Haidian Park: The Birthplace of China's Most Innovative and Entrepreneurial Technology Companies

Chinese Silicon Valley Series

Jan 22, 2015, 09:00 ET from IDG China

BEIJING, Jan. 22, 2015 /PRNewswire/ -- Within Beijing's renowned Zhongguancun technology zone, Haidian Park is now widely known as the home of many of China's most successful entrepreneurial companies. The park, a combination business district and high-tech industrial park, is situated squarely in the center of "China's Silicon Valley."

There's no mystery as to why Haidian Park has become one of the country's foremost high technology communities. The park traces its history to its close proximity to China's most prestigious technology universities and research institutes. The Zhongguancun area of Beijing is home to Peking and Tsinghua Universities, both world-class universities in science and technology, as well as more than 60 other leading institutions of higher learning. Also residing in the Zhongguancun area are the Chinese Academy of Science, 251 scientific research institutions and 62 key national laboratories.

Drawn by these centers of excellence, 40 of the world's top multinational companies have set up their headquarters or major R&D centers in Zhongguancun, including Microsoft and IBM. As the area prospered during the past four decades, the huge numbers of highly qualified scientists, engineers and technicians who work there have also become a major attraction for multinationals. Today, approximately 36 percent of the country's academicians who are currently enrolled or graduated from the Chinese Academy of Science and the Chinese Academy of Engineering work in Zhongguancun. An estimated 120,000 employees working here hold either Doctorate or Masters degrees, and a quarter of the Chinese students returning to China with degrees from overseas universities choose to launch their careers in Zhongguancun.

Haidian Park was Beijing's first national high-tech industrial development zone and was originally called New Technology Industry Development Experimental Zone. Two other major technology development zones also put down roots here: Zhongguancun Science and Technology Park and the Zhongguancun National Innovation Model area. Haidian Park now encompasses 174.06 square kilometers. By year-end 2013, Hadian Park included 5,005 "state-level" designated enterprises, 12,000 high-tech enterprises and 331 publicly listed companies. Together, these enterprises comprise approximately 55 percent of all high-tech companies in Beijing and 10 percent of all high-tech companies nationwide. It is estimated that the total income for these enterprises in 2013 exceeded RMB1.2 trillion (more than US$273 billion at current exchange rates) for a year-on-year growth rate of 17.5 percent. These firms also represent 41.7 percent of all income generated in the Zhongguancun Model Area. The estimated research input intensity index for these enterprises is 5.0, exceeding the average standard of 3.7. The number of patents granted to companies and individuals who work in this district now totals 11,800, representing 54 percent of the all patents issued in Beijing. Turnover for technical contracts, is RMB119.1 billion, say government officials, which is equivalent to 46 percent of the total turnover in Beijing.

Zhongguancun, the birthplace of legendary smartphone maker Xiaomi

Over the past two decades, this high-tech section of the nation's capital has become home to some of the biggest and most widely respected names in Chinese technology. These companies include Lenovo, a global powerhouse with 2013 revenues of US$34 billion; Baidu, the dominant search engine company in China with 2013 revenues of US$5.227 billion; and image processing equipment supplier Vimicro, which supplies 60 percent of the world semiconductor market in image-processing. In addition to being the home of these long-established companies, the area has also become the venue of choice for some of the newest stars in China's technology galaxy. Foremost among them is Xiaomi, the world's third largest mobile phone maker, known locally as the "Zhongguancun Legend."

In April 2010, Xiaomi, invested by IDG, then a young venture-backed startup with a strong R&D focus, set up shop in Haidian Park and the Zhongguancun Science and Technology Park. Initially an Android-based firmware supplier for smartphones and tablet computers, Xiaomi rapidly grew into China's most popular smartphone maker, with millions of enthusiastic fans. In 2011, Xiaomi's sales totaled RMB0.55 billion. By 2012, Xiaomi had sold 7.19 million Xiaomi phones and posted annual sales of RMB12.65 billion. In 2013, the company sold 18.7 million phones and posted annual sales of RMB31.6 billion, a 160 percent increase in unit sales over the previous year and a 150 percent increase in revenue. In 2014, Xiaomi moved into the first place in China's fiercely competitive smartphone market and became the world's third largest manufacturer of smartphones behind only Samsung and Apple. Overall sales for Xiaomi in 2014 exceeded RMB50 billion.

Lei Jun, the founder, president and CEO of Xiaomi, credits Haidian Park in part for the company's outstanding performance. The reason Xiaomi chose Zhongguancun as its corporate headquarters, Lei Jun says, is because the district was an outstanding center for innovation in science and technology. In addition to Haidian Park's superb infrastructure, the area had an unmatched pool of skilled technology talent, which helped transform the young company from an innovative startup into a global leader.

"There is so much talent in Zhongguancun's Haidian Park," Lei Jun says, "that we were soon highly competitive, to the point where we were able to surpass many of the giants in the industry. Soon Xiaomi was able to recruit many talented personnel, some straight out of college and others from established companies in the area, including Google, Microsoft and Motorola. Today, Lei Jun credits Xiaomi's success to two factors: talent, and capital, "both of which are readily available here. I think it's fair to say that Xiaomi would not have been able to reach our current level of success without the outstanding financial support and incubator capability available in Haidian Park. To a large extent, our success was possible because we grew up in Zhongguancun and set down our roots in Haidian Park."

To help further the development of hardware and software in the mobile Internet sector in China, Xiaomi, has joined forces with Kingsoft, a well known software and Internet service provider, to invest in the construction of a new Mobile Internet Industry Park within Haidian Park in Zhongguancun. Once construction is finished, this new area of the park will become the headquarters for both Xiaomi and Kingsoft, along with many new enterprises affiliated with Xiaomi's incubation program. The goal will be to help create a high-tech community where mobile Internet enterprises can meet one another and match their capabilities in a coordinated way to take innovation within their companies to the next level. Xiaomi believes that companies participating in the incubation program will be able to enhance their overall operational efficiency, promote the development of the mobile Internet industry and stimulate the development of other related technologies. In the future, it is anticipated that this subdivision of Haidian Park will give birth to a new wave of companies in the Chinese mobile Internet industry. Local executives believe that the incubator program being spearheaded by Xiaomi and Kingsoft could lead to the creation of new businesses with revenues that one day exceed RMB100 billion.

An innovation-driven entrepreneurship center for global technology

To maintain its dominant position in innovation and entrepreneurship, Haidian Park within the Zhongguancum district is devoting substantial resources to continue to grow vigorously through the 21st century. The foundation for future growth, park officials believe, is the area's solid infrastructure, its sharp focus on science and technology, its proximity to the country's leading scientific institutes and universities and a growing talent pool.

In the future, the Zhongguancun Model Area will undoubtedly become a powerful innovative center for science and technology, not just for China, but for the entire world and will impact many developing industries. The Model Area within Haidian Park, is already making significant progress in implementing an innovation-driven development strategy being unfolded in China both regionally and nationally. Three factors are contributing to the Model Area's success.

First, Haidian Park has already made important breakthroughs to commercialize technology research, contributing to further technological innovation, economic growth and social development in China. At the same time, through ongoing cooperation with industry associations and industrial alliances, companies operating in Haidian Park have taken part in significant advances in technology research and sharing of knowledge within the park. Officials here believe these experiences can help break down institutional barriers, accelerate technology transfer, create both tangible and intangible assets and help scientists and engineers commercialize their research findings in a way that will both spur the development of new products and create market demand for them.

Second, by focusing on ways to speed the development of new products and technologies, Haidian Park also believes it can build a collaborative innovation platform for participating companies in the district. This platform will, in turn, lead to more breakthroughs in innovation and, in so doing, help establish a roadmap for future technological development in China. The collaborative innovation center within the park is now working closely with several leading local universities, including Tsinghua, Peking and Beihang universities. This collaborative platform will also help participating companies compete globally to commercialize the results of their research efforts. To help local companies internationalize their products and to help multinationals develop products for the Chinese market, Haidian Park's new incubation center also cooperates closely with experts in patent law and intellectual property rights. Such resources will help companies accelerate the transformation of research findings into commercially available products. These entrepreneurship incubation services, now available within Haidian Park, can assist new innovative enterprises gain access to financial resources for micro-, small- and medium-sized enterprises. Access to these services can also help young enterprises reduce their costs and accelerate growth by helping them gain access to capital markets.

Third, Haidan Park has developed mechanisms to help attract, train and retain needed talent. Currently, a major focus for the park is finding ways to ease the barriers of entry and departure to and from China and to help attract international talent. In addition to attracting talent for already established high-tech companies, Haidian officials are also working to grow the park's service and support sector for the benefit of the next generation of entrepreneurs. For example, a recent addition to Haidian is Garage Cafe, an open office space for Chinese startups. The park is also becoming home to companies specializing in recruitment and career development to help further propel the development of new innovative enterprises within Haidian.

All this is challenging, but Haidian Park is committed to creating a technology district to serve the needs of its tenants. To assist both Chinese and multinational companies, Haidan Park has committed itself to the construction of a dynamic, innovative, entrepreneurial ecosystem in which these new industries can grow and thrive.

Government officials believe that the total income for high-tech industries in China will reach RMB1.6 trillion in 2015 and that several emerging sectors could achieve revenue of RMB100 billion. Haidian Park is dedicated to building an environment to help companies become a part of this future and to develop new products and technologies for both local and international markets. In the years ahead, Haidian Park is committed to firmly establish itself as one of China's leading R&D centers and as a leader in science and technology worldwide.

SOURCE IDG China