The World Intellectual Property Organization (WIPO) reports that China has become the first country ever to file 1 million patent applications in a single year. While this was in the context of growing patent applications around the world, the size of the difference is remarkable. Chinese patent applications totaled as many applications as the next three offices combined: the U.S. (589,410), Japan (318,721) and the Republic of Korea (213,694). Chinese applications were led by electrical engineering and telecom, followed by computer technology and semiconductors. Growing innovation in these areas shines a spotlight on the potential for new opportunities in the burgeoning Internet of Things (IoT). It also points to an important shift in innovation toward Asia at a critical point where AI technologies, Industry 4.0, and consumer devices are starting to move forward.
The Chinese patent applications were largely for home consumption rather than for international patent protection. China’s applications flow from a highly competitive economy in which domestic protection is important and current government policies have a focused upon developing innovation in all sectors—but particularly in electronics and IT. The huge number of Chinese patent applications reflects this policy, which applies pressure to municipal governments, educational institutions, and companies to produce patent as a demonstration of support.
The recent DDoS attack on the Dyn server in the US used a botnet largely comprised of inexpensive Internet-connected Chinese cameras. The desire to innovate in these types of devices and the growing market is creating the elements of a security problem. As firms continue to release devices at a faster and faster rate at lower cost and without security procedures, security issues will proliferate. Chinese ability to innovate, manufacture, and market in this area is likely to lead to a tsunami of unprotected devices. Rapid innovation will lead to new opportunities as well as new threats as devices offered at extreme low cost are adopted before their impact can be fully understood.
Chinese innovation is also of importance in considering the growth of new product ideas within Asia. It is interesting to note that three of the top five patent producers are in Asia (China, Japan, and Korea). Asian firms have focused upon industrial automation and ability to produce inexpensive devices. This makes it likely to create a hub of innovation in IoT within Asia generally, adding to existing concentrations in robotics and mobility. As frictions continue to develop between China and the West, it is possible that new concentrations of innovation will emerge. The IoT presents a wide range of possibilities for growing markets in a stagnant economy. The connected consumer device territory is still a greenfield area. Low cost in this market is an absolute advantage, since it reduces consumer resistance in experimenting with new technology. By boosting innovation and also controlling low cost manufacture the Chinese are in an ideal position to pursue these types of developments.
For the rest of the world, patent applications continue to grow, particularly in information technology. Computer technology (7.9% of total) leads global applications, followed by electrical machinery (7.3%) and digital communication (4.9%). While the Chinese have focused upon internal patents, most other countries pursue international protection. Offsetting the million internal patents, Chinese international patents remain a relatively tiny number (42,154). While this is growing somewhat, it also demonstrates the country’s ability to isolate itself; or, perhaps, in the words of Deng, “hide your strength, bide your time.”