China's Innovation Breeds IP Respect?

The world's leading handset manufacturers, drawn to the explosive growth of the Chinese market, are facing a rising challenge there from indigenous manufacturers. China's rapidly expanding mobile subscriber base is supporting the expansion of local firms, who are using their knowledge of local tastes to cash in on Chinese consumers' insatiable appetite for the latest gadgets. Phones made and designed by Chinese firms will account for a third of the global handset market in 2009, and the increasing competition has caused the average price for a feature phone in China to drop from $220 to $90 in just five years. Native firms have grabbed market share by developing innovations, such as twin SIM card slots and phones that double as projectors, at a price and pace that foreign firms have difficulty matching.

These developments reflect the growing maturity of homegrown Chinese companies, which are starting to transform themselves from low-cost manufacturers into innovators in their own right. This evolving position gives Chinese firms, as well as the Chinese government, a greater stake in the protection of intellectual property (IP) rights, an issue which has long been a bone of contention between China and the West. China's regional and national governments are increasingly aware of the need for stronger IP protections and have begun to implement them.

These trends are a double-edged sword for Western firms. The rising innovation capacity of Chinese (and other developing-country) firms will make them stronger competitors in both developed and emerging markets. But greater protection for IP will make introducing products in emerging markets safer and potentially more profitable for foreign firms. Working with market experts can give firms a clearer picture of both the legal and sales landscape and help them to become more nimble contenders both at home and abroad.

Shifting Sands: Recent growth highlights the Middle East's technology potential

Jordan's budding IT industry got a big boost recently with the announcement of a new fund intended to help meet the financing needs of the country's growing crop of startup firms. Backers aim to launch the fund in 2010 with a combination of local enterprise and bank resources, along with support from the government and multinational investors in Jordan. The country's leader, King Abdullah, has made growing Jordan's $900 million technology industry a key part of his economic policy and is supporting the fund's creation. Initiatives like this are intended to give a further lift to indigenous firms and raise Jordan's status as a hub for the Arab technology industry, a position highlighted by Yahoo's recent acquisition of Amman-based Maktoob, the leading Arabic Internet portal.

These developments underscore the emergence of Middle Eastern countries as players in the global technology and communications industries as they try to diversify their economies. Abu Dhabi's Advanced Technology Investment Company (ATIC) made a big splash with its multi-billion dollar investment in AMD/GlobalFoundries and Chartered Semiconductor this year, while the brand new King Abdullah University of Science and Technology and its $10 billion endowment are attracting leading talent to Saudi Arabia. Mobile penetration has skyrocketed across the region and homegrown companies like Egypt's Orascom and Kuwait's Zain have become major operators both inside and outside of the Middle East.

The growth of Middle Eastern markets presents opportunities and challenges to multinationals. As noted above, companies based in the region are raising their profile both as acquirers and targets for foreign acquisition. Arab countries' populations are growing quickly and are disproportionately young, which makes them attractive markets for products and services in areas like education and entertainment. Despite recent liberalization, though, countries like Egypt, Morocco and Algeria remain heavily regulated in many aspects of their economy. The region is culturally diverse and politics remain a fault line. Learning the ins and outs of each national market may enable firms to better capitalize on this growing and multifaceted region.