Genie vs. Anti-Genie

One Bottle, Two Genies; Neither Going Back!

The genie of unintended consequences just saved China’s tech industry.
Robotics and automation could be the better for it

“Asia is on track to top 50 percent of global GDP by 2040 and drive 40 percent of the world’s consumption,
representing a real shift in the world’s center of gravity.” —McKinsey, Asia’s Future Is Now

Losing face to the new reality
If it hadn’t been for the U.S. trade war genie popping out of its bottle, China might still be asleep, firm in the belief that it’s tech was industry leading and master of its own destiny.

Beijing got a mighty rude awakening when the U.S trade war genie shook ZTE like a rag doll.

The shocking humiliation of having to genuflect to an arch-rival tech power in order to save the world’s No. 4 maker of telecom gear and its 75,000 employees, must have struck to the core of the country’s tech identity. Maybe the whispering began anew: “Are we innovators of our own tech or still copycats?”

No doubt that post-ZTE Beijing’s brain trust huddled together and hurriedly drew up a list of other potential ZTE-like time bombs that were just waiting to explode into the face of Made in China 2025. Their list making must have been eye-opening and sad: China’s vaunted technology boom was sitting mostly atop Western technology.

As Li Yuan wrote in his piece for the New York Times: “The ZTE incident, as it is called in China, may be the country’s Sputnik moment.”

China now knows that to buy, borrow, beg or steal tech from the West is hollow success that buys only time, not advantage. The end result remains the same: maybe more ZTEs waiting in the wings readying for collapse.

Two genies
When the U.S. popped the cork and let its trade war genie out, it quickly came to realize that its genie offered way more than just three measly wishes; there were dozens for the asking. Tariffs, debt, and rag-dolling ZTE were but three.

The U.S. is finding out quickly that the genie is better than the WTO or even the UN at dealing with and settling international disputes…trade or otherwise. It could even sic its trade war genie on the South China Sea muddle. And now, flushed with success, it looks like the genie is not going back in its bottle any time soon.

But, as can happen when a genie is out and about making outlandish wishes come true for its master, up springs the genie of unanticipated consequences. Let’s call it the anti-genie. China’s anti-genie offered up something more important than any amount of wishes; it taught China a valuable lesson: China can’t lead in technology if it depends on the technology of others to do so. Self-reliance is what the anti-genie is urging, and it looks like it too is staying far away from the bottle from which it popped.

Can you hear me now?
Our first good look at the anti-genie’s urging for a more self-reliant China sits with Huawei’s latest move: A substitute OS, after Huawei was denied access to Android; a denial that could well be a potential killer for a world-class smartphone producer like Huawei.

“Huawei has officially announced HarmonyOS,” reported the Verge, “the operating system it was rumored to be developing to replace its reliance on Android.

“In China, the software will be known as Hongmeng. The company says the operating system, a microkernel-based distributed OS, can be used in everything from smartphones to smart speakers, wearables, and in-vehicle systems to create a shared ecosystem across devices. The operating system will be released as an open-source platform worldwide to encourage adoption.”

Like Linus Torvalds and the Linux kernel, open-sourcing the release of HarmonyOS will help with the bugs of disharmony that are undoubtedly lurking within Harmony.

Ren Zhengfei, Huawei’s CEO and founder, has a reported 76,000 R&D staff on his payroll. Now’s a really good time for those tens of thousands to show their stuff with Hongmeng/Harmony. The country needs a quick tech victory to hang its hat on. Hopefully, such a victory would encourage more.

Of course, nothing is that simple. HarmonyOS has lots of hurdles to leap. “I think Huawei is under-communicating the work it will take to make this successful,” says Patrick Moorhead, president of Moor Insights & Strategy, a technology analyst firm. “Most every Android app writes to specific Android APIs, so any code that touches cameras, fingerprint readers, AR cameras, microphones, proximity sensors, and even privacy and security standards must be altered.”

Again, there’s 76,000 R&D staff that need to step up to make HarmonyOS click.

Finger-pointing at domestic robots
If China’s anti-genie of self-reliance is finger-pointing anywhere, one direction for sure would be towards China’s domestic brands of large, industrial robots, which are good and getting better, but not good enough in head-to-head competition with foreign robots manufactured in China or imported by China. …But they must, and soon.

Unlike their big-brother industrial robots, Chinese cobots are highly competitive technically and have favorable price points, although sales have been low for both foreign and domestic cobot suppliers alike. It’s the big boys that need help.

China, under the gun to automate its industries with robots—since 2013 the world’s biggest buyer of industrial robots (135,000 in 2018)—needs to upgrade its homegrown brands. As the South China Morning Post headline read: China’s robot industry ‘plagued by low quality, overinvestment and too much duplication’. And as far as critical robot parts go: “Ren Yutong, executive president of the Guangdong Robotics Association, said China lagged far behind developed economies in robot component technology.”

See related: China’s Journey to Self-Reliance in Robots
Difficult but doable. Under the gun of “modernize or perish,” it might be a good time for China’s domestic robot industry to step up and be counted.

These days, there’s also the slim but possible scenario of a future trade war that could possibly restrict or withhold sales of industrial robots to China. Think, the current Japanese-Korean trade war extended to robots and robot parts to China. Impossible, you say; probably, but it’s enough of a threat to China’s national security to warrant renewed emphasis on homegrown robots. No one ever thought ZTE could get hammered.

So, how does China go from so-so industrial robots to world class? Well, China’s high-tech M&A spree can offer some insight on what to do. “In 2016, 68 German companies were bought by Chinese operations; in 2017, it was 57, mainly in Germany’s engineering sector.” And there’s been more since (from Germany and others).

This short list of some of the acquisitions is impressive:

Egemin Automation
Linde Material Handling
Ecoclean Group

In addition to all the products and associated gear that these companies manufacture, they are also sitting on the real prize: billions of dollars’ worth of high-grade patents and other intellectual property. All of it now readily available to China.

Even Syngenta AG, a global company that produces agrochemicals and seeds—not normally associated with robotics—actually has its own specialized robots (and associated IP).  Syngenta is now owned by ChemChina.

Syngenta has Artemis, an agriculture chemical formulation robot. “The robot can make almost any liquid agrochemical formulation in small amounts, and perform a basic series of tests to see if those formulations are of interest for further research.”

And then there’s Syngenta’s Adam, “the first robotic system to make a scientific discovery with virtually no human intellectual input.”

No single company in the world has a stash of IP to match what China has acquired since 2016, but China has yet to utilize it in any meaningful way. However, if China could, it might be able to glean from all of this mind-boggling IP a way to spark innovation?

In WIPO’s Global Innovation Index 2019 rankings, China is #14 (#17 in 2018 and #22 in 2017). The country’s innovation trend is up; and WIPO’s index of leading patent producing countries has China at #2. But, in USA Today’s list of The World’s 50 Most Innovative Companies, none are from China. That’s telling! The country is showing innovation growth, but individual companies and their products are not.

Yet, there’s all of that acquired IP just sitting in a heap…waiting.

All of this IP has the potential to be used to design and build industrial robots better than China’s existing homegrown industrial robots, and as good as or maybe even better than current foreign robots.

Better still, building an AI that could train on this mass of valuable patents might quickly produce advanced robot designs heretofore never seen anywhere…or even attempted. Maybe something so totally new and startlingly innovative it sets a standard that sells well both at home and abroad.

For now, the anti-genie has delivered its wake-up call to China tech.

McKinsey’s latest research piece: Asia’s Future Is Now, announces Asia’s future as having arrived earlier than anyone thought: “The question is no longer how quickly Asia will rise; it is how Asia will lead.”

China is looking to lead that parade, so the more self-reliant it gets, especially in its tech, the more others will want to follow where ever it goes.

See related: Around Asia China’s Homegrown Cobots