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Rival China may overtake India in MNC R&D investments, cautions a latest study by advisory firm Zinnov.
At present, India and China compete neck to neck in attracting R&D spends from global companies like Yahoo, Eli Lily and BMW. But China could run past India, given its investor-friendly policies, talent pool, lucrative domestic market and maturing R&D ecosystem.
Consider this. China with its $7.65-billion MNC R&D market is trailing India ($7.75 billion investment). But investments across the bamboo curtain are growing at almost 16 per cent against 10.5 per cent in case of India.
Although India promises higher cost savings for companies doing R&D work, China has been able to attract 200 new centres post recession. In contrast, 50 new centres were opened up in India between October 2008 and March 2011.
“With the US market growing slower-than-expected, China has emerged as a huge opportunity. But MNCs have realised that to do business in China they have to understand the local requirements and design products accordingly. So a lot of R&D effort is around the ‘in China-for China' strategy,” says Mr Praveen Bhadada, Manager – Consulting, Zinnov Management Consulting.
A case in point is Motorola's language recognition phone – Ming, he pointed out.
China R&D snapshot
The US and EU continue to account for the majority of the R&D centres in China.
“China is increasingly becoming an R&D destination for many of the auto OEMs such as Audi, Toyota, Volvo, as it is one of the biggest market for these OEMs,” the Zinnov study said.
Interestingly, the study pointed out that 50 per cent of the installed talent pool for MNC R&D facilities were in the Tier II locations in China such as Xi`an, Wuxi, and Chengdu.
The manufacturing vertical is the single largest contributor in China's offshore R&D basket, followed by semiconductor, software and telecom verticals.
R&D in new technology areas such as cloud, mobile and e-commerce are also fast catching up. China practically rolls out the red carpet for its investors with some provinces even doling out allowances for companies hiring freshers and training them.
“India needs to move away from cost arbitrage game, and focus on value creation. There are a lot of unresolved issues globally such as water, security or even managing massive amounts of data. Indian R&D could lead the way in bringing out innovative products in these segments, which can then be utilised at a global level,” Mr Bhadada said.
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