Carlos Ghosn has the Wall Street Journal flabbergasted. To the utter dismay of the WSJ, Ghosn said that Nissan is talking to their joint venture partner Dongfeng about transferring lithium-ion battery know-how and other electric-car technology to the joint venture. Even more worrisome to the WSJ is Ghosn’s statement that “there’s no limit to technology we bring to China.”
According to the WSJ, “Ghosn’s remarks on electric vehicles, at a news conference Monday, come amid worries by many foreign auto executives about a ten-year plan China is drafting for the electric-vehicle industry that they fear could compel foreign companies to transfer technology to local joint ventures in a way that might result in their losing control of the technology.”
These worries are either worries by junior executives, or the imagination of even greener Wall Street Journal reporters.
Nothing to see, move along: Ever since AMC brought the first Jeep to China, ever since Volkswagen laid the ground works to China’s mass motorization in the early 80’s, foreign companies transferred technology to local joint ventures. That’s just the way it’s done here. If a foreigner wants to build a car in China, he needs a joint venture. If he wants to build parts, he can do it himself and doesn’t have to share with nobody. Advanced technology is often hidden away in parts companies that are 100 percent in foreign hands.
The rules have been written down in the “Catalogue of Guidance to Foreign Investment”, as amended in 2007. The “manufacturing of complete automobiles” by foreigners is “encouraged” with the proviso that “foreign investments shall not exceed 50%.” The manufacturing of “automobile engines”, “key spare parts”, the “production as well as research and development of automobile electronic devices” can be done 100 percent under foreign control. The rules expressly specify that the manufacture of “power cell (NiH and Li-con) and control systems” is limited to equity joint ventures. These rules are available on-line, maybe the WSJ needs help in using Google.
Ghosn is a bit more worldly and seasoned than the WSJ. He has a down-to-earth perspective of the matter: “It often makes little sense to hold back in sharing technology because a partner like Dongfeng is a fast learner and can catch up relatively quickly on any technology.”
Actually, sharing technology in a joint venture is a safer way than not sharing at all. In a joint venture, contracts are written, and payments for licensing are negotiated. If you don’t share, the Chinese will just buy a few cars and quickly reverse engineer the technology, without a dime going to the inventor.
There are no Western technology secrets that the Chinese don’t already have. We’ve been giving it to them voluntarily for 20 years.
I seriously doubt they have our military tech. They may have some but not all. Such as stealth technology or aircraft as capable as our most advance ones. They don’t have our IT tech other wise we would be seeing baidu instead of google or amd/intel and what not.
Good point. I was really referring to non-military secrets. Although they have a vast network of spies (even more than the Russians and ourselves) to find those too.
As far as the chipmaking thing goes, Applied Materials will sell you everything you need to create a state of the art chip fab. They don’t care if you are located in China or anywhere else.
I don’t think making high-end silicon is that far out of reach for the Chinese. I think they just haven’t gotten there yet in their “industrial-revolution” timeline.
I think we will be buying Chinese chips in the next 10 years – maybe sooner if AMD/INTEL decide to do a “joint venture” in China.
I think Mr. Ghosn has been reading bedtimes stories about the Russian SU-27 and Chinese J-11.
“If you don’t share, the Chinese will just … quickly reverse engineer the technology …” Bingo!
We’ve been giving it to them voluntarily for 20 years.
Who needs to give it to them? All you need to do is get a car and take it apart. That will give you pretty much all you need.
That reminds me of when I worked at a software company and we were agonizing over whether to sell our products in China. We were afraid they would be pirated. Then we found out that our products were already being sold in China.
Pirates don’t need to be handed their plunder on a silver platter. No reason to keep intellectual property from your Chinese subsidiary or partner for fear of piracy. That just harms you, not the pirates.
“Who needs to give it to them? All you need to do is get a car and take it apart. That will give you pretty much all you need.”
Not really. Seeing the finished product doesn’t impart the skills and know-how which go into making said product. The process by which advanced things are made is often not obvious at all.
Granted, having a finished product in your labs makes it easier to figure out how to reproduce it, but doesn’t make how to do so clear.
Consider, for example, having the output of a laser printer in your hand. Holding in your hand what came out of the printer tells you very little about how to make a printer which produces such things.
Likewise, having the latest Intel microprocessor under your scanning electron microscope doesn’t enable you to make one just like it. However, having Intel build a joint venture factory and train your people in exactly how it is done would in fact enable you to reproduce a similar product.
Good point, John. Which is why a friendly tour of the original manufacturing plants is on the to do list, unless you buy them outright as Geely did with Volvo.
They already have the know-how to assemble a car and manufacture its parts. And it is the same with many other products.
So IMO they can reverse engineer mostly anything that falls in their hands.
Reverse engineering does not yield all the secrets of modern technology easily. Software and unmarked micrcontrollers and other ICs can pose real challenges.
We don’t do business in China, but we do have a relationship with a company there so that we have a low end product to sale, we will not even let them into our production area as the only thing keeping us in business is the fact that they cannot produce certain things because the M&E/processes are custom developed and they haven’t been able to figure it out. And everytime they come “We would most like to see your manufacturing area” (we let them into the warehouse once, when our engineer went over they had about thirty of our custom measuring machines up and running and were actually manufacturing them to sell)
When we first started with this company, they were small, built things by hand, now they are ten times our size and actually make the machinery to make the machines to make the things we make.
“We’ve been giving it to them voluntarily for 20 years” You’re right, Bill Clinton sold the Chinese our missile guidance technology for campaign contributions.
I thought it was sold to Canada as a weather-tracking system?
whatwhatwhat – the Chinese used missiles to deliver campaign contributions to Bill Clinton?
Riiiiight, Clinton won because of the Chinese. Not because of Bush saying, “Read my lips, no new taxes.” I like to see where you get this information though.
Bush lost* because when a small recession occured after the economy overheated (primarily related to cutting off the government spicket) he chose the right thing to do which was nothing (economies overheat and must correct), compare and contrast to how his son handled the recession after the dotcom bubble and see what doing anything possible to avoid a recession leads too (hint – the worst economic collapse since the great depression). Doing the right thing is never politically friendly but every once and awhile it would be nice to have leaders that have the balls to do it, country might be a better place.
*(perot splitting the republican base b/t two candidates didn’t help either).
Similar to Daanii2, I worked for a software company that wanted to get into the PRC market. How can you resist the lure of 1 Billion potential customers? We found a partner and set up a JV. Our Chinese partner insisted we escroe the source code in case we went bankrupt (we were a small start up). The next year we found ourselves competing with our own product launched by a “new” Chinese company.
The Chinese will conquer the world not by force, but by theft.
The Chinese will conquer the world not by force, but by theft.
Don’t worry, we in the United States had our turn. In the 1800s, we stole from everyone. We were especially blatant about stealing copyrighted works. Charles Dickens in particular suffered from American piracy of his works.
Then, in the 1970s and 1980s, everyone was complaining about Japanese companies stealing intellectual property. And they were (though a lot of the complaints came from paranoia not facts).
Now China gets the complaints. Again, there is some truth to the complaints. But that’s the way it works. Always has been, always will be.
Let me add – while there may be theft, in some areas of R&D, when the Chinese Communist government wants to go in certain direction they have been known to throw immense sums of money and human talent in that direction.
They will pass us by in certain fields and I believe “green energy and products” is one of them.
By the way, I hate the terms “green energy” and “green products”. Why can’t we just say energy efficient?
Ah my friend, it’s a lot more than energy efficiency (which itself will continually improve over time). What about walking instead … or settling for a smaller engine?
I’ve been bicycling to work for the past 14 years – mainly, because it’s good exercise- not because it’s green or energy efficient . Not having to use a parking garage is another plus.
So far so good, but I haven’t received any hugs from polar bears.
Ghosns not an idiot, Nissans invested TONS of money and research into their new EV and battery tech, licensing it out to Daimler and China are just ways of recouping some of their money back. Nissans looking to be THE leader in EV technology, they won’t get there by not building alliances with other companies. Toyota has done this to insure they were the leader in Hybrid tech…
Ghosn is not an idiot and besides the Communist Chinese government has other ways to force the issue: – http://www.nytimes.com/2010/09/23/business/global/23rare.html
http://en.wikipedia.org/wiki/Tupolev_Tu-4
http://en.wikipedia.org/wiki/Shanghai_Y-10
…
Nice link to the Tu-4. The Tupolev TU-95 more than made up for the Tu-4 copy and the Russians are still flying them.
I love the Gyro Gearloose reference, for what it’s worth.
http://www.armscontrol.org/print/414
http://www.washingtonpost.com/wp-srv/politics/special/campfin/background.htm