for nearly one-third of total venture money invested. Dow Jones VentureSource

Venture capital investments in the U.S. slid 8 percent last year to $28.8 billion while fund raising decreased 25 percent to $24.7 billion. DJ

In 2008, Asian venture investments declined by 22 percent to $22.3 billion.
Asia venture funds jumped 8 percent to $20 billion. AVCJ

In 2008, China raked in $9.3 billion in new venture investments while India weighed in at $8.5 billion. AVCJ

Asia accounted for 62 percent of global IPOs in 2008, up from 53 percent in 2007. North America contributed only 11 percent of 745 IPOs worldwide in 2008. Ernst & Young

China had the most IPOs two years in a row—126 in 2008 and 209 in 2007.
The U.S. chalked up 34 IPOs in 2008 and 178 in 2007. E&Y

U.S. venture-backed companies generated $24.1 billion through IPOs and M&As in 2008, down 58 percent from $57.6 billion in 2007. Just seven venture-financed businesses in the U.S. completed IPOs and raised $551 million, compared to 76 and $6.8 billion in 2007. These were the lowest levels on record since 1992. DJ