Not sure I can agree with your statement about IoT, in fact I believe the "Things" are mostly about items consumers DON'T purchase but are part of the infrastructure like vending machines, parking and utility meters etc., and certainly the Apples of the world aren't going to be (very) involved designing the occasional "connected" refrigerator that needs to ask for the filter on the icemaker to be replaced. The real challenge with IoT will be REAL good security for next to no cost, if we averaged it across the industry I wonder how much was spent per PC before the industry came up with the "kind of decent" security we have now? IoT security will certainly have to be an order of magnitude better for a few percent of the cost, that'll be the real challenge and even funding for THAT will be darned hard to come up with, it's just that if we don't there'll be "Target-sized" security breaches of everyone's electric meters all over the media every week or so until it gets fixed correctly.
I will disagree, the profit IS certainly a motive for Chinese chip companies. If you will make your homework and try to research what are the best selling and quickest growing chip companies in PRC's domestic market, you will see that there are no state funded companies in the top.
A ~20 out of top 50 mainland China's chip companies reached multiple of 3 of tangible book value within less than 3 years since their start of operations, which is quite fast in comparison to what we see here.
I can only agree with you in the point that there is no opportunity for conventional types of investments in China as PRC's legal environment is implicitly disallowing foreign VCs operations.
Only Govt. / public funded R&D can keep the fire burning in obscure areas and keep disruptive new science from getting suppressed by vested interests.
Though T. J. Rodgers does keep rolling with the punches ( P-SoC ), he seems to think too highly of his contributions. After all he is still walking on the path created by others like Bob Noyce that was first charted with Govt. / Taxpayer money.
The "disruptive new science" should have it's share of attention, but close to earth start-ups do bigger success. The biggest progress in SoC industry in last decade was not in "disruptive" areas, but in SoCs for low-end consumer electronics and went largely unnoticed.
Yes, this may be different model. Since pioneers of this industry have earn good money, they themselves may be investing in new innovation. They may not need VCs as much as new technology. Also fabless model makes it possible to innovation in any part of world like China, India or east european countries.
Interesting observations about how semiconductor companies are investing more and more in software development, which they have to give a way for free in order to sell chips, yet at the same time VCs have all moved on to web companies...whose only real product is software.