Global Science and R&D: Asia Chips Away At US Edge

Even in the field of science and engineering, Asia appears to be rapidly chipping away at the edge of the Americans.

The press release from the US government's National Science Board (NSB) underscores such concerns, (bold highlights mine, interspersed charts from NSB)

``The state of the science and engineering (S&E) enterprise in America is strong, yet its lead is slipping, according to data released at the White House today by the National Science Board (NSB). Prepared biennially and delivered to the President and Congress on even numbered years by Jan. 15 as statutorily mandated, Science and Engineering Indicators (SEI) provides information on the scope, quality and vitality of America's science and engineering enterprise. SEI 2010 sheds light on America's position in the global economy.

``"The data begin to tell a worrisome story," said Kei Koizumi, assistant director for federal research and development (R&D)in the President's Office of Science and Technology Policy (OSTP). Calling SEI 2010 a "State of the Union on science, technology, engineering and mathematics," he noted that quot;U.S. dominance has eroded significantly."

``Koizumi and OSTP hosted the public rollout at which NSB Chairman Steven Beering, National Science Foundation (NSF) Director Arden L. Bement, Jr., and NSB members presented SEI 2010 data and described a mixed picture. NSB's SEI Committee Chairman Lou Lanzerotti noted the good news for those in the S&E community about public attitudes, "Scientists are about the same as firefighters in terms of prestige," he said. His presentation focussed attention on NSB's Digest, also released today, higlighting important trends and data points from across SEI 2010.

``Over the past decade, R&D intensity--how much of a country's economic activity or gross domestic product is expended on R&D--has grown considerably in Asia, while remaining steady in the U.S. Annual growth of R&D expenditures in the U.S. averaged 5 to 6 percent while in Asia, it has skyrocketed. In some Asian countries, R&D growth rate is two, three, even four, times that of the U.S.

``In terms of R&D expenditures as a share of economic output, while Japan has surpassed the U.S. for quite some time, South Korea is now in the lead--ahead of the U.S. and Japan. And why does this matter? Investment in R&D is a major driver of innovation, which builds on new knowledge and technologies, contributes to national competitiveness and furthers social welfare. R&D expenditures indicate the priority given to advancing science and technology (S&T) relative to other national goals.

[It is competition that serves as a major pillar of innovation. R&D is only utilized only in response to needs of the market.-Benson]


```NSB SEI 2010 Committee Member Jose-Marie Griffiths discussed another key indicator: intellectual research outputs. "While the U.S. continues to lead the world in research publications, China has become the second most prolific contributor." China's rapidly developing science base now produces 8 percent of the world's research publications, up from its just 2 percent of the world's share in 1995, when it ranked 14th.'"

The above signifies as empirical evidence, which supports our earlier post, exhibiting how Asian high tech companies have rose to the occasion, using the recent recession, to mount a serious challenge on the leadership of Western companies. [see Asian Companies Go For Value Added Risk Ventures]

The other areas of concern as cited by the NSB.

-Cross Border R&D or the globalization of the Research and Development function [yes, R&D isn't a national standalone thing as misperceived by protectionists, it's being collaborated by different institutions worldwide.]

According to the NSB, ``Overseas R&D expenditures by foreign affiliates of U.S. multinational companies (MNCs) rose from $12.6 billion in 1995 to $28.5 billion in 2006. Europe’s share of these overseas expenditures fell from 73% to 65%, and Asia’s share increased from 15% to 20%. Foreign MNCs spent $34 billion in the United States in 2006, up from $15 billion in 1995. European-owned companies’ share of these expenditures was little changed at 75%."

-Patents

Asian Companies Go For Value Added Risk Ventures

In the ambiance of globalization or free markets, Asian companies have now been boldly embarking to enhance their competitiveness by scaling up the value chain in the technology sphere.

Yes, Asians appear to realize that we are transitioning into a post-industrial era or the third wave or the information age more than mainstream would like us to believe.

This telling article from the New York Times, (all bold highlights mine)

``For years, the process remained relatively static: PC makers like Hewlett-Packard and Apple, with well-staffed research labs and design departments, would dream up their next product and then hire a Chinese or Taiwanese fabricator to manufacture the largest number of units at the lowest possible cost."

``But lately, this traditional division of labor has been upended. Many of those Asian companies have moved well beyond manufacturing to seize greater control over the look and feel of tomorrow’s personal computers, smartphones and even Web sites.

``The investment arms of large Taiwanese and Chinese manufacturers have created an investment network in Silicon Valley operating under the radar that pumps money into a variety of chip, software and services companies to gain the latest technology. As a result, some Asian manufacturers have proved more willing than entrenched Silicon Valley venture capitalists to back some risky endeavors.

``“In the past, the manufacturers would sneak around and get inside information on technology by investing in these companies,” said K. Bobby Chao, the managing partner at DFJ DragonFund China, a business that invests in technology companies in China and the United States. “Now, they’re more involved, more visible and charging after more complex maneuvers.”

``As manufacturing of electronics in the United States began moving offshore decades ago, some feared the American economy would suffer. But the American companies, as well as economists and policy makers, said that as long as the high-value jobs like research and design remained in the United States, there was little danger.

``Asian investments in Silicon Valley present some risks for America’s top technology companies, which could lose their connection to top innovations."

The recent crisis, perhaps, may have opened the windows for Asians to make use of their accumulated savings, liberal access to financing, manufacturing and technology experience accrued over the years, revitalized confidence to take on new challenges and importantly a freer market environment, aside from a continually advancing research and development capabilities to advance on their risks ventures.

Again from the New York Times,

``The investments by Asian companies have already started to pay off. At the Consumer Electronics Show this week in Las Vegas, people will see laptops that end sluggish start times and instead boot up instantly and TVs that do not require remotes because they can see the gestures of viewers. These features are a result of strategic investments in technology by Asian manufacturers. One Asian manufacturer turned investor is Quanta, based in Taiwan, which has long been one of the largest manufacturers of laptops and personal computers for major brands like H.P., Acer and Dell.

``To keep those customers coming back, it needs unique product designs and technologies that give it an edge over competitors."

In other words, for Asia to improve its wealth and economic conditions requires capital accumulation or added economic value (or the lengthening of the economic structure) by producers competing to satisfy the needs of the consumers. The article appears to underscore on such a transition.

And it is only under free market environs where producers become sensitive to changes of consumer desires, as Professor Ludwig von Mises explains, ``But it is precisely modern capitalism that is faced with rapid changes in conditions. Changes in technological knowledge and in the demand of the consumers as they occur daily in our time make obsolete many of the plans directing the course of production and raise the question whether or not one should pursue the path started on."

Beer, Consumer Choice and Free Society: The American Model

A striking quote for Beer- "Beer is proof that God loves us and wants us to be happy"-Benjamin Franklin

Video from Reason TV,

Quoted from Reason TV

``In 1920, the National Prohibition Act destroyed the beer industry in the United States, putting some 1,500 breweries out of business. When the "noble experiment" was repealed in 1933, beer lovers rejoiced, and the beer industry staggered back to its feet. The industry had lost much of its diversity, however, and the emergence of national brands in the 1950s and 1960s led to industry consolidation and fewer choices for American beer drinkers. By 1980, there were less than 50 breweries in the U.S.

``By the 1980s, American beer had an international reputation as weak and watery as a case of Hamm's. Most breweries only produced American-style lagers, a light and inexpensive style of beer typically made with rice or corn adjuncts in addition to barley, hops, yeast and water.

``What American beer lovers didn’t know at the time was that a revolution was imminent. In 1979, a clerical error in the 21st Amendment was corrected, and for the first time in nearly 50 years it became legal to brew small batches of beer at home. Home brewers who had little interest in cutting costs or making beer with mass appeal began brewing big, flavorful beers in a wide range of styles. Many of these home brewers decided to turn their passion into small businesses, and microbreweries began popping up all over the country.

``Today, although mainstream beers still dominate the market, more than 14,00 breweries in the U.S. produce more styles of beer than anywhere else in the world, and American beers routinely dominate international beer competitions.

``So the next time you’re at your favorite brewpub, hold your glass up high and celebrate the American beer revolution."

Lesson: Industry liberalization promotes competition, which provides consumers with the best choices at the most reasonable prices, and societal satisfaction.

Unfortunately for the Philippines, the microbrewery industry is still at an infancy...I only know of two.

Hat Tip Mark Perry