On his recent visit to Beijing, Intel Corp. CEO Craig Barrett threw cold water on China's efforts to establish a domestic semiconductor-manufacturing foundation on which to build its Silk Road for the Information Age. According to a wire-service report, Barrett called chip manufacture a "dead-end street for China" and said the government instead should focus on software.
We would advise China otherwise.
For starters, ignore American chip-company executives who suggest that software is the key to electronics self-determination. Software is important, but it's only one link in an intellectual-property value chain that China must master in full if it is to build a world-class electronics industry.
Indeed, world-class capability is a goal to which China appears truly committed (see Nov. 2, page 1). Intel rival NEC Corp. is laying the foundation for China's entrance into the world semiconductor market via Project 909. And in its efforts to forge a Super Video CD international standard through the International Electroctechnical Commission, China has also demonstrated its intention to use its huge consumer-market clout to drive standards.
China has grasped the importance of developing state-of-the-art design capability at the IC and system-on-a-chip levels. And it understands the need to exploit its intellectual capital. But there are other steps it must take.
Long term, China should seek to travel far enough along the intellectual-property curve to lure back the thousands of talented "immigrant" engineers now streaming into the United States' ever-deepening H-1B visa pool. The H-1B brain drain stacks the deck against China and other developing electronics powers that are bent on establishing chip industries of their own.
But before it can make the desired strides in software development, chip manufacturing, design engineering and, ultimately, advanced product development, China must open market access for joint ventures and, most important, fully embrace the rights and responsibilities incumbent on creators and users of intellectual property. Settling with Philips, Sony, Matsushita and JVC on the IP issues associated with the Super Video CD would be a logical step in that direction, but one that China has yet to complete.
