Monday,27 May 2024

On technology, skills and innovation in China: The next lap

5 min read

By Emmanuel Daniel

TAB chairman and founder Emmanuel Daniel was invited by the Nanjing Jiangbei government to speak at their "Yangtze River New Finance" Digital Economy Seminar on 23 June 2021 and give them ideas on how to turn Jiangbei into an international hub. The speech contained some of his views on the challenges facing China on the skills and innovation fronts.

  • Technology is going to be owned by the end users
  • China is still struggling to master the chip technology
  • Nanjing’s future as a global city

Here is the transcript:

Nanjing is a beautiful city with a history. Understanding the past can help us better see the city's future. 

The first time I visited the Sun Yat-sen Mausoleum, I came across his three goals of society: minzu, minquan, minsheng. Nationalism, representation and livelihood. When I first saw this representation of his dream for China, I thought I could understand what his meaning was. For 4,000 years, China was ruled by emperors from the top down and what Sun Yat-sen was saying here was that in the future, China should be ruled from the bottom up. This year, while we celebrate the 100th year of the government, we realise that the government and the rulers of China have kept to the promise of winning the people's hearts, of winning the people's trust. 

I start with this presentation because that's exactly what is happening in technology today. From the first day when technology was invented, when we had the huge mainframes, and if you remember COBOL programming, it was technology ruling society from the top down. Over time, in this complex chart, we've seen how large businesses have organised themselves around modularisation, business integration, and platform independence. They even tried service-oriented architecture, which means that the institution gives you a service and the institution is struggling to give you a service that responds to your business needs but without having a lot of technology around it. That world has changed today because of open source, because of platforms like GITHub and Red Hat, and other forms of open source platforms. The world today belongs to the end user.  

Today we talk about collaboration. We talk about personalisation. And large companies like IBM are finding it very difficult to be profitable in today's world. The revolution of giving technology back to the people is going through a fundamental change today. It’s going through an amazing change that is going to revolutionise society. Technology is not going to be owned by the large platforms. Technology is going to be owned by you and me as end users. That revolution probably started with the invention of the internet. Then with the HTTP.  

In the early days of the platform technology, if you remember, it was dominated by players like Amazon, Baidu, and so on. In 2011, a very interesting revolution took place, all of that technology was transferred to the mobile device. Because of this very simple transformation – taking existing platform technology and putting it on mobile – we saw the rise of new forms of business models. Today, we cannot live without Weixin, Alipay, Ant Financial and so on. That revolution took place very recently, in 2011. And guess what? That revolution is again going to be changed. It's going to go through another revolution called personalisation. And that revolution has already started. 

In 2011, when mobile became the de facto device, all of the businesses that did very well in the platform era had to revolutionise very quickly. Yes, the mobile device, the smartphone, whether it's the iPhone or the Android, was created or invented in 2007. But it took about three to four years before they became commonplace enough for the revolution to start. So in the same way today, because of a revolution taking place on blockchain technology, on decentralised autonomous organisations (DAO), we will start to see that transformation come into play in the next two to three years. 

When the personalisation of platform technology finally comes into its total being, you will find that technology no longer sits with large businesses but with an individual. Already, we can see that we have been empowered, you and me, because of our mobile device. But because of the Internet of Things, of blockchain, machine learning, artificial intelligence, we can have so much more power in our hands as individuals that used to not even exist when man sent the first astronauts to space or the large businesses like IBM used to run large banks and companies. 

The evolution of blockchain technology is based on a very simple ideology. If you remember, in the HTTP era, the protocol layer was very thin. That was HTTP. It was invented by Tim Berners-Lee, whom I know quite well. And he didn't make money from that simple coding that he put together to be able to share files. The applications that were built on HTTP became huge businesses. We have Facebook and Baidu, and in China there is Sina and there is a whole range of large businesses that were created and today exist on the HTTP protocol. In blockchain, it is exactly the opposite. The protocol belongs to you. It's in your hand and the application becomes a tiny part of your everyday life. The control of that relationship between you and the application is in your hand, is in your power. 

The amazing thing about cryptocurrencies is not that the price of cryptocurrencies went up dramatically. The amazing thing about cryptocurrencies is that everyone can create a cryptocurrency. You can create a cryptocurrency. I can create a cryptocurrency.  

The evolution in blockchain technology continues at an amazing pace today. Some of the presentations this morning we're trying to move what used to exist in the platform technology into blockchain. If you describe blockchain as a token and if I describe the token as a nut, it's a token or a nut that can carry several huge dimensions in finance that used to exist in large businesses before.  

So today, token technology is a form of technology that can absorb all the applications as well as the payments for those applications, as well as the investment for the applications. When you look at many of the new cryptos that are being created, such as polkadot and even simple ones like dogecoin, and application-centric ones like tezos and XRP. Each of these represent a specific technology application that they are trying to solve. And guess what? These are also being funded on the token. Finally, of course, tokens also represent a digital asset, which you can save and you can make as part of your overall assets.

China has gone through tremendous transformations in the last 40 to 50 years. In 1978, when Deng Xiaoping first opened China for business to the rest of the world, the per capita gross domestic product (GDP) was $156. In 2001, when China joined the World Trade Organization (WTO), the per capita GDP was $1,053. The achievements of China at the lowest level of human civilisation, of human society country building is a very well-told story. China lifted 800 million people out of poverty. My one amazement of China is the literacy that was created, that today, over 90% of its people are literate, while many other countries in the world still struggle with these numbers: poverty, literacy, and the basic amenities for its people. China is way past that now. It is now a proper middle income country.  

Where China today is a country that all of us know – the world's largest manufacturer, the world's biggest service economy. The GDP today is $10,000. China produces nine million graduates a year. When I travelled through the country and I see the huge railways and highways and amazing new glistering cities, I think about the engineering talent that is being released into the economy right now. China produces 600,000 engineers a year. The United States produces 60,000 engineers a year, STEM graduates, that is science, technology, engineering and mathematics. China has, in the last few years, 4.7 million STEM graduates that were released into the economy. This makes it possible for the country to build all of the infrastructure and the economy that it has today. So this part of China's economy is a very well-known story. It's a story that all of us celebrate. The question then, is that top 1% of China's story, not the 9 million graduates that China releases in a year, the 1% of that 9 million, the 90,000 who need to lead China into the next dimension, the next realm.  

In order to understand the challenges that China has for that top 1%, one of the huge difficulties of China's economy is in building the chip technology. Today China has sent rockets to other planets including Mars. But this one technology is confusing everybody. Why is it that this one technology that China finds difficult to overcome and to master? In this technology, the revolution that is taking place is immense. The key players in this technology are reducing the size of the microchip to be able to do 50 billion transistors in 10 nanometers of space. The technology is predicated by upstream abilities, including the skill sets of the university students that come out into the marketplace, the downstream demands of the technology to be able to meet the physical needs of the software and the applications that need to be developed and the competition in the industry. Currently, the integrated circuit (IC) market is $143 billion. China only makes $23 billion. The “made in China” policy 2025, the goal is to have 70% of microchips made in China. Currently, China produces 16%. The analysts say that in all likelihood, China will probably do a 19.4% to 20% of the global demand for microchips by 2025. The problem is in the skills required and the imagination required to build electronic design automation, the little graphic equipment which China still struggles with.

This is the face of the microchip technology. What can you tell about the face of the microchip technology? The man on your left, Kunle Olukotun, is a Nigerian born in the United Kingdom. The man in the centre, Rodrigo Liang, is American Chinese who used to work for a company that Olukotun used to invest in or started, which was sold to Sun Microsystems many years ago. The man on my extreme left is Christopher Re, Kunle’s colleague in Stanford University. These three men put together a microchip which today is the hottest chip in the market. It's called SambaNova and its chip is called Cardinal SN10. It’s artificial intelligence (AI)-centric and it's meant to meet the general purpose, AI chip. The point of this particular slide is to tell you the challenge today comes from anywhere in the world. When we think about all the numbers that represent how big China is and how successful China is, we think about the 1.5 billion people who make China. When we think about how successful the US is and how big the US is, it actually benefits from 7 billion people around the world who want to go there in order to make their livelihood and their success in leading edge technologies like the microchip. 

The problem appears to be several fold. First, the microchip industry is highly competitive. If you look at just the companies that are involved in the microchip industry, in 2000 TSMC acquired WSMC for only $550 million. Today Nvidia is going to acquire ARM Holdings for $14 billion. Each of these players have been in the industry for many years. The DNA that is required to succeed in this industry is immense. The people in the industry and the companies in this business have been very good at what they do for many years. The technology itself has been changing dramatically. Then, of course, the fact that the users’ demand has been increasing and will continue to increase as we continue to put more technology into the hands of individuals.  

The top five players in the semiconductor industry from around the world, they're all here in China and yet that transition of the technology for China has not yet taken place. Perhaps another analogy might make better sense. When we think about an aircraft, like the Boeing 787 Dreamliner, which is one of the newer aircraft put out by Boeing. Something that the US has been able to do well, and that China will probably need to learn from and master, is the fact that the latest aircrafts are not made from one country. The Boeing, for example, is made from about 12 countries, five continents, 100 partners. The battery is from Japan, the doors are from Sweden and from different countries like Canada. The wingtip is from Korea. When the iPhone was being invented, they needed to find a screen that was going to be used by the iPhone and they found it in Japan.

These are some of the people who are overachievers in the US. What do you think is the common feature of these overachievers? Look at all of them. I think you recognise a few of the names: Bill Gates, Paul Allen, Mark Zuckerberg. Then I put in a few of the movie industry overachievers like Steven Spielberg. Can you guess what is the common feature among all of them? They are all university dropouts. That's the 1% of the US. They drop out for many reasons. But the main reason is that they had nothing more to learn in university that they did not already know or that they weren't equipped to be able to get on with the things that they wanted to achieve. I tried to get a sense of where these people come from. What is interesting about the US is that there are three very specific areas - up in the north, extreme northeast, and the extreme northwest. If you visit these places, you'll see that these are highly stable parts of the country. There's one feature that is common to all the people that I've just put together for you which is first, they enjoy their leisure. Second, they’re curious. Third, they are knowledgeable. That's exactly the kind of culture that you want to build in a new area like this northern Zhang area in Nanjing, which is an area that is open to people who enjoy their leisure, who are curious and who are knowledgeable. The big challenge for this area is how are we going to create this ecosystem for people who are overachievers? The US has already given up that middle layer of development. They are now in that little top area of the best of the best and how they can continue to dominate the world's economy through technology. 

One of my favourite stories in China is the story of Zheng He, whose name is called Ma He, his original name. The young emperor sent him on seven voyages out into the southern part of China into Southeast Asia and then to the Indian Ocean to West Asia, as they call it. And what interests me about Zheng He is that he actually started his journey from this city, from Nanjing. And that's one feature of Nanjing, which is very interesting, together with Nanjing’s four cities, which made these journeys possible. And I did not understand it until I started visiting the different museums in the city.

Zheng He was Muslim. And in that time, the period of 1100 to 1300, there was a huge Muslim population in these cities. In that period, in the early days of a thousand years ago, the Muslims were known for one very important skill - they were very good astronomers. In fact, more than 2,000 stars were given the names by the Arabic people. And the Arabic people were doing a lot of trade with China and the door of entry was Nanjing. So when I think about the story of Zheng He, I think about a city that was always open to foreigners, that got the best of foreigners and attracted them to come and live in the city and to be part of the story that eventually became the history of China. 

Society is going through a fundamental transformation and it always has. From tribal to institutions, to markets and then to a phenomenon called networks. So not only are we going to be all empowered individually, we're also going to be networked with each other at an individual level. In fact, some of the presentations made this morning attributed to that, which is not only are they creating blockchains, they're going to make blockchains more integrated with other blockchains. So as society evolves and these transformations take place, we need to think about Nanjing and this area being part of a networked world.  

So the purpose of my presentation is this: Nanjing global city. We need to make it into a people-centric technology city, a people-centric economy and a people-centric city. Since China's started opening up, it has put in place many important special economic zones, free ports, and free trade zones. And now the time has come to think about free people zones, for want of a better word. 

What do you do in a people zone? Well, I thought about it and I was thinking about certain ideas and I leave you with these ideas. How about a Sun Yat-sen presidential scholarship to the best students in technology from anywhere in the world? How about international schools? You're already thinking about that? How about investor homes in this region with a residency visa attached to it? Medical centre collaboration with some of the world's best medical institutions. How about a Nanjing world young talent competition? Because the future belongs to the young people. These are some thoughts that I want to leave you with, how to make Nanjing capture the imagination of the world. 

Keywords: COBOL, Give App, Red Hat, Weixin, Alipay, Facebook, Cryptocurrency, Stem, Sambanova
Institutions: IBM, Amazon, Baidu, Ant Financial, WTO, Sun Microsystems, Stanford University, TSMC, WSMC, Boeing
Country: China, Japan, Sweden, Canada, Korea, USA
People : Emmanuel Daniel, Sun Yat-sen, Tim Berners-Lee, Deng Xiaoping, Kunle Olukotun, Rodrigo Liang, Christopher Re, Bill Gates, Paul Allen, Mark Zuckerberg, Zheng He
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