Technology firms continue to grow global foothold(2)

Labor asset matters

Guo Xin, former president of IDC Greater China, said the country can afford to see some low-end manufacturers leave the country, but the most urgent task is how to hold onto the mid- and high-end producers.

He added that many overseas manufacturers jealously eye China's large, highly skilled workforce, which is capable of sophisticated levels of manufacturing and assembly, and this remains a huge asset to the country.

In December, Apple announced plans to move some production of its Macintosh computers to the United States from China.

Apple makes the majority of its products, from Macs to the iPhone and iPad, in China — a country highly efficient at manufacturing collaboration. But like some other US corporations, it has come under fire for relying on low-cost labor, and contributing to the decline of the US manufacturing sector.

"Honestly, it's not so much about price, it's about skills. Over time, there are skills that are associated with manufacturing that have left the US," said Apple's Chief Executive Officer Tim Cook, explaining the move in an interview with NBC.

Providing a skilled, reliable labor asset does not now guarantee profit margins for Chinese companies, and entrepreneurs should be finding new ways to improve the added value of their products to generate more profit, said Guo Xin.

And for China's top IT equipment makers, investing in research and development has become essential to increasing their global competitiveness.

Telecom equipment makers Huawei Technologies Co Ltd and ZTE Corp, for instance, have maintained high levels of spending on innovation.

Both founded in the 1980s in Shenzhen, in South China, the companies have quickly become world leaders and rising stars in the protection of intellectual property.

Huawei and ZTE each invest more than 10 percent of their total annual revenues on research and development, and close to half of their workforce works on R&D.

Over the past three years, ZTE said it had spent 20 billion yuan ($3.21 billion) on R&D.

"About 46 percent of Huawei's staff, or 68,000 employees, are working in the R&D sector," according to Fang Xingdong, the founder of chinalabs.com and a commentator on Internet industries.

"The number has already surpassed the total employed at the US-based Cisco Systems Inc, which has about 66,000 staff members."

Fang said the figure shows just how much of a priority Huawei places on innovation.

About 40 percent of the 30,000 employees at ZTE, meanwhile, are now employed on R&D work.

It has set itself the goal of "having the world's top talent working in some of the company's most important positions", and recently opened an office that is specifically charged with attracting talented employees from overseas.

According to the United Nations World Intellectual Property Organization, in 2011, ZTE applied for the largest number of patents offered through the Patent Cooperation Treaty, which provides a standard procedure for applying for patents.

By June 2012, it had filed 45,000 patent applications both at home and abroad and had been granted 12,000 patent licenses.

Wang Haibo, ZTE's director of intellectual property, said: "ZTE's patents already cover some critical technologies in the telecom industry."

An example is fourth-generation (4G) Long Term Evolution, or LTE, technology, a standard for wireless communication.

ZTE's basic LTE patents make up 7 percent of the total in existence, Wang said.

Rival Huawei, the world's second-largest telecom equipment maker and vendor, holds 15 percent of LTE patents.