In recent years, China's investment in scientific research has been growing rapidly.

However, from a certain perspective, scientific research and innovation are not entirely driven by throwing money at the problem, but rather are achieved through persistent effort and patience.

More importantly, we must ensure that these "hidden champions"—companies dedicated to technological R&D—can access the resources they need on an equal footing with industry giants, allowing them to focus steadfastly on their core work.

2.79 trillion yuan—this was China’s total R&D expenditure in 2021, with an R&D intensity reaching 2.44%, and the country’s comprehensive innovation capability ranking rising to 12th in the world.

Amid the impact of the pandemic, China is one of the very few countries that has maintained positive growth in R&D investment.

A recent report by the Aspen Institute, a U.S. think tank, indicates that China’s R&D investment is expected to surpass that of the United States by 2025.

China’s ambitious drive to catch up is reflected in the details of the Two Sessions. In the 2022 Government Work Report, the term “innovation” appeared 36 times, and “science and technology” appeared 18 times.

The 14th Five-Year Plan also explicitly states: “We will uphold the central role of innovation in the overall process of China’s modernization and regard self-reliance and strength in science and technology as a strategic pillar of national development.”

Over the years, China’s scientific research capabilities have firmly established themselves among the world’s leading ranks; high-speed rail has evolved from virtually nothing to accounting for more than half of the world’s total operational mileage; and the smartphone industry has transformed from being dominated by knockoffs to having three of the world’s top five brands…

From laboratory research to the daily lives of ordinary people, all these changes are visible and tangible.

As the global economy enters a recessionary cycle and faces downward economic pressure, increasing investment in scientific research to drive industrial upgrading has become an inevitable choice for China.

However, a mindset focused on quick gains often leads to the opposite of the intended result.

Take the chip crisis of the past two years, for example: many companies struggling with financing pressures have scrambled to don the “chip” label, as if simply using that term allowed them to ignore fundamentals, profitability, and relative technological advantages.

Stalled projects, typified by Wuhan Hongxin and Jinan Quanxin, have laid bare this chaos, disorder, and the financial black holes they represent.

In recent years, in an effort to gain the upper hand in the semiconductor industry, China has pursued both the path of Sino-foreign joint ventures and “market-for-technology” exchanges, as well as the path of independent R&D and self-driven innovation.

Neither path is easy; one misstep can lead straight into a pitfall.

The term “chips” we use today is a broad concept that encompasses both high-end and low-end products; for example, chips used in computers and mobile phones are considered high-end. High-end chips are further categorized: some are responsible for data storage, while others handle data processing.

China has made significant progress in storage chips, with Yangtze Memory Technologies (YMTC) having caught up to international advanced levels. However, the technology for processing chips is complex, and China still lags significantly behind foreign counterparts.

Of course, we hope China can develop its own chips. But companies in Europe and the U.S. got an early start and have established comprehensive ecosystems; other companies have no choice but to rely on these systems to survive.

For example, Intel’s x86 architecture has dominated the PC and server markets, while ARM’s architecture has dominated the mobile sector.

▲ The architectures mentioned here can be viewed as blueprints for CPU development; other companies wishing to produce CPUs must purchase these blueprints from these two firms. Of course, there are also free blueprints available, but CPUs produced using such blueprints have no market.

Many companies and local governments hope to introduce advanced foreign technologies through joint ventures for the R&D and manufacturing of domestic chips.

In 2014, Suzhou Zhongsheng Hongxin spent over $100 million to secure a permanent license for IBM’s POWER architecture.

The POWER architecture is also a blueprint for chip design. However, its development did not go well, and even IBM itself could no longer sustain it, which is why they launched the OpenPOWER initiative: the architecture is open to the public, but not for free.

The reason IBM was willing to sell the technology was to have Zhongsheng Hongxin take the lead in breaking into the Chinese market and competing against Intel’s x86 architecture. It was indeed a shrewd calculation: if it failed, the Chinese company would bear the brunt of the loss; if it succeeded, IBM would be the biggest beneficiary.

Industry insiders have commented on this partnership: “It’s like guarding IBM’s backyard while having to buy your own dog food.”

However, Intel’s x86 architecture has already established a monopolistic ecosystem in the server market, leaving no room for other architectures to break in.

So did Zhongsheng Hongxin successfully assimilate the technology? No.

According to the original plan, the process was supposed to be: first introduce the technology, then assimilate it, and finally achieve independent innovation. However, the company’s first processor was nothing more than an IBM design rebranded with Zhongsheng Hongxin’s logo, and nothing more was heard from them afterward.

This is by no means an isolated case—trading market access for technology has resulted in profound lessons.

In 2016, Guizhou partnered with U.S.-based Qualcomm to establish Huaxintong. The Chinese side’s goal was to assimilate Qualcomm’s chip design expertise and achieve domestic production. In the end, this joint venture served merely as a testing ground for Qualcomm; not only did the Chinese side fail to assimilate the technology, but it also lost a significant amount of money.

Qualcomm has long focused on developing ARM-architecture processors for mobile devices. This partnership was an attempt to use that architecture to enter the server market and test it in the Chinese market, but it ultimately failed.

Although Huaxintong obtained the source code for chip design, the saying goes, “The master leads you to the door, but it is up to you to practice”—understanding the meaning of every line of code and developing a complete design solution still required guidance from Qualcomm.

However, when Qualcomm realized the ARM architecture held no promise in the server market, it abandoned the plan and dissolved the relevant departments. Not only did the project fail to introduce the technology, but the massive initial investment was also wasted.

China has successful precedents for introducing, digesting, and absorbing technology. For example, high-speed rail technology was introduced from Japan, France, Germany, and Canada, and subsequently innovated upon to develop various models. Similarly, the Su-27 fighter jet was introduced from Russia and Ukraine, leading to the development of domestically produced fighter jets.

Why have these industries succeeded, while the semiconductor sector has not?

A key reason is this: in the former cases, the state designated them as priority research projects involving national security, led by state-owned enterprises. The R&D personnel themselves felt a sense of mission and were determined to overcome any difficulties, no matter how great.

In contrast, chips and processors are products of a fully market-driven environment. The technology is highly complex, and next-generation products are typically improvements based on their predecessors, designed to address the shortcomings of the previous generation.

Domestic design teams lack the accumulated experience gained over generations. Even if they obtain the source code for chip designs, they face the same difficulties as a primary school student trying to learn advanced mathematics—they have the textbook but cannot understand it, let alone talk about improvements or a sense of mission.

In the past, when foreigners heard that China was developing chips, they didn’t take it seriously, assuming China was merely training talent for them. But in recent years, as the performance of domestic chips has improved and they’ve begun to replace imports, foreign giants have panicked and are now proactively seeking cooperation.

Their tactics boil down to: “We’ll let you use our products at a discount; let’s set up a joint venture, and you should stop your independent R&D.”

▲ In July 2021, Loongson officially launched its next-generation 3A5000 processor, which delivers over 50% higher performance and reduces power consumption by more than 30% compared to the previous generation. It completely avoids foreign architectural technologies, achieving autonomy and control over the core architecture at the foundational level.

Such cooperation is undoubtedly tempting; after all, independent R&D is both costly and time-consuming, and everyone wants to make money without lifting a finger.

According to the market theory promoted by Western countries, each nation has its own role in the supply chain. China is responsible for producing shoes, socks, and clothing, while Western countries handle R&D and sell patents.

Back then, many domestic experts firmly believed in this division of labor. However, the current technological blockades imposed by Western nations have made everyone realize the critical importance of mastering core technologies.

Against this backdrop, policy measures have begun to take effect: semiconductor industrial parks are springing up frequently, industrial investment funds are being established one after another, industrial plans are being rolled out in rapid succession, and subsidies and incentives are too numerous to list.

However, a group of speculators—lacking technology, capital, and talent—attempt to exploit the enthusiasm of the government and society to “make a profit without any investment,” devising every possible means to funnel money into their own pockets.

Ultimately, regardless of the project’s outcome, these speculators stand to lose nothing, leaving the government to deal with the abandoned projects. If the government handles the situation poorly, they will even use public opinion to pressure the government.

As mentioned at the beginning of this article, industries and technologies are never built overnight; they are painstakingly developed and refined over time. Massive short-term investments of state capital cannot instantly create an industry.

Whether it’s semiconductors or other emerging industries, we must steadily accumulate experience and cultivate talent, clearly distinguishing between what can be imported but must remain secure and controllable, what can be introduced, digested, absorbed, and then innovated upon, what can be developed through collaboration with others, and what must be achieved through independent innovation relying solely on our own capabilities.

The government’s role is to act as the “referee” of market order, not to step onto the field as an “athlete” itself.

In the historical transition from “Made in China” to “Intelligent Manufacturing in China,” the key is to ensure that the “hidden champions”—those companies dedicated to R&D—can access the resources they need on an equal footing with industry giants, allowing them to focus steadfastly on their core tasks.

This brings us back to the oft-discussed topic of the business environment.

In recent years, local governments across the country have been determined to optimize the business environment, competing to roll out initiatives such as “one-stop service” and “serving as attentive shop assistants.” Businesses have taken note of these changes and feel the warmth in their hearts.

▲ Jinchuan District in Jinchang City has upheld its commitment that “once a business decides to proceed, the government will handle all procedures” (excluding environmental protection and safety), providing comprehensive support—from filing and preliminary paperwork to construction and production—for all signed investment projects.

Faced with such a proactive and sincere “service-oriented government,” businesses likely wouldn’t really mind whether they had to make one trip or two.

However, some localities, swept up in the fervor of “optimizing the business environment,” have gone too far in assisting enterprises to meet investment attraction targets. Short on start-up capital? The urban investment company will inject funds! No money to build factory buildings? The government will construct them on your behalf! No funds for equipment? The government will find a way!

Consequently, this leaves insufficient resources to serve local enterprises, let alone sustainably attract high-quality businesses.

A truly excellent business environment does not mean meeting all corporate demands at any cost or without conditions; rather, it involves creating a business environment governed by the rule of law, where enterprises compete fairly in the market and the fittest survive.

In other words, the government must provide public goods and services that the market cannot effectively deliver, establish fair rules, strengthen oversight, define and protect property rights through legal systems, ensure the free flow of products and production factors, break down administrative monopolies or restrictions imposed by local governments and departments, and establish and maintain a unified, open, and fair market order to ensure the market plays a decisive role in resource allocation.

China’s path to industrial upgrading requires a vast array of market entities—especially entrepreneurs—to cultivate a tenacious will and a deep sense of responsibility toward the nation. In sectors like semiconductors, which demand long-term investment, entrepreneurs must remain calm in the face of crisis, seize opportunities amid turmoil, and forge new paths forward.

However, for Chinese entrepreneurs to fulfill their mission in the new era, there is one prerequisite: they must be given the assurance to focus on development with peace of mind.

They do not need more preferential policies; they simply need true fairness.

If we put ourselves in their shoes, Chinese entrepreneurs will certainly not let down this era, which calls for greater drive and perseverance—not retreat or evasion.