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The Global Technology Revolution China, In-Depth AnalysesEmerging Technology Opportunities for the Tianjin Binhai New Area (TBNA) and the Tianjin Economic-Technological Development Area (TEDA)

Richard Silberglitt • Anny Wong

with

S. R. Bohandy • Brian G. Chow • Noreen Clancy

Scott Hassell • David R. Howell • Gregory S. Jones

Eric Landree • Parry Norling

Sponsored by the Tianjin Binhai New Area and the Tianjin Economic-Technological Development Area

A RAND INFRASTRUCTURE, SAFETY, AND ENVIRONMENT PROGRAM

Transportation, Space, and Technology

TECHNICALR E P O R T

The RAND Corporation is a nonprofit research organization providing objective analysis and effective solutions that address the challenges facing the public and private sectors around the world. RAND’s publications do not necessarily ref lect the opinions of its research clients and sponsors.

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This study was sponsored by the Tianjin Binhai New Area (TBNA) and the Tianjin Economic-Technological Development Area (TEDA) and was conducted under the auspices of the Transportation, Space, and Technology (TST) Program within RAND Infrastructure, Safety, and Environment (ISE).

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The global technology revolution, China, in-depth analyses : emerging technology opportunities for the Tianjin Binhai new area (TBNA) and the Tianjin economic-technological development area (TEDA) / Richard Silberglitt ... [et al.]. p. cm. Includes bibliographical references. ISBN 978-0-8330-4647-5 (pbk. : alk. paper) 1. Research, Industrial—China—Tianjin. 2. Technological innovations—China—Tianjin. 3. Economic development—China—Tianjin. 4. Technology and state—China—Tianjin. 5. Binhai Xinqu (Tianjin, China) I. Silberglitt, R. S. (Richard S.) II. Rand Corporation.

T177.C5G586 2009 338'.0640951154—dc22

2009001254

iii

Preface

In 2007, the Tianjin Binhai New Area (TBNA) and one of its administrative zones—the Tian-jin Economic-Technological Development Area (TEDA)—in northeast China commissioned the RAND Corporation to perform a set of technology-foresight studies to help them develop and implement a strategic vision and plan for economic growth through technological inno-vation. This report describes the results of those studies. The principal objectives were (1) to identify the most-promising emerging technology applications (TAs) for TBNA and TEDA to pursue as part of their plan for growth, (2) to analyze the drivers and barriers they would face in each case, and (3) to recommend action plans for each TA.

In performing this study, RAND staff met with representatives of the communities of stakeholders from TBNA and TEDA, both in China and in the United States. We also col-lected data both on site and by reviewing relevant international literature. Our methods, as well as additional data and analyses, were built on the foundation of the 2006 RAND report The Global Technology Revolution 2020, Executive Summary: Bio/Nano/Materials/Information Trends, Drivers, Barriers, and Social Implications (GTR 2020 Executive Summary) and The Global Technology Revolution 2020, In-Depth Analyses: Bio/Nano/Materials/Information Trends, Drivers, Barriers, and Social Implications (GTR 2020 In-Depth Analyses) (together, GTR 2020).

This report should be of interest to executives, managers, planners, businesspersons, sci-entists, engineers, and residents of TBNA, TEDA, and other communities in China and the developing world more broadly. It should also be of interest to the international development community, as well as academic, government, and private-sector organizations and individuals interested in emerging-technology development, application, and implementation.

The RAND Transportation, Space, and Technology Program

This research was conducted under the auspices of the Transportation, Space, and Technology (TST) Program within RAND Infrastructure, Safety, and Environment (ISE). The mission of RAND Infrastructure, Safety, and Environment is to improve the development, operation, use, and protection of society’s essential physical assets and natural resources and to enhance the related social assets of safety and security of individuals in transit and in their workplaces and communities. The TST research portfolio encompasses policy areas including transporta-tion systems, space exploration, information and telecommunication technologies, nano- and biotechnologies, and other aspects of science and technology policy.

iv The Global Technology Revolution China, In-Depth Analyses

Questions or comments about this report should be sent to the project leader, Richard Silberglitt (Richard_Silberglitt@rand.org). Information about the Transportation, Space, and Technology Program is available online (http://www.rand.org/ise/tech). Inquiries about TST research should be sent to the following address:

Martin Wachs, DirectorTransportation, Space, and Technology Program, ISERAND Corporation1776 Main StreetP.O. Box 2138Santa Monica, CA 90401-2138310-393-0411, x7720Martin_Wachs@rand.org

v

Contents

Preface . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . iiiFigures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ixTables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xiSummary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xiiiAcknowledgments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xxixAbbreviations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xxxi

ChAPTer One

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1TBNA: An Ambitious Vision for the Future . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3The Role of TEDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5Achieving the State Council’s Vision for TBNA Through Foresight . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5Road Map of This Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

PArT One

The Most-Promising Opportunities for TBnA and TeDA in Science and engineering . . . . . . . . . . 9

ChAPTer TwO

The Most-Promising Technology Applications for TBnA and TeDA for 2020 . . . . . . . . . . . . . . . . . . . 11How We Selected the Most-Promising Technology Applications for TBNA and TEDA . . . . . . . . . . . . . . 12

ChAPTer Three

The Foundation for TBnA’s Growth into a Leading-edge Science and engineering Center . . . 17TBNA’s Mission as a Special Pilot Zone . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

Become a Center for Modern Manufacturing, Cutting-Edge R&D and Technology Incubation, and International Shipping and Logistics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

Reform the Financial Sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18Pursue Innovative Environmental Initiatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

China’s National Needs and the Push for Cutting-Edge R&D and Innovation . . . . . . . . . . . . . . . . . . . . . . . 20Reduce Rural Poverty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21Provide for a Large and Rapidly Aging Population . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21Meet the Population’s Health and Sanitation Needs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22Meet Growing Energy Demands . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22Reverse Water Shortages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23Reduce Pollution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24Sustain High Economic Growth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

vi The Global Technology Revolution China, In-Depth Analyses

National Drivers of and Barriers to Cutting-Edge R&D and Innovation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27Capacity Available to TBNA and TEDA: R&D, Manufacturing, and S&T Commercialization . . . 30

R&D Capacity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30Manufacturing Capacity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35Capacity for S&T Commercialization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47

PArT TwO

Analysis of the Most-Promising Technology Applications for TBnA and TeDA . . . . . . . . . . . . . . . . . 53

ChAPTer FOur

Cheap Solar energy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55Importance to TBNA and TEDA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55Current Scientific and Market Status and Future Prospects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56

Technology Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56Environmental Dimensions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60Market Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61

Relevant Capacity Available to TBNA and TEDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62Drivers and Barriers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63A Possible Path Forward . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64

ChAPTer FIve

Advanced Mobile-Communication and rFID Applications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67Importance to TBNA and TEDA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67Current Scientific and Market Status and Future Prospects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68

Displays . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68Memory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70Batteries and Power Storage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73Sensors and Antennas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75Integrated Circuits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76Mobile-Communication Protocols . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77RFID Systems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78The Mobile-Communication Device of the Future . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78

Relevant Capacity Available to TBNA and TEDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79Drivers and Barriers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79A Possible Path Forward . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81

ChAPTer SIx

rapid Bioassays . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85Importance to TBNA and TEDA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85Current Scientific and Market Status and Future Prospects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85

Technical Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85Market Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92

Relevant Capacity Available to TBNA and TEDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94Drivers and Barriers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94A Possible Path Forward . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96

Contents vii

ChAPTer Seven

Membranes, Filters, and Catalysts for water Purification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99Importance to TBNA and TEDA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99Current Scientific and Market Status and Future Prospects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99

Membranes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101Filters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102Catalysts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104Alternative Methods for Reverse-Osmosis Desalination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105

Capacity Available to TBNA and TEDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106Drivers and Barriers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106A Possible Path Forward . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108

ChAPTer eIGhT

Molecular-Scale Drug Design, Development, and Delivery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109Importance to TBNA and TEDA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109Current Scientific and Market Status and Future Prospects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109

Research Area 1: Targeted Carriers for Drug Delivery and Imaging . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110Research Area 2: Controlled Release . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114Research Area 3: Drug Administration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115Research Area 4: Solubility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116

Relevant Capacity Available to TBNA and TEDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117Drivers and Barriers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117A Possible Path Forward . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119

ChAPTer nIne

electric and hybrid vehicles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121Importance to TBNA and TEDA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121Current Scientific and Market Status and Future Prospects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121

Technology Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121Market Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128

Relevant Capacity Available to TBNA and TEDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131Drivers and Barriers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131A Possible Path Forward . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 134

Building R&D Capacity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 134Developing an Industrial Base . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 134Positioning TBNA and TEDA for the Global Marketplace . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135

ChAPTer Ten

Green Manufacturing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137Importance to TBNA and TEDA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137Current Scientific and Market Status and Future Prospects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 138

Technology Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 138Regulatory Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 140Market Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 141

Relevant Capacity Available to TBNA and TEDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 144Drivers and Barriers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 144

viii The Global Technology Revolution China, In-Depth Analyses

A Possible Path Forward . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 146

PArT Three

Building for TBnA’s Future . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 149

ChAPTer eLeven

Toward Making TeDA a State-of-the-Art Science and engineering Center . . . . . . . . . . . . . . . . . . . . . 151Positioning TBNA and TEDA for the Future by Building on the Present . . . . . . . . . . . . . . . . . . . . . . . . . . . . 152Integrating Specific Action Plans into an Overarching Strategic Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 153

Building State-of-the-Art Research and Development Programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 153Updating and Expanding TBNA’s Manufacturing Base . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 154Positioning TBNA and TEDA for the Global Marketplace . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 154

APPenDIxeS

A. rAnD workshop on TBnA Science and Technology vision, August 8–9, 2007 . . . . . . . . . . 157B. TeDA Meeting Agenda, December 5, 2007, and List of Participants . . . . . . . . . . . . . . . . . . . . . . . . 161C. Green Chemistry Awards of national Governments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 165D. Some recent Conferences and Academic research on Green Manufacturing in China . . 171

references . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 173

ix

Figures

1.1. The Tianjin Binhai New Area, Situated in the Tianjin Municipality . . . . . . . . . . . . . . . . . . . . . . . . 2 1.2. Administrative Zones of the Tianjin Binhai New Area . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 3.1. TEDA Industrial Output, by Industry, 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 3.2. Increase in the Number of Enterprises in TEDA with Investment from

Fortune 500 Companies, 1984–2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 3.3. TEDA GDP Growth, 2001–2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 3.4. Electricity Consumption and Supply Capacity in TEDA, 2004–2007 . . . . . . . . . . . . . . . . . . . . 42

xi

Tables

2.1. Seven Technology Applications Selected for TBNA and TEDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 3.1. Some Fortune 500 Companies Invested in TEDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 3.2. Chinese Enterprises with Greatest Investment in TEDA, 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 3.3. Breaking Down TEDA’s Gross Industrial Output . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 3.4. Four Pillar Industries and TEDA’s Gross Industrial Output . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 3.5. Industrial Output of the Three Industrial Parks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 3.6. Breakdown of TEDA’s GDP, by Sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 3.7. New Enrollment at Postsecondary Institutions and Vocational Schools, 1994–2004 . . . . 45 3.8. Graduates of Postsecondary Institutions and Vocational Schools, 1994–2004 . . . . . . . . . . . 46 4.1. Top 10 Producers of Photovoltaics, January–June 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62 7.1. Water-Purification Applications Addressed by Emerging Technologies . . . . . . . . . . . . . . . . . . . 101 B.1. TEDA-TBNA Meeting Participants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 161

xiii

Summary

Running along 150 kilometers (km) of coastline in the sprawling municipality of Tianjin in northeast China,1 Tianjin Binhai New Area (TBNA) has taken on a pivotal role in Chi-na’s national economic strategy. Tianjin municipal authorities first established this locality of approximately 2,200 square km (sq km) in 1994. At that time an arid, undeveloped area, TBNA was given the ambitious task of spurring industrial growth in Tianjin. In little more than a decade, it has become home to 1.4 million people, northern China’s largest container port, and a broad base of industry and manufacturing.

In 2006, China’s State Council named this industrial center in the municipality of Tian-jin as a “special pilot zone” with a mandate to become the country’s next regional engine for economic growth. In this capacity, it is to serve as a model of regional development and eco-nomic reform for other parts of China. Now reporting directly to the State Council, TBNA benefits from a host of favorable national-government policies and tax incentives designed to attract foreign and domestic investment and stimulate trade. It is expected to emerge as China’s next economic powerhouse, invigorating the economy of the northeastern Bohai Rim region in the same manner as Shanghai and Suzhou did in the Yangtze River delta area and Guangzhou and Shenzhen in the Pearl River delta area before it.

The Tianjin Economic-Technological Development Area (TEDA) is one of three admin-istrative zones in TBNA. It is also TBNA’s industrial and manufacturing base and the center of TBNA’s financial and commercial activities. TEDA is to play a key part in the economic growth envisioned for TBNA. Established in 1984, TEDA is today a bustling industrial-park complex. It possesses a robust manufacturing base, with pillar industries in electronics, auto-mobiles and parts, food processing, and biopharmaceuticals. Many of the world’s Fortune 500 companies, top Chinese firms, and other leading multinationals have strong presences in TEDA.

A Vision of the Future for TBNA and TEDA

In its directive, the State Council specified that TBNA focus its development efforts in three domains, eventually becoming a center in north China for the following three spheres:

leading-edge research and development (R&D) and technology incubation•

1 A municipality in China is not a city in the Western sense of the term but rather an expansive administrative unit that extends from a populous urban core to cover a very large surrounding region. There are only four such municipalities in China, each of which holds the status of province and reports directly to the Chinese central government.

xiv The Global Technology Revolution China, In-Depth Analyses

first-class, modern manufacturing•international shipping and logistics.•

At the same time, along with economic development, the State Council intends for TBNA to lead efforts to address many of China’s most urgent national problems. Steadily rising energy demands, a growing scarcity of usable water supplies, and gravely escalating urban pollution are among China’s greatest concerns. With these needs in mind, TBNA, as a pilot zone, is to present an alternative to the traditional industrial economy, shaping a model of sustainable development and ecofriendly industry that will contribute to tackling all of these challenges.

Innovation in science and technology (S&T) stands at the core of this vision of economic and environmental development, particularly of cutting-edge R&D. TBNA will need to take definitive steps to pursue this goal, and TEDA will be at the forefront of this effort. Building on its existing manufacturing base, TEDA aims to transition from a successful industrial-park complex into a state-of-the-art science and engineering (S&E) center for high-impact emerging technologies. Other enterprises with relevant capacity located elsewhere in TBNA will follow suit. The desired end result is innovative R&D that meets international standards and posi-tions TBNA as a global technology leader.

Achieving the Vision for TBNA and TEDA Through Foresight Analysis

Early in the process of developing a strategic plan for this ambitious transformation, senior managers from TBNA and TEDA found a 2006 report by the RAND Corporation, The Global Technology Revolution 2020, Executive Summary: Bio/Nano/Materials/Information Trends, Drivers, Barriers, and Social Implications (GTR 2020 Executive Summary) and The Global Technology Revolution 2020, In-Depth Analyses: Bio/Nano/Materials/Information Trends, Driv-ers, Barriers, and Social Implications (GTR 2020 In-Depth Analyses) (together, GTR 2020). This pair of reports is a comprehensive foresight analysis that identifies technology applications (TAs) most plausible by 2020, those countries capable of acquiring them, and their likely effects on society. The study focused on the applications made possible by emerging technol-ogy trends rather than on the technologies themselves because technologies on their own rarely deliver solutions to real-world problems. Instead, solutions derive from the ways in which tech-nologies are put to beneficial use. Accordingly, GTR 2020 highlights TAs, such as cheap solar energy, instead of technologies, such as photovoltaic (PV) materials.

Having reviewed GTR 2020, TBNA and TEDA managers approached RAND to con-duct a series of foresight studies designed specifically for their purposes. They commissioned RAND to do the following:

Identify promising emerging TAs for TEDA and other high-tech centers in TBNA to •implement as a pivotal part of TBNA’s overall strategic plan for economic growth.Identify the capacity needs to implement these TAs, as well as the critical drivers and bar-•riers that might facilitate or hinder implementation.Develop a strategy and action plan for each TA.• 2

2 In this summary, we describe the strategy for each TA. The detailed action plans can be found in the chapters on the individual TAs in Part Two of this report.

Summary xv

Provide guidance on how these TAs might fit into an overarching strategic plan for •TBNA’s economic development.

An Overview of the Most-Promising Technology Applications for TBNA and How We Selected Them

Seven innovative TAs emerged from our analysis as particularly promising for TBNA to pursue as it endeavors to fulfill the State Council’s mandate:

Cheap solar energy: • Solar-energy systems inexpensive enough to be widely available to developing and undeveloped countries, as well as disadvantaged populations3

Advanced mobile communications and radio-frequency identification (RFID): • Multifunc-tional platforms for sensing, processing, storing, and communicating multiple types of data. RFID involves technologies that can store and wirelessly transmit information over short distancesRapid bioassays: • Tests to quickly detect the presence or absence of specific biological sub-stances with simultaneous multiple tests possibleMembranes, fabrics, and catalysts for water purification: • Novel materials to desalinate, dis-infect, decontaminate, and help ensure the quality of water with high reliabilityMolecular-scale drug design, development, and delivery: • The abilities to design, develop, and deliver drug therapies at the nanoscale to attack specific tumors or pathogens without harming healthy tissues and cells and to enhance diagnosticsElectric and hybrid vehicles: • Automobiles available to the mass market with power systems that combine internal combustion and other power sourcesGreen manufacturing: • The development and use of manufacturing processes that mini-mize waste and environmental pollution and optimize the use and reuse of resources.

To arrive at this selection, we began with the 12 TAs identified in GTR 2020 as those that China could acquire by 2020. We then combined this with a rigorous study of realities, circumstances, and issues in TBNA and in China more broadly, drawing on a diverse array of Chinese- and English-language sources:

Chinese- and English-language documents describing the mission, history, and current •status of TBNA and TEDAChinese- and English-language literature on China’s social, environmental, and economic •needs and measures that the Chinese government has taken to date to address themon-site interviews that we conducted in TBNA, TEDA, the Tianjin Port, the municipal-•ity of Tianjin more broadly, and the city of Beijingvisits to S&T institutions that could provide capacity outside TBNA and TEDA, such as •Tsinghua University and the Chinese Academy of Sciencesa two-day workshop that we held in TEDA with key figures from TEDA scientific insti-•tutions, firms, and management.

3 This and the following definitions are based on those used in GTR 2020.

xvi The Global Technology Revolution China, In-Depth Analyses

On the basis of that analysis, we narrowed down the top 12 TAs for China to the final selection of seven. These either come directly from GTR 2020 or are hybrids combining one or more of the top 12.

The Foundation for TBNA’s Future Development in Science and Technology

The analysis on which we based our selection of TAs and, eventually, the strategies and action plans that we suggested for them, took into account four principal factors:

TBNA and TEDA’s missions, as mandated by China’s State Council•China’s pressing national needs•drivers and barriers to technological innovation in China as a whole and for TBNA more •specificallyrelevant capacity currently available to TBNA and TEDA both locally and more broadly •in R&D, manufacturing, and S&T commercialization.

TBNA and TEDA’s Mission as a Special Pilot Zone for Economic and Environmental Development

In a relatively short time, TBNA and TEDA have successfully established a strong manufac-turing base. With its three-pronged mandate for TBNA, the State Council is now calling for TBNA and TEDA to build on this base to develop a modern, high-tech manufacturing capac-ity that emphasizes R&D to produce goods that add value and create better-paying jobs. This type of manufacturing is knowledge-based; consequently, S&T will be a crucial part of this transformation. The capacity for S&T commercialization will also be vital so that the products that TBNA and TEDA design in their R&D efforts are highly marketable and can be manu-factured using innovative production processes.

The part of the State Council’s mandate that directs TBNA to become a center for inter-national shipping and logistics is closely integrated with R&D and manufacturing objectives. Achieving this goal will require TBNA to operationalize cutting-edge supply-chain and logis-tics technologies emerging from current R&D.

A companion mandate for TBNA to experiment with reforms to the financial sector has helped identify preferred business areas for S&T development. In December 2007, TBNA signed an agreement with the China Development Bank to co-finance a RMB 2 billion (US$293 million) venture-capital fund to boost high-tech start-ups in TBNA.4 This specifies favored areas for investment: electronics, bioengineering, new materials, new energy, environ-mental protection, and automated manufacturing.

The State Council’s directive to TBNA to implement innovative environmental initia-tives alongside economic development stems from the recognition that three decades of rapid economic growth have taken a grave toll on the environment in China. While economic devel-opment must continue, it must be sustainable. TBNA has already taken definitive first steps to meet the environmental directive with such initiatives as its circular economy and the Sino-

4 As of November 5, 2008, the exchange rate was 0.146445 U.S. dollars per Yuan. RMB is Renminbi, the official Chinese currency, which is also frequently referred to as Yuan.

Summary xvii

Singapore Tianjin Eco-City.5 The first involves using and regenerating resources in sustained cycles that minimize industrial waste and pollution. The ecocity, with a planned population of 350,000, will be constructed and operate using advanced green technologies, guided by Singa-pore’s experience with renewable energy, green manufacturing, low-pollution public transpor-tation, and recycling of water and waste. These efforts are only the beginning of a push from TBNA to create a showcase of sustainable development and environmentally friendly manu-facturing approaches. What TBNA successfully prototypes could eventually be put into use throughout China.

China’s Pressing National Needs

Even as China’s economy continues to grow and its rising middle class enjoys the higher stan-dard of living that accompanies that growth, the country faces serious challenges:

Reduce rural poverty: • China’s meteoric economic growth has dramatically decreased pov-erty in busy urban commercial areas. But poverty remains entrenched in much of rural China. The country needs TAs that can help create opportunities for rural dwellers, improve their standards of living, and reduce the pressure to migrate to urban centers for work.Provide for a large and rapidly aging population: • Despite having curbed its population growth, China still has more than 1 billion residents, many of whom are elderly. At the same time, China is transitioning to a new social-welfare system that calls on working-age people to shoulder much of the cost of providing previously state-funded services. Conse-quently, TAs that help provide well-paying jobs are essential, as are medical innovations to help meet the special health requirements of senior citizens.Meet the population’s health and sanitation needs: • A population as large as China’s presents daunting health-care needs. Noncommunicable diseases are now the primary concern, although certain communicable diseases remain a problem. The health-care burden is disproportionately high in rural areas. China needs TAs that can improve private and public health care and cost-effectively enhance the quality of water and sanitation, par-ticularly in rural areas.Meet growing energy demands: • China is one of the world’s top energy consumers, and its needs are on a steady upward curve. Oil and gas for automobiles are in particularly high demand as ever-larger numbers of China’s expanding middle class purchase cars. The country needs TAs that can tap alternative energy sources, reduce demand for oil, boost energy efficiency, and decrease industrial energy requirements.Reverse water shortages: • Clean water is scarce in China overall. Shortages are especially severe in the north of the country, which suffers from very low rainfall and dwindling groundwater sources. Yet, residential and industrial demand shows no signs of abating, and supplies cannot keep pace. TAs that can provide access to clean water from a variety of sources are vital.Reduce pollution: • China’s economic boom has left it facing critical pollution levels. Acid rain, air pollution, urban sprawl, loss of arable land, and red tides are among the grav-est problems. The country needs TAs that can help balance economic development with

5 A circular economy uses energy, water, and raw materials in sustained cycles to minimize waste and pollution.

xviii The Global Technology Revolution China, In-Depth Analyses

environmental protection by reducing toxins in automotive and industrial emissions, recycling resources, and increasing energy efficiency.Sustain high economic growth: • China must continue to build and expand its economy to be able to solve national problems, create jobs, and enhance quality of life for its residents. The country is now at a crossroads at which knowledge-driven economic growth is criti-cal to its future. At the core of this growth will be TAs that help China reduce its reliance on foreign technology sources, join the ranks of the world’s leading S&T nations, and repair a national brand image damaged by a series of high-profile incidents indicating poor quality assurance.

Drivers and Barriers to Technological Innovation in China and TBNA

Widespread, sustainable implementation of any TA depends on the balance between the driv-ers that facilitate implementation and the barriers that hinder it. A single factor can be a driver or a barrier. Consider cost and financing: The availability of ample venture capital can make money a driver, but lack of funds can turn it into a barrier.

In our view, the factors that will most influence China’s ability to successfully pursue cutting-edge R&D and technology innovation are as follows:

the country’s needs•its national R&D policies•other national policies that could generate demand (or, as appropriate, reduce demand) •for certain TAsintellectual property rights (IPR) protection•finance and banking laws and regulations•local policies, laws, and regulations that could directly affect individuals’ and organiza-•tions’ ability to conduct cutting-edge R&D and commercialize innovative technologieshuman capital•culture of R&D and innovation.•

These same eight factors will most affect TBNA’s ability to develop and implement the selected TAs. Some of these are clearly either a driver or a barrier throughout most of China. But occa-sionally, local circumstances make them stronger or weaker drivers or barriers in a particular organization or region (or for a specific TA) than they are elsewhere in the country.

Several of these factors are unmistakable barriers in TBNA and hold for all seven TAs. IPR protection, for example, remains a barrier in TBNA, as in China as a whole, to both homegrown innovation and the involvement of foreign capital and talent in new R&D and technology ventures. Finance and banking laws and regulations are also a barrier in TBNA, as they are in China generally, because they discourage investment of venture capital. But, for certain of the seven TAs, sources of venture capital available to TBNA for specific technologies mitigate this barrier to some degree. Lack of a culture of R&D and innovation is a third bar-rier in TBNA, as it is in China as a whole. It discourages the risk-taking in new ventures that is essential to pursuing and commercializing groundbreaking R&D.

TBNA has one driver that all seven TAs share: human capital. This stems from the strength of TBNA’s current manufacturing base, the corresponding workforce, and the con-centration of academic institutions in the municipality of Tianjin. However, young Chinese

Summary xix

people are tending to shy away from technical and vocational training, and domestic competi-tion for S&E talent is heated. Both of these could be mitigating factors.

Capacity Currently Available to TBNA and TEDA

To fulfill the State Council’s mandate, TBNA and TEDA will need capacity in three areas: (1) R&D, (2) manufacturing, and (3) S&T commercialization. Both local capacity—in TBNA, TEDA, and the municipality of Tianjin more broadly—and that from elsewhere in China and internationally will play a part.

In terms of R&D capacity, TBNA and TEDA have a growing number of institutions that provide cutting-edge research facilities and a professional cadre of highly trained scientists and engineers. But they face intense competition, both within China and abroad, for human capital of this caliber.

With regard to manufacturing capacity, TBNA and TEDA have a substantial industrial base that has been growing for the nearly 25 years since TEDA’s inception. Investment by an array of Fortune 500 companies, a track record of increasing industrial output, and a rising gross domestic product (GDP) indicate the strength of this base. TBNA is also steadily improv-ing the physical infrastructure—utilities, cargo facilities, and waste-management processes—that are vital to manufacturing capacity. But a potential shortage of the skilled laborers and technicians needed to work in manufacturing and, again, heightened competition for those on the job market are real challenges.

As for S&T commercialization, TBNA and TEDA operate a well-established network of research parks and technology incubators aimed at supporting emerging high-tech enter-prises. Ample financial incentives help spur development and attract human capital. Yet, these enterprises face considerable challenges due to China’s need to better protect IPR and reform finance and banking laws and policies. They also lack strong linkages between R&D institu-tions and commercial industry to facilitate the transfer of high-tech products to market.

A Close Look at the Seven Most-Promising Technology Applications

The seven TAs that appear to be most potentially fruitful for TBNA build on two highly influential emerging global trends in technology and industry. The first is micro- and nano-scale technology. The vast majority of the TAs identified in GTR 2020 involve micro- or nano scale advances and the integration of bio-, nano-, information, and materials technol-ogy. Similarly, six of the TAs recommended for TBNA involve technologies in this domain. Second, both industry and consumers today are moving clearly in the direction of green processes and technologies. Four of the TAs recommended for TBNA are focused on using energy, water, and other resources much more efficiently than has occurred in the past.

Cheap Solar Energy

Cheap solar energy has strong potential worldwide market demand. Driven by govern-ment incentives and renewable-energy subsidies—especially in Germany and Japan—the solar-electricity industry has grown at an average annual rate of 44 percent over the past five years. In 2007, it grew by 55 percent to nearly $13 billion. To sustain such growth, companies are now competing to make solar-energy systems less expensive and more efficient.

xx The Global Technology Revolution China, In-Depth Analyses

China needs to promote energy growth but, concurrently, to develop renewable-energy sources, improve air quality, and reduce pollution. Pursuing cheap solar energy is consistent with these needs because it would replace energy currently being generated mostly by coal-fired power plants.

There are three generations of solar electric technologies. The first generation, based pri-marily on polycrystalline silicon, currently accounts for more than 90 percent of global sales. The emerging second- and third-generation systems are based on thin-film materials and novel nanoscale technologies. They have the potential to transform the industry, offering lower costs and potentially greater efficiency. The growth of the global market demand depends on them.

Available Capacity. The Tianjin area offers substantial capacity for TBNA to implement cheap solar-energy applications. The thin-film silicon research group at Nankai University, working in collaboration with the Beijing Solar Energy Institute, is one notable example. Another is the China National Academy of Nanotechnology and Engineering (CNANE) in TEDA. CNANE has the technical and instrumentation capacity on the nanoscale level required to conduct R&D on third-generation solar materials.

Drivers and Barriers. China’s need to ensure energy growth while reducing harm to the environment and improving air quality is a driver for this TA. China’s national R&D poli-cies, including support for solar-energy demonstrations, and other national policies are also drivers.

Local policies and laws—in particular, building codes and regulations governing electric-utility connections to buildings—have often been barriers where solar-electricity systems have been implemented. This is because balance-of-system equipment, such as batteries and electri-cal inverters, as well as other safety and metering equipment that building inspectors and the local electric utility might require have presented a considerable ongoing expense. TBNA has the opportunity to mitigate these problems and perhaps even turn local policy and law into a driver by reviewing building codes and utility-interconnection regulations to ensure that the balance-of-system requirements for solar electricity provide needed safety without increasing costs.

Finance and banking laws and regulations do constitute a barrier as well. But this is to a somewhat lesser degree with cheap solar energy than with other TAs because TEDA’s nano-technology venture fund and the green venture-capital fund of Tsinghua University, Tsing Capital, are potential sources of investment funds for TBNA to pursue this TA.

Recommended Strategy. China already has a well-developed first-generation solar- electricity industry. Consequently, we believe that the best opportunity for TBNA and TEDA lies not in entering the first-generation market but rather in becoming an R&D and manufac-turing center for second- and third-generation systems. The initial focus should be the global export market and, in the longer term, the domestic Chinese market, as it develops.

Advanced Mobile Communications and RFID

Mobile-communication devices increasingly do much more than exchange voice data. They also serve as platforms that can sense, process, store, and communicate data in multiple forms. At the same time, RFID devices have become increasingly inexpensive and sophisticated. Already in widespread use in supply chains and a variety of commercial transactions, they are now poised for integration into mobile-communication devices.

The demand for multifunctional wireless communications in both rural and urban mar-kets is growing rapidly worldwide. This is particularly true in the Asia-Pacific region and China.

Summary xxi

In addition, with its mandate to become an international shipping and logistics center with the Tianjin port as its hub, TBNA has a pressing need for advanced mobile-communication and RFID technologies that promise to streamline cargo logistics, reduce the cost of port opera-tions, and increase shipping security.

Advanced mobile-communication and RFID systems are composed of many individual component technologies—for example, displays, memory, batteries and power storage, and sensors and antennas. Each of these constitutes an industry itself and will determine the future direction of wireless computing platforms. As global demand for this TA grows, the market for these component technologies will strengthen in kind.

Available Capacity. TEDA produced more than 105 million cell-phone handsets in 2006—approximately 10 percent of the mobile phones sold worldwide. Its extensive manufac-turing base in this area includes Samsung’s largest facility for manufacturing mobile phones. TBNA also has available capacity in component technologies. Two groups at Tianjin Univer-sity (TU) are doing leading edge R&D on display technologies. In addition, a TEDA firm manufactures the smallest hydrogen canister in the world (just the size of a AA battery), which can provide the hydrogen storage for fuel cells and mobile-phone chargers.

Drivers and Barriers. China’s need to spur economic development and increase produc-tivity is a driver for this TA. Advanced mobile communications will help supply the country’s growing mobile-phone market and, accordingly, boost consumption. RFID applications for supply chains and logistics have the potential to enhance manufacturing and shipping con-siderably. China’s national R&D policies supporting integrated circuit, software, and network development are another driver.

Other national policies—especially China’s resolve to date to not adopt international standards for mobile communication—may constitute a barrier.

Recommended Strategy. TBNA should aim to become an R&D and manufacturing center for mobile-communication devices and RFID systems. It should focus initially on the domestic Chinese market and then broaden to the global market. In addition, it should build state-of-the-art R&D programs in two component technologies: displays and power sources. It should not, however, attempt to shape R&D trends in integrated circuits.

Rapid Bioassays

Global markets for better means of testing personal and public health and monitoring the envi-ronment are emerging rapidly. China has a particular need for state-of-the-art technology to help meet public-health and environmental challenges. Novel biochips to detect and analyze genes and proteins are enabling very fast tests for diseases and pathogens. The specificity and sophistication of these advanced bioassays has increased to the extent that some lab-on-a-chip systems can even perform as small-scale laboratories using miniaturized devices. These types of bioassays could identify or eliminate threats to public health, significantly improve patient outcomes, and accurately detect pathogens in the environment and the food supply.

Available Capacity. TEDA is home to one of China’s five national biochip R&D centers, the Tianjin Biochip Corporation. This institute produces its own biochips, as well as reagents and other disposables used in bioassays. It also provides diagnostic bioassays to detect E. coli, Shigella, and Salmonella. It has partnered with a global leader in the field, the U.S. company Affymetrix.

Drivers and Barriers. This TA has several drivers. One is China’s need to improve public health, reduce environmental damage, and, especially, to improve the quality of the water

xxii The Global Technology Revolution China, In-Depth Analyses

supply. Another is China’s national R&D policy, in which health, medicine, and biotechnol-ogy are focus areas. Other national policies (particularly those designed to regulate food and drugs more effectively) are a third.

Recommended Strategy. The long-term strategy is for TBNA to become a leading player in the global marketplace for state-of-the-art rapid bioassays. But its initial focus should be on using licensing and partnership agreements to attract leading companies to TBNA and TEDA. During this period, TBNA should build capabilities as a reseller of bioassay disposables and equipment. Eventually, TBNA companies should start manufacturing these products them-selves. The Chinese domestic market should be the first target, followed by the global market.

Membranes, Filters, and Catalysts for Water Purification

Ensuring affordable access to clean water is a major global challenge. This challenge is acute in China, one of the world’s top five growth markets for water and wastewater technologies. It is especially weighty in the Bohai Rim region and TBNA, where usable water supplies are exceedingly scarce.

Technologies for purifying water are an important emerging area of S&T. Four applica-tions are being developed:

desalination• : removing salt from sea waterdisinfection• : removing microorganismsdecontamination• : removing toxic compoundsquality assurance• : detecting potentially harmful matter.

Novel nanomaterials can enhance current purification systems and may make them much more cost-effective. Examples include nanocomposite and biomimetic membranes,6 filters made of fibrous media, filters with nanoscale porosity, nanoscale catalysts, and DNA-nanoparticle composites. The principal challenge will be to scale up materials from labs to commercial applications.

Available Capacity. TBNA is the home of Tianjin Motian Membrane Engineering and Technology Company. Motian has a 20-year track record of manufacturing water-filtration membranes for industrial, personal, water-utility, and medical uses, including desalina-tion. CNANE has the capacity to conduct research on nanoscale filters and catalysts. TU’s School of Chemical Engineering and Technology has a strong R&D program in desalina-tion, including a desalination demonstration project, and is designing, fabricating, and test-ing nanoscale filters. TEDA’s nanotechnology transfer and commercialization organizations, the Nanotechnology Industrial Base Company (NIBC) and the Nanotechnology Venture Capital Company (NVCC), have named nanoscale water-purification filters as key targets for commercialization.

Drivers and Barriers. China’s need to improve public and individual health and meet the demand for clean water is a driver for this TA. China’s national R&D policies, which have ear-marked R&D funding for water purification, and other national policies aimed at providing clean water for China’s residents are two others.

6 Those that mimic mechanisms found in nature.

Summary xxiii

Chinese government subsidies have kept the price of water lower than what it would cost to provide it by desalination or purification. These subsidies fall into the category of other national policies, making this a barrier as well as a driver.

Recommended Strategy. We suggest two long-term goals for TBNA: (1) to become a center for R&D in nanoscale membranes, filters, and catalysts and (2) to become a leader in manu-facturing state-of-the-art membranes for purifying water. It is vital for TBNA to foster close relationships between research labs and private companies to facilitate commercialization.

Molecular-Scale Drug Design, Development, and Delivery

The demand for new, more-effective medical treatments, with lower needed doses and fewer adverse side effects, is growing both in China and globally. Molecular-scale drug therapies and diagnostics are based on recent developments at the intersection of nanotechnology and bio-technology. This young, very promising field of nanomedicine could serve this market. Four innovative applications are of particular interest:

targeted carriers for drug delivery and imaging•controlled-release platforms and materials•novel methods of drug administration•means of increasing solubility.•

Available Capacity. In terms of R&D capacity, TEDA’s nanotechnology center, CNANE, runs a pharmaceutical R&D program. TU and Nankai University have world-class research groups working together on an exciting new platform for drug delivery: carbon nanohorns. TEDA is also home to Tianjin SinoBiotech, a company developing biotechnology and gene therapies at the preclinical stage. There is a strong industrial base for pharmaceuticals in the municipality of Tianjin that includes several of the world’s top pharmaceutical companies. Biopharma and bionanomaterials for drug delivery have been named as thrust areas for tech-nology transfer and commercialization in TBNA.

Drivers and Barriers. One driver for this TA is China’s need to improve public and indi-vidual health. China’s national R&D policies are also a driver. They have thrusts in demonstra-tion projects for commercially producing vaccines and gene-modified medicines, improving modern traditional Chinese medicine, and enhancing capabilities for inventing and producing new drugs.

Other national policies are a barrier—specifically, regulations that make development more expensive and impede clinical testing and marketing of new drugs.7

Recommended Strategy. TBNA should aim to become a center for R&D and manufac-turing of drugs developed through bionanotechnology. It should focus initially on attracting investment from foreign enterprises and, in tandem, aggressively building homegrown R&D capacity. Eventually, it should direct R&D activities toward commercializing novel medical treatments and techniques.

7 Despite these problems, a recent article in Nature Biotechnology assesses the market for biotechnology-derived pharma-ceuticals in China as “beginning to take off” (see Frew et al., 2008). Detailed data for the article were derived from inter-views of 22 homegrown Chinese health biotechnology firms, including Tianjin SinoBiotech. The authors note that this constitutes only a small fraction of the “thousands of companies in this sector.”

xxiv The Global Technology Revolution China, In-Depth Analyses

Electric and Hybrid Vehicles

Current trends in the global marketplace, including concerns about the price of oil and global warming, suggest that vehicles using electric and hybrid technologies will assume an increasing market share. At the same time, China faces a severe problem with urban pollution. Among its national priorities are reducing automobile pollution and lowering demand for oil.

Hybrid vehicles are already a leading worldwide automotive market. The emergence of plug-in hybrids, which allow the batteries that power the electric motor to be recharged inde-pendently of the motor itself, has blurred the distinction between hybrid and electric vehicles. With this in mind, we created this combined TA. It encompasses four types of automobiles:

purely electric vehicles•traditional hybrids, in which an internal combustion engine recharges the batteries•plug-in hybrids•serial hybrids, in which an on-board power source charges the batteries.•

Many of the components needed for this class of vehicle also have a growing market demand and strong potential for development. These include batteries, power electronics and electrical machines, power trains, internal combustion engines, and emission controls. Advances in battery technology, for example, are extending the range and improving the per-formance of electric and hybrid vehicles.

Available Capacity. To our knowledge, hybrid vehicles are not currently being manufac-tured in TBNA. But TBNA does have extensive capacity to conduct R&D on electric vehicles as well as to manufacture them. The Tianjin Qingyuan Electric Vehicle Company in TEDA builds electric cars, buses, and vans and has sold them globally.

TBNA also has capacity in electric-vehicle components. Qingyuan has an ongoing research collaboration with the U.S. Argonne National Laboratory in power-train technology and other component areas. One of the stakeholder companies in Qingyuan, EV Battery, is conducting battery research. CNANE, TEDA’s nanotechnology center, has an active research program on nanoscale capacitors for electric vehicles. And in terms of S&T commercializa-tion, the China Automotive Technology and Research Center (CATARC) conducts standards and certification testing, which will be essential in developing a market for electric and hybrid vehicles. CATARC is headquartered in the municipality of Tianjin.

Drivers and Barriers. China’s need to raise energy efficiency and reduce environmental damage is one driver for this TA. China’s national policies that promote both the manufacture and purchase of fuel-efficient vehicles are another.

But other national laws and policies are barriers. Examples include tariffs on vehicles or auto parts coming into China, hybrid-component patents held by foreign firms, controls that keep fuel prices low in China, and restrictions on electric vehicles in large Chinese cities.

Recommended Strategy. Given the strong market potential of electric- and hybrid-vehicle components, we recommend that TBNA develop and expand collaborative R&D on sub-systems and component technologies. At the same time, it should develop the capacity to manufacture hybrid vehicles and components for hybrid and electric vehicles. It should target the growing global market first and the Chinese market later.

Summary xxv

Green Manufacturing

Both multinational corporations and consumers worldwide are increasingly embracing green manufacturing. In many developed economies, for example, governments have established national green chemistry awards for industry. China is no exception: Green manufacturing plants are appearing in the country, and clean-technology venture capital has started to flow in. Mandates, such as the State Council’s directive to TBNA to establish a circular economy, are other signs of this trend.

Four approaches are commonly employed in green manufacturing:

Green chemistry: • environmentally benign chemical processes and productsGreen engineering: • feasible processes and products that minimize pollution and risks to health and the environmentInherently safe process design: • smaller quantities of hazardous material, less hazardous mate-rial, and alternative reaction routes or process conditionsGood manufacturing practices (GMPs): • methods, facilities, and controls to make high-quality reproducible products that meet appropriate regulations and standards.

Available Capacity. Several companies located in TBNA already have programs in green chemistry and experience with green manufacturing. Several firms that have won the U.S. Environmental Protection Agency (EPA) Presidential Green Chemistry Challenge Awards, such as PPG Industries and Novozymes, operate facilities in TEDA. Otis Elevator has built the world’s first green elevator-manufacturing plant in TEDA.

Drivers and Barriers. China’s need to boost energy efficiency and reduce pollution and other environmental impacts is one driver for green manufacturing. Another is national policy designed to conserve resources and reduce pollution. In some cases, these policies explicitly support green manufacturing.

Cost can be a barrier, especially when an existing plant needs to be renovated or replaced to become green. But the competitive advantage that green manufacturing provides in many cases can mitigate this barrier.

Recommended Strategy. TEDA should become a center for green manufacturing in China. The initial focus should be on attracting to TBNA those companies at the leading edge of green chemistry and engineering. Over time, TBNA itself should start conducting R&D on new green manufacturing processes and, eventually, implement them in TBNA and TEDA. When designing green manufacturing initiatives, TBNA should emphasize new plants and focus on processes that offer cost savings.

Building for TBNA’s Future: Integrating the Seven Action Plans into an Overarching Strategic Plan

We believe that the seven TAs should form a pivotal part of TBNA’s strategic plan for tran-sitioning into a state-of-the-art S&E center. All of the TAs are in line with promising global trends; are well suited to current capacities in TBNA, TEDA, and the municipality of Tianjin and build on existing pillar industries; and support Chinese government priorities.

Part of the overarching strategic plan should be geared toward addressing broad general challenges that currently stand as barriers to all seven TAs. One of these is protecting IPR. The

xxvi The Global Technology Revolution China, In-Depth Analyses

plan should include measures to help TBNA and TEDA enforce existing laws in this domain. A second is getting people at different stages of technology development working together. Here, we recommend that TBNA and TEDA incorporate into the plan ample opportunities for cross-fertilization between research facilities and industry. Finally, it is vital that TBNA build a culture of R&D and innovation. The plan should contain elements that promote flex-ibility and risk-taking in TBNA and TEDA’s funded ventures.

Beyond this, TBNA could use a three-pronged framework to integrate the specific action plans for the seven TAs into an umbrella strategic plan:

Develop state-of-the-art R&D capacity in relevant areas.•Update and expand the existing manufacturing base.•Build capacity for S&T commercialization.•

These three activities would need to be carried out in parallel. Each requires using and expand-ing existing local capacity and introducing new capacity. Novel advances should stem from and extend the existing capacity base while fresh R&D programs are started and new compa-nies with state-of-the-art capabilities come in to bring overall capacity up to world-class stan-dards. Each will also support the others.

Develop State-of-the-Art R&D Capacity in Relevant Areas

The strategic plan should lay out an agenda for each TA for (1) making optimal use of current local R&D capabilities, (2) expanding the outreach of existing R&D programs, and (3) begin-ning entirely new ones. Efforts in all three of these areas would need to go on in tandem. Existing local R&D programs include those of TEDA’s nanotechnology center (CNANE) and of Tianjin and Nankai universities. TBNA could provide resources to expand these pro-grams in areas that underpin the seven TAs—for example, bionanotechnology, nanofiltration, and microfluidics. A good model for expanding the outreach of existing research programs is the collaboration between the Qingyuan Electric Vehicle Company and the U.S. Argonne National Laboratory. This is an excellent example of a public-private partnership, as well as a cross-cultural one.

A first step in building entirely new R&D programs could be to cement relationships with leading global companies developing second- and third-generation solar collectors, nano-scale filters and membranes, and nanoscale-formulated drugs. These companies could partner with appropriate research institutions in TBNA, TEDA, or the municipality of Tianjin more broadly. Building new programs could also involve attracting companies that already have cutting-edge R&D capabilities to establish a presence in TBNA.

Update and Expand the Existing Manufacturing Base

TBNA’s strategic plan should include measures to ensure that manufacturing companies cur-rently operating in TBNA and TEDA are using processes that take advantage of the most recent advances in both design and technology. For example, TBNA could provide a pack-age of subsidies and awards to firms that apply green manufacturing principles. It should also establish the infrastructure that would make it easier for them to do so. At the same time, it should make provisions in the plan to institutionalize the training that TBNA’s manufacturing workers need for these advanced processes.

Summary xxvii

Bringing in new companies with state-of-the-art manufacturing capabilities should be a vital part of this effort as well. TBNA could approach and provide a portfolio of incentives to global companies manufacturing second- and third-generation solar collectors, system compo-nents for advanced mobile communications, or lab-on-a-chip bioassays to establish plants in TBNA or TEDA.

Build Capacity for S&T Commercialization

The strategic plan should include initiatives aimed at ensuring that TBNA and TEDA’s manu-facturing plants and processes meet global standards. It might make mandatory, for instance, such certifications as the International Standards Organization standard 14001, a globally rec-ognized environmental management standard.

The plan should also lay out steps to position TBNA to serve the global marketplace. It should make a standard practice of using the local Tianjin market as a testing ground for prod-ucts that could eventually be marketed elsewhere in China and worldwide. Provisions should be included to ensure that products tested and approved in TBNA are on par with accepted practices and standards in target global markets. Electric and hybrid vehicles, for example, would have to meet the most restrictive U.S. and European Union (EU) standards for emis-sions and mileage performance. Bioassays to monitor food and water developed in TBNA would need to satisfy U.S. and EU standards for demonstrated levels of pathogen detection.

xxix

Acknowledgments

The authors greatly appreciate the hospitality provided by the many members of the TBNA and TEDA communities who met with us during our visits to China, as well as their willingness to share with us their thoughts, experiences, and data and other information that were essential for our analyses. We are also extremely grateful to the TBNA and TEDA senior managers who met with us both in China and the United States; Mu Dan Ping, who provided us with an important perspective on the history and issues currently facing TBNA and TEDA; Qian Gu, Jianhui Hu, Xiaoyan Li, Xiao Wang, Xin Wang, Mengjie Wu, Shinyi Wu, and Henu Zhao for their invaluable assistance with Chinese translations; Yong Kang for his help in arranging an important set of meetings at Tsinghua University; Matthew Southerland for essential research into the English and Chinese literature; and our colleagues Susan Everingham, Julie Kim, Debra Knopman, and Martin Wachs, for their sage advice and guidance. We also thank Lisa Spear for her expert administrative support in the development of this report.

We owe a special debt of gratitude to our peer reviewers, Steven Berner, William Blan-pied, and Carl Dahlman, whose insightful analyses and suggestions provided the impetus for significant revisions and improvements to this report.

xxxi

Abbreviations

3G third generation

863 Program National High-Technology Research and Development Program of China

8th ISGCC’ 2007 Eighth International Symposium on Green Chemistry in China

AC alternating current

AIChE American Institute of Chemical Engineers

AIDS acquired immunodeficiency syndrome

atm atmosphere

BNP bimetallic nanoscale particle

CAH China Automotive Technology and Research Center Auto High-Tech Company

CAS Chinese Academy of Sciences

CASIEE Chinese Academy of Sciences Institute of Electrical Engineering

CATARC China Automotive Technology and Research Center

CBRC China Banking Regulatory Commission

CCP Chinese Communist Party

CDC U.S. Centers for Disease Control and Prevention

CDMA code division multiple access

CdTe cadmium telluride

CIAPS China Industrial Association of Power Sources

CIGS copper indium gallium selenide

CIP chemical industrial park

CMOS complementary metal-oxide semiconductor

CNANE China National Academy of Nanotechnology and Engineering

xxxii The Global Technology Revolution China, In-Depth Analyses

CNT carbon nanotube

CO2 carbon dioxide

CPV concentrating photovoltaic

CTCL cutaneous T-cell lymphoma

DC direct current

DLP® Digital Light Processing®

DMFC direct-methanol fuel cell

DNA deoxyribonucleic acid

DOE U.S. Department of Energy

dpi dots per inch

DRAM dynamic random-access memory

EI Engineering Index

EPA U.S. Environmental Protection Agency

ESIA European Semiconductor Industry Association

EU European Union

EV electric vehicle

FDA U.S. Food and Drug Administration

Fe iron

Fe2O3 ferrous oxide

FeRAM ferroelectric random-access memory

F-T Fischer-Tropsch

ft2 square foot

G24i G24 Innovations

GaAs gallium arsenide

GB gigabyte

GDP gross domestic product

GE General Electric

GM General Motors

GMP good manufacturing practices

GPRS general packet radio service

Abbreviations xxxiii

GREET Greenhouse Gases, Regulated Emissions, and Energy Use in Transportation

GSCN Green and Sustainable Chemistry Network

GSM Groupe Spécial Mobile

GW gigawatt

HCCI homogeneous charge–compression ignition

HEV hybrid-electric vehicles

HIV human immunodeficiency virus

HPB Canadian Health Protection Branch

HPV human papillomavirus

HTIG Headwaters Technology Innovation Group

HTS high-throughput screening

IC internal combustion

IEC International Engineering Consortium

IL-2 interleukin-2

IPR intellectual property rights

ISE Infrastructure, Safety, and Environment

ISGCC International Symposium on Green Chemistry in China

ITRS International Technology Roadmap for Semiconductors

JEITA Japan Electronics and Information Technology Industry Association

kg kilogram

km kilometer

kPa kilopascal

KSIA Korean Semiconductor Industry Association

kWh kilowatt-hour

L liter

LED light-emitting diode

LEP light-emitting polymer

Li-ion lithium ion

m3 cubic meter

MB megabyte

xxxiv The Global Technology Revolution China, In-Depth Analyses

Mbit megabit

MEMS microelectromechanical system

MIP microelectronics industrial park

MIT Massachusetts Institute of Technology

µm micrometer

mpg mile per gallon

mph mile per hour

MRA magnetic resonance angiography

MRAM magnetoresistive random-access memory

M-RFID mobile radio-frequency identification

MRI magnetic resonance imaging

MW megawatt

NASA U.S. National Aeronautics and Space Administration

NEMS nanoelectromechanical system

NIBC Nanotechnology Industrial Base Company

NiMH nickel-metal hydride

nm nanometer

NNTIB National Nanometer-Technology Industrialization Base

NOx nitrogen oxide

NVCC Nanotechnology Venture Capital Company

NZVI nanoscale zerovalent iron

OECD Organisation for Economic Co-Operation and Development

OLED organic light-emitting diode

PAMAM polyamidoamine

Pap Papanicolaou

Pb lead

PCM phase-change memory

PCR polymerase chain reaction

PEG polyethylene glycol

PHEV plug-in hybrid-electric vehicle

Abbreviations xxxv

PLED polymer light-emitting diode

PM particulate matter

PNNL Pacific Northwest National Laboratory

PSAT Powertrain System Analysis Toolkit

PV photovoltaic

R&D research and development

RACI Royal Australian Chemical Institute

RAM random-access memory

RF radio frequency

RFID radio-frequency identification

RMB renminbi

RNA ribonucleic acid

RNIP reactive nanoscale iron particle

RoHS restriction on hazardous substances

RRAM resistive random-access memory

S&E science and engineering

S&T science and technology

SAMMS™ self-assembled monolayers on mesoporous supports

SARS severe acute respiratory syndrome

SCI Science Citation Index

SCORR supercritical–carbon dioxide resist remover

SDR software-defined radio

SEPA State Environmental Protection Agency

SIA Semiconductor Industry Association

SMTA Surface Mount Technology Association

Sn tin

SNP single-nucleotide polymorphisms

SO2 sulfur dioxide

SONOS silicon-oxide-nitride-oxide-silicon

sq km square kilometer

xxxvi The Global Technology Revolution China, In-Depth Analyses

sq. mi. square mile

SUV sport-utility vehicle

SWCNT single-walled carbon nanotube

TA technology application

TBC Tianjin Biochip Corporation

TBNA Tianjin Binhai New Area

TD-SCDMA time division–synchronous code division multiple access

TEDA Tianjin Economic-Technological Development Area

TFT thin-film transistor

TSB Tianjin SinoBiotech

TSIA Taiwan Semiconductor Industry Association

TSMC Taiwanese Semiconductor Manufacturing Company

TST Transportation, Space, and Technology

TU Tianjin University

UCLA University of California, Los Angeles

UHF ultrahigh frequency

UMC United Microelectric Corporation

USB universal serial bus

USTC University of Science and Technology of China

VOC volatile organic compound

W-CDMA wideband code division multiple access

WEEE waste electrical and electronic equipment

WiMAX Worldwide Interoperability for Microwave Access

YSP Yat-Sen Scientific Industrial Park

1

ChApTeR One

Introduction

The coastal municipality of Tianjin has long been a key center in northern China for finance and trade, heavy industry, and education. Located in the Bohai Rim region, one of China’s three major coastal economies, it is not a city in the usual Western sense of the term. It is rather a very large administrative unit that spreads out from a densely populated urban hub to cover an extensive surrounding area of less urbanized counties, smaller cities, towns, farmland, and coast.1 In 1984, it became among the first special economic zones the Chinese central govern-ment created to receive foreign investment aimed at promoting national economic reform.2 Today, Tianjin has approximately 11 million residents,3 and its urban center is the third largest in China, after Shanghai’s and Beijing’s.

Less than an hour’s drive toward China’s east coast from Tianjin’s urban hub is the Tian-jin Binhai New Area (TBNA) (Figure 1.1).4 TBNA spans approximately 2,200 square kilome-ters (sq km) in the Tianjin municipality, with 150 km of coastline.5 Today, 1.4 million people call it home. The Tianjin Municipal Committee of the Communist Party of China and the Tianjin municipal government established the area in 1994. The Tianjin authorities gave this barren and undeveloped area a mandate to become a hot spot for industrial growth, accord-ing it special policies and incentives to help it achieve that goal. As it grew, it was expected to increasingly promote economic development throughout the greater Bohai Rim region and beyond.

Within TBNA are three administrative zones (Figure 1.2). The Tianjin Port is the largest port in the Bohai Rim region and the fourth largest in China,6 handling both passenger and cargo transport. It currently maintains trade links with more than 300 other ports around the world. In 2005, its rapidly expanding handling capacity reached 200 million tons of freight—somewhat more than half of Shanghai’s capacity (US-China Business Council, 2006). By 2010, that number is expected to have reached 300 million tons (Koninkrijk der Nederlanden, undated).

1 Tianjin and the other three municipalities in the People’s Republic of China—Beijing, Shanghai, and Chongqing—hold the status of province. Each reports directly to the central government.2 The government created a total of 14 special economic zones, all in coastal areas, in 1984. See “Special Economic Zone (SEZ)” (undated).3 Tianjin’s population at the end of 2006 was 10.75 million (Guo Jia Tong Ji Ju, 2007).4 TBNA is also known as the New Coastal District and the Binhai New Area.5 876 square miles (sq. mi.) total; 93 mi. of coastline.6 As of 2007. The larger ports are Shanghai, Ningbo, and Guangzhou, in that order (Tianjin Port Development Holdings Limited, 2008).

2 The Global Technology Revolution China, In-Depth Analyses

Figure 1.1The Tianjin Binhai New Area, Situated in the Tianjin Municipality

TBNA

Tianjinmunicipality

Tianjinurbanarea

HEBEI

BEIJING

HEBEI

RAND TR649-1.1

Bohai Rim

Covering 5 sq km in Tianjin Port, the Tianjin Port Free Trade Zone is northern China’s largest zone of this kind. With a diverse network of marine, air, rail, and ground transporta-tion and a variety of policies to enable the fast and effi cient handling and transport of freight, it provides a bustling link in the Bohai Rim region between international and Chinese domestic markets.

TEDA is TBNA’s industrial and manufacturing base and the center of its administra-tive, fi nancial, and commercial activities. Occupying 33 sq km just 8 km from China’s east coast, TEDA predates TBNA by a decade: It was originally created in 1984 as a state-level industrial park with the approval of the State Council, China’s highest national administrative

Introduction 3

Figure 1.2Administrative Zones of the Tianjin Binhai New Area

Tianjinurbanarea

HEBEI

Tianjin PortFree Trade Zone

TEDA

TEDA YSP

TEDA CIP

TEDA West

TEDA MIP

Tianjin Port

TBNA

Tianjinmunicipality

NOTE: Based on information from TBNA and TEDA sources and Asia Times.TEDA = Tianjin Economic-Technological Development Area. TEDA CIP = TEDA Chemical Industrial Park. YSP = Yat-Sen Scientific Industrial Park. MIP = TEDA Micro-Electronics Industrial Park.

RAND TR649-1.2

authority. Th is status accorded it a host of tax benefi ts and investment incentives designed to attract foreign ventures and jump-start the economy of what was, at that time, a completely undeveloped geographic area. As a state-level entity, it reported directly to the State Coun-cil. By 1994, when TBNA was established, it had already made substantial headway toward achieving this original mandate.

TBNA: An Ambitious Vision for the Future

In 2006, TBNA caught the attention of China’s State Council. Th e council designated it as a special pilot zone to further propel the country’s comprehensive ongoing economic reforms, making it part of national development strategy. In this capacity, TBNA was to explore “new regional development models [so as] to off er [a] practical example for development and reform

4 The Global Technology Revolution China, In-Depth Analyses

throughout China” (see State Council, 2006). Toward this end, the council directed, “TBNA should adopt new ideas, new institutional systems, and new mechanisms to steadily strengthen [its] innovation ability, service ability, and international competitiveness.” The State Council’s decision has given TBNA a clear directive to become an export-oriented, modern, international economic center (State Council, 2006). Ultimately, the council envisions that TBNA will become a vital “new engine for regional economic growth” in China (State Council, 2006).

The council’s primary objectives for TBNA are that the area should eventually encompass centers for the following:

first-class, modern manufacturing•leading-edge research and development (R&D) and technology incubation•international shipping and logistics (State Council, 2006).•

The ambition is for TBNA, having achieved these goals, to accelerate the development of the Tianjin municipality and spearhead the economic revitalization of the Bohai Rim region more broadly. In this role, it will join coastal China’s two other highly prosperous regional econo-mies: the Pearl River delta area in the far southeast of the country and the Yangtze River delta area in the south-central part. Both set strong precedents: The Pearl River delta area helped launch China’s current economic boom when the Chinese government opened the port city of Guangzhou to the rest of the world and established special export zones7 in Shenzhen and Zhuhai. The Yangtze River delta area subsequently became a second hub for China’s economy, with the cities of Shanghai and Suzhou propelling its growth.

In tandem with economic development, the State Council intends for TBNA to play a special role in the mounting effort to address national problems of growing energy demands, water scarcity, and escalating pollution levels. In its capacity as a pilot zone, TBNA is to offer a model of sustainable development and ecofriendly industry to other regions of the country. A hallmark initiative in this regard is the Sino-Singapore Tianjin Eco-City. This is a collaborative project between the governments of China and Singapore, located in the heart of TBNA, its southernmost tip only a 10-minute drive from TEDA. The ecocity is to use “clean and renew-able energy, with strengthened innovation capabilities and [an] optimized industrial structure” (Sino-Singapore Tianjin Eco-City Administrative Committee, undated) that will take the form of a circular economy—a concept that TBNA is mandated to implement more broadly as well.8 An alternative to the traditional industrial economy, which depletes resources and causes heavy environmental pollution (Qian, 2007), a circular economy entails “a closed loop process of ‘resource-production-consumption–regenerated resource.’” As a result, energy, water, and raw materials can be used in sustained cycles and waste and pollution minimized.9

7 Later called special economic zones.8 A circular economy uses energy, water, and raw materials in sustained cycles to minimize waste and pollution.9 TEDA presented its circular-economy plan at the Third International Conference on the Circular Economy in Tianjin, October 22–23, 2006. See Salonen (2007).

Introduction 5

The Role of TEDA

In the view of the State Council, innovation in science and technology (S&T) is a linchpin of its vision of TBNA’s economic and environmental development; the council’s directives for TBNA give S&T innovation a special priority. Here, TEDA will play a pivotal role. In response to the State Council’s mandate, TBNA’s and TEDA’s leaders have set out to transform TEDA from an industrial-park complex into a state-of-the-art science and engineering (S&E) center for high-impact emerging technologies. TEDA will help TBNA meet the second of the State Council’s objectives: to see TBNA become a hub in northern China for cutting-edge R&D.

Being state-of-the-art means being among the best in the world. This ambition extends beyond being a national S&E leader to being a global one. TEDA’s experts, research facilities, and research agenda will have to meet high international standards. Its focus on “high-impact emerging technologies” speaks to its goal to achieve global excellence in R&D. High impact entails high-risk and high-reward R&D that can push scientific and engineering innovation to a new level of depth and breadth. The potential pay-offs are ample: The resulting knowledge and tools could provide smart, simple, and cost-effective solutions to the most pressing prob-lems in TEDA, TBNA more broadly, China, and ultimately the world. The same standards would hold for other high-tech centers in TBNA that share similar aspirations.

Although achieving this vision clearly poses significant challenges, TEDA is specially poised to play this role in TBNA’s development. As a busy industrial-park complex with a number of pillar manufacturing industries, it offers a strong, diverse, and well-established manufacturing base. In fact, it has topped the Ministry of Commerce’s list for 10 years for its “comprehensive investment environment” (People’s Republic of China Ministry of Com-merce, 2007). Electronic components and telecommunication products comprise 50 percent of TEDA’s industrial output.10 It is the largest electronic-manufacturing base in China and the country’s top manufacturer of mobile-telephone handsets (TEDA, 2007). Many of the world’s preeminent companies in this industry maintain facilities in TEDA, including Emerson, Free-scale, Hyundai, IBM, Kyocera, Motorola, Panasonic, Samsung, Sanyo, and Yamaha.

Machinery, automobiles, and automotive parts constitute 32 percent of TEDA’s industrial output. Its auto-related industrial park is one of the largest in China and one of the country’s top producers of small cars with 1.0 liter (L) and 1.3 L engines (TEDA, 2007). TEDA’s roster of international machinery and automotive firms includes John Deere, Toyota, United Tech-nologies, Volkswagen, Yazaki, and Zollern.

Food processing comprises about 4 percent of TEDA’s industrial output. International investors include household names, such as Coca-Cola, Kameda, Kraft, Nestlé, and Pepsi. Biopharmaceuticals also make up about 5 percent of total output, with multinational corpora-tions, such as GlaxoSmithKline, Novozymes, and Tanabe, well established in TEDA.

Achieving the State Council’s Vision for TBNA Through Foresight

In 2006, a set of reports published by the RAND Corporation came to the attention of TBNA and TEDA senior managers. The Global Technology Revolution 2020, Executive Summary: Bio/Nano/Materials/Information Trends, Drivers, Barriers, and Social Implications (GTR 2020 Exec-

10 This number and all industrial-output percentages in this section are from TEDA (2008).

6 The Global Technology Revolution China, In-Depth Analyses

utive Summary) and The Global Technology Revolution 2020, In-Depth Analyses: Bio/Nano/Materials/Information Trends, Drivers, Barriers, and Social Implications (GTR 2020 In-Depth Analyses) (together, GTR 2020) present the results of a detailed and broad technology-foresight analysis that identified plausible future technology developments and their potential impact on countries around the world.11 GTR 2020 focused on the applications that developing-technology trends make possible rather than on the technologies themselves. This is because technologies on their own rarely provide solutions to real-world problems. Instead, they typically have to be incorporated into an actual product to enable people to use them to create benefits. In this sense, the analysis in GTR 2020 of advances in genetic-modification techniques, for example, is not the main focus. Rather, it is gauging how these advances might be applied through prod-ucts, such as genetically modified foods to improve nutritional content.

In the process of developing a strategic plan to achieve the State Council’s vision of TBNA’s future, the managers of TBNA and TEDA believed that the type of foresight used in GTR 2020 could help them to identify a selection of fertile and innovative technology applica-tions (TAs) that would be especially well suited to form a pivotal part of this effort. They com-missioned RAND to conduct a foresight analysis that would help them develop the strategic plan for the transformation. The primary focus was to be on TEDA. But RAND’s findings and recommendations could also be implemented elsewhere in TBNA, as the overarching goal is to drive the economic development of TBNA as a whole, and other emerging high-tech centers in the area might also possess the necessary infrastructure and capacity.

The RAND team used as a starting point the 16 “top” TAs presented in GTR 2020 as both the most technologically feasible by 2020 and the most socially influential worldwide by 2020. Modifying the analytic approach used for the 2020 study, RAND performed a foresight analysis that did the following:

Identified from this starting pool of 16 the most-promising TAs for TEDA and other high-tech •centers in TBNA to pursue in the endeavor to make TBNA a global leader in state-of-the-art S&E: These will be TAs that represent emerging market opportunities that are in line with TBNA’s mission and can build on existing capacities both in TEDA specifically and in TBNA more broadly. They will also address societal issues that are important locally, regionally, and nationally, such as pollution reduction and public health and safety.Identified capacity needs for implementing these TAs in TEDA and TBNA more widely: •Implementing high-impact TAs at a state-of-the art level will require ample capacity—both locally based and beyond—in manufacturing, R&D, and S&T commercializa-tion. In each of these three capacity areas, TBNA and TEDA will need ample human resources—in R&D, for example, access to a talented pool of scientists and engineers spe-cializing in relevant areas; for S&T commercialization, skilled lab technicians and man-agers. Physical infrastructure, such as up-to-date facilities and transport networks, will be essential. Supporting institutions, such as laws, policies, regulations, and standards, are an indispensable part of adequate capacity in each of these three domains. Some of this capacity exists and can be built on; some of it, TBNA and TEDA will need to develop.

11 GTR 2020 updated The Global Technology Revolution: Bio/Nano/Materials Trends and Their Synergies with Information Technology by 2015 (Antón, Silberglitt, and Schneider, 2001), which concluded that the world is undergoing a global tech-nology revolution that is integrating developments in biotechnology, nanotechnology, materials technology, and informa-tion technology at an accelerating pace.

Introduction 7

Identified the critical drivers and barriers that TBNA and TEDA are likely to face for each •TA: Among the factors that determine whether and how a TA can be implemented, whom it benefits, whether its use is sustainable, and whether it can produce optimal out-comes, the balance of drivers and barriers is critical. Drivers facilitate the implementation of a TA. Barriers are the opposite: They hinder implementation. One entity can be either a driver or a barrier. Cost and financing are prime examples. The presence of ample venture capital can make cost and financing a driver, while lack of sufficient capital can convert it into a barrier. Our analysis of drivers and barriers is not intended to be comprehensive or quantitative. Rather, we provide it as a guide to factors that are either likely to be help-ful (drivers) or will require action to address (barriers) as TBNA and TEDA pursue the selected TAs.Presented a detailed analysis and action plan for each of these TAs, with the intent of support-•ing TBNA’s overall strategic planning: Each action plan provides suggestions for actions that TBNA and TEDA might take to develop state-of-the-art research and manufactur-ing capabilities and to position TBNA to compete in the global marketplace in these areas.Showed how the most-promising TAs could fit into a potential overarching strategic plan for •TBNA: These TAs should form a pivotal part of TBNA’s plan for transitioning into a growth engine in China for leading-edge R&D. All of the TAs are in line with promis-ing global trends, such as efficient use of resources (e.g., energy and water) and health and environmental protection; are well suited to current capacities in TBNA, TEDA, and the Tianjin region; and support Chinese government priorities. All emerge from one or more of TEDA’s current pillar industries. This should provide for a fluid transition over time, in which new advances stem from and extend existing capabilities, while new R&D pro-grams and new companies with state-of-the-art capabilities bring the overall capacity base up to world-class standards.

Road Map of This Report

Part One of the report provides an overview of the seven TAs that our analysis indicates offer TBNA and TEDA the most-promising opportunities for economic development. It then details the method we used to select them. Part One also provides a comprehensive overview of the four principal factors we assessed when making our selection and laying out an action plan for each TA:

TBNA and TEDA’s missions as mandated by China’s State Council•China’s pressing national needs•drivers and barriers to technological innovation in both China as a whole and TBNA •specificallythe relevant capacity base in manufacturing, R&D, and S&T commercialization avail-•able to TBNA and TEDA locally and more broadly.

Part Two contains seven chapters that treat each of the seven selected TAs in turn. We explain each TA’s importance to TBNA and TEDA, its current scientific and market status and future prospects, the relevant capacity available to TBNA and TEDA for that TA, and

8 The Global Technology Revolution China, In-Depth Analyses

the drivers and barriers that the TA involves. We conclude each chapter with action steps that TBNA and TEDA could take to implement that TA and bring it to a state-of-the-art level.

Part Three suggests how the seven TAs could fit into the context of an overarching stra-tegic plan for enabling TBNA to achieve the State Council’s mandate to develop cutting-edge R&D. Part of this plan would be to build TEDA into a state-of-the-art S&E center for high-impact emerging technologies.

9

pART One

The Most-Promising Opportunities for TBNA and TEDA in Science and Engineering

11

ChApTeR TwO

The Most-Promising Technology Applications for TBNA and TEDA for 2020

Tianjin Binhai New Area (TBNA) and Tianjin Economic-Technological Development Area (TEDA) are mandated to develop state-of-the-art science and engineering (S&E) capacity that helps transform TBNA into the economic growth engine for northeast China. For this to happen, they will need to cultivate world-class abilities to research, develop, and commercial-ize high-impact emerging-technology applications that will position TBNA as an influential player in important emerging global markets. Seven such technology applications appear par-ticularly well suited to this purpose:

cheap solar energy•advanced mobile-communication and radio-frequency identification (RFID) applications•rapid bioassays•membranes, filters, and catalysts for water purification•molecular-scale drug design, development, and delivery•electric and hybrid vehicles•green manufacturing.•

Cheap solar energy has potentially strong worldwide market demand. Growth of this demand will depend on new thin-film and nanoscale technologies for which substantial local capacity exists in the Tianjin region. Pursuing low-cost solar power is also consistent with the policy of the Chinese central government to emphasize renewable energy sources.

Advanced mobile-communication and RFID applications can build on TEDA’s strong man-ufacturing base in electronics and information-technology industries. This technology appli-cation (TA) will meet the rapidly growing needs of both rural and urban markets for wireless communications. Development of these applications will also provide the latest emerging tech-nologies for use in supply-chain and logistics monitoring and shipping security, which should be of increasing importance as TBNA grows in importance as an international shipping and logistics center.

Rapid bioassays provide access to a rapidly emerging market for personal and public health testing and environmental monitoring. In particular, they provide a way to address China’s environmental and public health needs with state-of-the-art technology. This TA builds on the existing presence in TEDA of a state-of-the-art bioassay company, as well as its biotechnology industrial-park initiatives.

Membranes, filters, and catalysts for water purification provide advanced-technology approaches to one of the most pressing needs in the Bohai Rim region. Most of these approaches

12 The Global Technology Revolution China, In-Depth Analyses

are based on nanotechnologies and can consequently be built on existing research and develop-ment (R&D) in the Tianjin region.

Molecular-scale drug design, development, and delivery are among the leading applica-tions being pursued by pharmaceutical firms worldwide. It requires integrated advances in bio technology and nanotechnology, which have both been defined as priority research and development (R&D) areas by the Chinese central government. It builds on TEDA’s current capacity in these areas and capitalizes on the existing pharmaceutical industrial base in the Tianjin region.

Electric and hybrid vehicles build on TEDA’s strong program in the research, design, development, production, and marketing of electric vehicles. The recent emergence of plug-in hybrids has blurred the distinction between electric and hybrid vehicles, and current trends in the global marketplace point toward increasing market share for both. Development and use of electric and hybrid vehicles in China can contribute to reducing both demand for oil and pollution from motor vehicles, thus addressing two of China’s major issues, as described in Chapter Three.

Green manufacturing, aimed at reducing waste streams and use of toxic materials or elimi-nating them altogether, has become a high-profile initiative among large multinational corpo-rations serving global markets. By adopting this approach in their manufacturing industries, TBNA and TEDA will be able to meet international standards for marketing products globally while pursuing the mission of making efficient and environmentally sound use of resources.

How We Selected the Most-Promising Technology Applications for TBNA and TEDA

Our process of selecting the most-promising technology applications for TBNA and TEDA started with the extensive base of literature, analysis, and expert opinion presented in the 2006 RAND report GTR 2020 (GTR 2020 In-Depth Analyses, Chapter Two and Appen-dixes A–E). We relied especially on the report’s technical foresights in biotechnology, nano-technology, materials technology, information technology, and their intersections.

The research team for the GTR 2020 study originally used these technical foresights to identify 56 emerging TAs deemed plausible by the year 2020. They then subjected these 56 TAs to a net assessment that (1) gauged the potential impact of each TA on 12 societal sectors, (2) evaluated technical feasibility in terms of potential for a commercial product by 2020, and (3) evaluated the feasibility of actually implementing the TA, in terms of its potential market size and whether it posed significant public-policy issues (GTR 2020, pp. 15–31).1

From this net assessment, the “top 16” TAs emerged—the ones that exhibited the stron-gest combination of possible multisectoral social impact, feasibility, and good commercial potential. These top 16 provide a market basket of emerging technology applications that any aspiring S&E center should consider:

cheap solar energy•rural wireless communications•communication devices for ubiquitous information access•

1 For examples of how this net assessment was performed, see Silberglitt (2007).

The Most-promising Technology Applications for TBnA and TeDA for 2020 13

genetically modified crops•rapid bioassays•filters and catalysts for water purification•targeted drug delivery•cheap autonomous housing•green manufacturing•ubiquitous RFID of commercial products and individuals•hybrid vehicles•pervasive sensors•tissue engineering•improved diagnostic and surgical methods•wearable computers•quantum cryptography.•

The GTR 2020 authors then assessed the capacity of 29 representative countries—including China—to acquire emerging TAs. Their evaluation was based on literature, analysis, and expert opinion on each country’s science and technology (S&T) capabilities (GTR 2020 In-Depth Analyses, Chapter Three and Appendixes H–K). China was placed in a group of “scientifically developing” countries with capacity to acquire 12 of the top 16 TAs. Of the 16, four were judged to require a higher level of S&T capacity than China and the other countries in its group currently possess: communication devices for ubiquitous information access, pervasive sensors, tissue engineering, and wearable computers.

For this study on TBNA and TEDA, we started with the 12 TAs in GTR 2020 that apply to China:

cheap solar energy•rural wireless communications•communication devices for ubiquitous information access•genetically modified crops•rapid bioassays•filters and catalysts for water purification•targeted drug delivery•cheap autonomous housing•green manufacturing•ubiquitous RFID of commercial products and individuals•hybrid vehicles•quantum cryptography.•

From these 12, we selected a subset most appropriate for TBNA and TEDA to pursue. To make this assessment, we considered four primary factors:

TBNA’s and TEDA’s missions•China’s pressing national needs•the drivers and barriers to economic development through S&T innovation both in China •as a nation and in TBNA specifically

14 The Global Technology Revolution China, In-Depth Analyses

relevant capacity in the Tianjin region and that available to TBNA and TEDA more •broadly.

To gather quantitative and qualitative data for this analysis, we drew from multiple sources:

available Chinese- and English-language documents describing the mission, history, and •current status of TBNA and TEDA—from the perspective of the State Council, TBNA and TEDA, and the Chinese mediaChinese- and English-language literature on China’s social, environmental, and economic •needs and Chinese government measures taken to date to address these needsOn-site interviews that we conducted in TBNA, TEDA, Tianjin Port, the Tianjin munic-•ipality, and Beijing in May, June, and August 2007 with a highly diverse selection of stakeholders in TBNA’s future, including workers, managers, students, professors, and administratorsvisits to S&T institutions that could provide capacity outside TBNA and TEDA—for •example, Tsinghua University and the Chinese Academy of Sciences in Beijing and Tian-jin University (TU) in the Tianjin municipalitya two-day workshop that we conducted in TEDA in August 2007, in which key figures •from TEDA scientific institutions, firms, and management discussed their history, cur-rent status, aspirations, plans, and challenges. The keynote speakers at this workshop complemented these data by providing information and perspectives based on their extensive experience with S&T innovation, financing, and management in China and other countries.2

On the basis of these data, we drew up a list of seven TAs that the analysis indicated would be particularly promising opportunities for TBNA and TEDA (Table 2.1).

Of the starting 12 TAs, we eliminated genetically modified crops because TBNA is not an area focused on agricultural development. Cheap autonomous housing was cut because it is considered unlikely to lead to a commercial product by 2020 (GTR 2020, In-Depth Analyses, p. 25) and thus seemed inconsistent with TBNA’s mandate to become an economic growth engine. We eliminated quantum cryptography because neither TBNA nor TEDA is currently very focused on the industry of information security. We combined or modified several of the TAs remaining after these cuts, as explained in the table.

For each of the seven selected TAs, we carried out a comprehensive foresight study based on current literature reviews, expertise on the TA in question by a member of the RAND team with

2 Keynote speakers were Liu Xuelin of the Graduate School of the Chinese Academy of Sciences; Seguchi Kiyoyuki, head representative to China for the Bank of Japan; Anne Stevenson-Yang, director of J. P. McGregor and Co. and former manag-ing director of the U.S. Information Technology Office in Beijing; and Patrick Tam, general partner with China Environ-ment Fund, Tsing Capital. The final agenda of the workshop is in Appendix A.

The Most-promising Technology Applications for TBnA and TeDA for 2020 15

Table 2.1Seven Technology Applications Selected for TBNA and TEDA

TA Explanation

Cheap solar energy Same as in GTR 2020

Advanced mobile-communication and RFID applications

“Rural wireless communications” combined with “ubiquitous RFID” and modified

Rapid bioassays Same as in GTR 2020

Membranes, filters, and catalysts for water purification Modified slightly from “Filters and catalysts for water purification”

Molecular-scale drug design, development, and delivery

“Targeted drug delivery” combined with “improved diagnostic and surgical methods” and modified

electric and hybrid vehicles expansion of “hybrid vehicles” to “electric and hybrid vehicles,” because the advent of the plug-in hybrid has blurred the distinction between these two types of vehicles; TeDA also has substantial existing capacity in electric vehicles

Green manufacturing Same as in GTR 2020

specialization in that area,3 and a second workshop held at RAND in December 2007.4 The results of these foresight studies are described in Part Two of this report.

Each foresight analysis consisted of four principal tasks:

We established the current scientific and market status and future prospects for the TA, •developing an overview of the global market, and identifying the companies, organiza-tions, institutions, and individuals leading the important developments.We evaluated the relevant capacity available to TBNA and TEDA, both locally and more •broadly.We assessed the drivers and barriers that TBNA would face should it endeavor to develop •these TAs.We suggested action plans for achieving the long-term goal of building these seven TAs •into important components of TBNA’s mission to become a state-of-the-art S&E center. Each action plan combines three tracks: raising the level of R&D, expanding the exist-ing manufacturing base, and developing products positioned for the global marketplace. The second RAND workshop, which included participants with experience in the devel-opment, financing, and management of innovative enterprises,5 informed these action plans.

3 Leaders of these foresight analyses were as follows: cheap solar energy, Richard Silberglitt and Scott Hassell; advanced mobile-communication and RFID applications, Eric Landree; rapid bioassays, Gregory Jones and Brian Chow; mem-branes, filters, and catalysts for water purification, David Howell; molecular-scale drug design, development, and delivery, David Howell; electric and hybrid vehicles, Scott Hassell and Noreen Clancy; and green manufacturing, Parry Norling.4 The agenda of this workshop appears in Appendix B.5 The keynote speaker was John Servo of Dawnbreaker. A list of participants is given in Appendix B.

17

ChApTeR ThRee

The Foundation for TBNA’s Growth into a Leading-Edge Science and Engineering Center

This chapter describes the four principal factors that we took into account in selecting and analyzing the seven technology applications (TAs) that we recommend as the most-promising opportunities for pursuit by TBNA and TEDA in their development into a state-of-the-art sci-ence and engineering (S&E) center: TBNA’s mission as a special pilot zone; China’s pressing national needs; national drivers and barriers in China to cutting-edge research and develop-ment (R&D) and innovation; and the capacity available to TBNA and TEDA to support the development and implementation of the selected TAs.

TBNA’s Mission as a Special Pilot Zone

In 2006, when the State Council designated TBNA a special pilot zone for economic growth in China, this relatively undeveloped northeastern area became a pivotal part of the country’s national economic strategy. TBNA is to put to the test novel concepts, approaches, practices, and systems that will accelerate its own economic development, serve as a model for other developing regions, help continue to reform and grow China’s national economy, strengthen the country’s integration with global markets, and meet challenging and pressing national needs (State Council, 2006). TBNA’s successes and lessons learned will be successes and les-sons not only for itself but also for China as a whole.

During the past three decades, China has experienced tremendous economic growth. This growth, however, has been specifically concentrated in certain parts of the country. Most of the highest-growth cities and provinces are situated along China’s coast in the east. The Pearl River delta area and Yangtze River delta area are the best-known examples. With its 150 kilometers (km) of coastline, TBNA is no exception. Now the Chinese government aspires to spread growth from the east more evenly throughout the country as a whole. With this in mind, the State Council has stated,

The development and opening of TBNA will be helpful for China’s eastern regions to take the lead in attaining modernization so as to give impetus to the central and western regions, [and] the three northern regions (China’s northeast, central north and northwest) in par-ticular, forming a coordinated regional development pattern in which the eastern, central, and western regions can better interact, complement, and support each other, and develop together. (State Council, 2006)

TBNA’s location in the circum-Bohai region makes it a gateway to northeast, central north, and northwest China. Accordingly, as it fulfills this role of modernizing to provide

18 The Global Technology Revolution China, In-Depth Analyses

impetus for other regions to do the same, TBNA’s initial focus will be particularly on these northern regions. The primary strategic goals, as indicated in the State Council’s three-pronged mandate for TBNA, are to become a center in northeastern China for (1) leading-edge, modern manufacturing; (2) R&D and technology incubation; and (3) international shipping and logis-tics. TBNA is also to explore new means of reforming the financial sector and to pursue inno-vative environmental initiatives.

Become a Center for Modern Manufacturing, Cutting-Edge R&D and Technology Incubation, and International Shipping and Logistics

TBNA and TEDA are firmly established as a regional manufacturing powerhouse. Yet they have accomplished this on the basis of low-cost, low-tech, labor-intensive manufacturing. Man-ufacturing will continue to play an important role in TBNA’s development strategy as a special pilot zone. But to achieve the State Council’s goals, TBNA will need to operate at a new cali-ber, departing significantly from its previous business model. As other developing economies become part of the global manufacturing network and present China with strong competition as producers of low-cost, labor-intensive goods, China can no longer—nor does it aspire to—continue to compete in this market. Rising energy prices, increasing land costs, and growing demand from Chinese workers for higher incomes and better quality of life further underscore the need for TBNA and TEDA, as a model for China as a whole, to develop modern, high-tech manufacturing capacity. This type of manufacturing will emphasize R&D and the use of technology to produce higher value-added products and create better-paid jobs.

Inasmuch as this type of manufacturing is knowledge-based, knowledge—in particular, in science and technology (S&T)—will be crucial for TBNA and TEDA to make this transfor-mation. So too will the capacity for S&T commercialization, so that they can put that knowl-edge to work when designing marketable products manufactured using innovative production processes. In this way, building modern manufacturing and developing cutting-edge R&D and technology incubation go hand in hand.

The mandate for TBNA to build on its already-substantial capacity for shipping and transport to “develop into northern China’s international shipping and logistics center” (Cen-tral People’s Government of the People’s Republic of China, 2006) is also closely integrated with these other two goals. Already, the Tianjin Port is the largest container port in north China, enabling the current manufacturing base in TBNA, TEDA, and elsewhere in the region to connect with global markets. TBNA is also endowed with a deepwater bay and is a major hub in China’s national rail and air freight systems. As TBNA develops and expands into a world-class, modern manufacturing center, the Tianjin Port and its free-trade zone will also develop their capabilities to serve as the transportation and logistics hub to bring in necessary materials and export TBNA’s products to its global customers. This will require the use of the most up-to-date supply-chain and logistics technologies emerging from R&D and technology incubation.

Reform the Financial Sector

The State Council (2006) also specified that TBNA can experiment with reforms in the areas of financial enterprises, financial business, financial markets and financial opening, industry investment funds, venture-capital investment, mixed operation of the financial sector, multi-owner financial enterprises, foreign exchange–management policies, and offshore financing.

The Foundation for TBnA’s Growth into a Leading-edge Science and engineering Center 19

Indeed, financial-sector reform is essential for TBNA to achieve its goals in building modern manufacturing, creating capacity in cutting-edge R&D and technology incubation, and developing international shipping and logistics. At the heart of all these economic activi-ties is the need for finance. Put simply, plans, knowledge, and determination are all essential, but—without money—they will not bring about modern manufacturing, cutting-edge R&D and technology incubation, or international shipping and logistics. New types of economic activities—e.g., technology incubation—impose new demands on China’s financial system. China also wants to mobilize growing wealth and capital within the country to spur domestic economic growth, complementing what foreign direct investment brings to China.

Therefore, reforming the financial sector is a major focus of China’s national economic-development priorities. Because of the unique circumstances and conditions in China’s econ-omy, reforming the financial sector in China means more than simply adopting international practices. Changes must be sensitive to the legacy system in place and needs in this stage of China’s economic modernization. Thus, we see that the State Council’s guidance simulta-neously emphasizes reforms in mixed operation of the financial sector and venture-capital investment.

Where cutting-edge technology and innovation are concerned, the China Develop-ment Bank and TBNA signed an agreement in December 2007 to co-finance and create a RMB 2 billion (US$293 million) venture-capital fund to boost high-tech start-ups in TBNA. This venture-capital fund is expected to serve primarily as an investment fund for a portfolio of other venture capital–investment funds rather than investing directly in projects.1 The goal is to get the most competitive high-tech start-ups to get a public listing in the Chinese or overseas stock exchange, and the preferred business areas are electronics, bioengineering, new materi-als, new energy, environmental protection, and automated manufacturing (“VC Fund to Back Binhai Economic Zone,” 2007).

The presence of this new venture capital–investment fund and the preferred business areas for investment thus provided us with additional information to consider when identify-ing TAs for TBNA and TEDA and, relative to TBNA’s mission to become a center in north China for leading-edge, modern manufacturing, R&D and incubation and international ship-ping and logistics. When considering these areas of focus, it is quite clear that there is much on which TBNA and TEDA can build in the current modern manufacturing industries operating within them. China’s national needs and priorities in S&T development (as will be examined in more detail in a subsequent section of this chapter) and the kinds of businesses identified for preferential treatment by this new venture capital–investment fund point to areas for R&D and incubation activities.

Finally, the development of international shipping and logistics—already under way in the Tianjin Port and Tianjin Port free-trade zone—will benefit from cutting-edge R&D and innovation that will support these industries—e.g., new, advanced materials for shipbuilding and maintenance; new, advanced communication technologies for shipping navigation and high-speed logistics management; and new technologies to enable a high level of environmen-

1 This fund will choose both domestic and overseas outstanding venture-capital funds, including private equity funds, to invest. Those selected venture-capital funds, in partnership, will be asked to prioritize their investment portfolio in high-technology start-ups based in TBNA (see China Internet Information Center, undated; “VC Fund to Back Binhai Eco-nomic Zone,” 2007).

20 The Global Technology Revolution China, In-Depth Analyses

tal safety in the use and disposal of maritime paint, fuel oils and lubricants, and ballast dis-charge that could otherwise create environmental and human health hazards.

Pursue Innovative Environmental Initiatives

While three decades of high-speed economic growth have vastly improved the standards of living for hundreds of millions of Chinese people, the adverse effect of this high-speed growth on the environment and its consequences for human health cannot be denied (ZhiDong Li, 2003; Jianguo Liu and Diamond, 2008). Thus, a major thrust in China’s national economic-development strategy for the 21st century is to emphasize harmony between economic activi-ties and the environment. The State Council’s guidance to TBNA states this clearly: Use space reasonably, take strong measures to conserve water, use land intensively and efficiently, reduce energy usage, and improve investment strength and output efficiency per unit of land. Fur-ther, “TBNA should successfully deal with all kinds of environmental problems to maintain eco-balance and develop a circular economy so that harmony will be achieved between human beings and nature, between economic and environmental protection” (ZhiDong Li, 2003; see also Jianguo Liu and Diamond, 2008).2

The development of an ecocity in TBNA, in particular, well complements the effort to build capacity in cutting-edge R&D and technology incubation. The ecocity concept empha-sizes deliberate and intensive use of advanced technology in planning and building new urban communities to minimize the effect of human activities on the environment.

The Sino-Singapore Tianjin Eco-City in TBNA, situated in the middle of Tanggu and Hangu districts and adjacent to TEDA and the coastal leisure zone of the Tianjin Port, is an ambitious and highly innovative undertaking. The site, which has begun development of its first phase, will have a total area of 31.23 sq km with a planned population of 350,000.3 This ecocity is envisioned to support mixed residential, administrative, commercial, and recreational functions. More than 90 percent of the traffic in the ecocity will be low-pollution public trans-port that will use green technologies in its construction and operation. In particular, the eco-city’s development will be guided by Singapore’s experience in the use of solar and wind power, rainwater recycling, wastewater treatment, and desalinization of sea water (J. Wu, 2008).

The goal of this enterprise is to create a showcase of sustainable development to generate ideas, lessons, and interest in furthering sustainable development across China (and perhaps the world). The opportunities for cutting-edge R&D and innovation to produce TAs and business models for their implementation are enormous. TBNA’s goal to develop cutting-edge R&D and technology-incubation capacity would well get a boost from this enterprise and con-tribute to its realization.

China’s National Needs and the Push for Cutting-Edge R&D and Innovation

In the past several decades, China has become a leading contributor to the global economy and a major international manufacturing hub (see, e.g., Fallows, 2007). As its economy continues to grow and its rising middle class enjoys the higher standard of living commensurate with

2 A circular economy uses energy, water, and raw materials in sustained cycles to minimize waste and pollution.3 See Sino-Singapore Tianjin Eco-City Administrative Committee (undated). Finland also has an interest in developing an ecocity in TBNA (see VTT Technical Research Centre of Finland, 2007).

The Foundation for TBnA’s Growth into a Leading-edge Science and engineering Center 21

that growth, the country faces many challenges. This section highlights the most pressing of these challenges. Innovative technologies, together with the development and implementation of necessary laws, policies, regulations, and standards, can provide a means of addressing these challenges (e.g., through rural economic development; more-efficient use of resources, such as water and energy; reduced pollution; and improved public and individual health).

Reduce Rural Poverty

Poverty has been a daunting problem in China for many years. Today, although reduced, it remains persistent in many parts of the country outside the bustling industrial and commer-cial centers in the coastal cities and those cities and counties close to them. According to the State Council, in 2006, there were 21.48 million destitute people and 33.5 million low-income people living in rural China. The State Council defines a person as destitute if he or she earns no more than $92 per year and as low-income if he or she earns no more than $120 per year (L. Yan, 2007).

Numerous plans, initiatives, and reform measures in the past three decades have aimed at lifting more people out of poverty in the rural areas of China.4 And as part of the larger national strategy, coastal economies that have taken off are expected to help jump-start rural economies and help promote their economic growth. The mandate by the State Council that TBNA and TEDA assume a role in promoting economic development in north China exem-plifies this. As China’s transportation and communication networks expand in coverage and quality,5 we are seeing more industrial activity moving from the core of the coastal economic centers into cities and townships contiguous to them and into the hinterlands.6 As the pioneers in China’s economic reform and opening, Shanghai, Shenzhen, Xiamen, TEDA, and other coastal cities, simultaneously, turn into service-oriented economies.

TAs that are relevant to the needs of rural users and appropriate to local conditions are much needed in China and elsewhere in the world to improve standards of living, to reduce pressure to migrate to urban centers for work, and to mitigate the social problems that result from such economic migration (Malik, 2006; K. W. Chan, 2008).

Provide for a Large and Rapidly Aging Population

Although China’s population growth has slowed in recent decades as a result of government policy and changing cultural values, it is a nation with a large population of more than 1 bil-lion people and will remain so for decades to come. The Chinese economy must generate jobs—well-paying jobs—for its future workforce.

Not only would better-paying jobs be essential to improve its population’s quality of life, it is also essential at the individual level and collectively for the nation to support a rap-

4 Examples like the New Century Rural Poverty Alleviation Plan for 2001–2010 and its predecessor, the National Plan for Poverty Reduction, extended assistance to poor, rural households to improve land management and agricultural produc-tion, as well as improving infrastructure, such as roads, electricity, and water, and expanding universal primary education and basic preventive and curative care (see “China’s 8-7 National Poverty Reduction Program,” undated).5 By the end of 2007, China had 53,600 km of toll expressways and a total of 11,600 km of paved roads. Also, high-speed bullet trains now go between Beijing and Tianjin city, while the world’s only maglev trains service Shanghai’s Pudong Air-port and the city center. See World Bank (1994), for example, on how much highway there was in China in the early 1990s, and compare to where China was by the end of 2007 (see “Rushing on by Road, Rail and Air,” 2008). More projections of highway growth in China can be found in Davis Langdon and Seah International (2007).6 On plans to expand China’s rural highways, see “China Plans to Expand Rural Highway Network” (2004).

22 The Global Technology Revolution China, In-Depth Analyses

idly aging society and the transition toward a new social-welfare system that demands more resources from individuals to access education, health care, and other services that the state has traditionally provided. In 2000, there were 6.4 working-age Chinese (15–59) per elder (60 and older). It is projected that there will be two working-age Chinese per elder in 2040 (Jackson and Howe, 2004). By 2004, the elderly already made up 11 percent of China’s population, and the United Nations projects that, by 2040, the elderly will compose 28 percent of the popula-tion, or 397 million people (Jackson and Howe, 2004).

China does not have an adequate social-welfare system to take care of its elderly popula-tion. As the legacy system dismantles, a new private market–driven one has to take root. Fur-ther, with a one-child policy in place for the past three decades, China’s workers in the coming decades will have to shoulder a bigger share of the economic cost of providing care directly and indirectly for this elderly population (Jackson and Howe, 2004).

Meet the Population’s Health and Sanitation Needs

With 1.3 billion people, China’s health-care needs are also enormous. As quality of life and sanitation improve, the prevalence of communicable diseases has generally declined. Non-communicable diseases (e.g., diabetes, heart problems) are now responsible for 80 percent of all deaths in China. Of particular concern is the rise in disease tied to lifestyle (e.g., obesity, which is increasingly a problem for China’s youth; lung cancer from tobacco smoking) (Y. Li, 2007; Levine and Stein, 2008).7 Many of these are chronic diseases that will impose an enormous cost on the nation in hours of lost work time and the cost of care. One projection estimates that China will lose $558 billion over the next decade from premature deaths due to heart disease, stroke, and diabetes (“China Warned of Rising Tobacco Use,” 2006).

Then there are public health hazards, such as bird flu and other animal and zoonotic dis-eases, that can quickly take lives and incur enormous economic costs on China. Since 2003, 16 people have died from bird flu in China, and estimates put China’s annual loss to animal diseases at RMB 40 billion (or US$5.9 billion). China is the world’s largest producer of poul-try, livestock, and aquatic products. China’s success in maintaining the health of these animals and the environments in which they live, as well as in animal-waste management, can have an enormous impact on public health (“Guangzhou Reports Suspected Bird Flu Outbreak,” 2007).

Finding cost-effective ways to provide care and sanitation to its population is already a challenge in a strained public-health system trying to meet the Chinese people’s health-service needs. The poor and rural populations of China, researchers observe, further bear a dis proportionately heavy share of the health-care burden, as reflected by statistics indicating that the rural mortality rate is four to six times the rate in urban areas (Powell, 2006; S. Ma and Sood, 2008; “Rural Mortality Rates in China Outpace Urban Areas by Up to Six-Fold,” 2007).

Meet Growing Energy Demands

With 1.3 billion people, a growing economy, and rapidly expanding consumer spending, China is a top user of energy in the world and will remain so in the decades to come. For example, the demand for oil for transportation will continue to grow as more members of China’s expand-

7 Of China’s 1.3 billion residents, 350 million are smokers, and tobacco use in China continues an upward trend (see “China Warned of Rising Tobacco Use,” 2006).

The Foundation for TBnA’s Growth into a Leading-edge Science and engineering Center 23

ing middle class become car owners. In the first five months of 2008, auto sales in China were 17.41 percent higher than they were in the same period in 2007. An expected 10 million vehicles will have been sold in China in 2008 (“China Car Sales Up 17.41% Through May 2008,” 2008). And China has shifted from being a net exporter of coal to being a net importer in 2007 (“China Car Sales Up 17.41% Through May 2008,” 2008). At the rate China is going, its primary energy demand could reach 3,819 megatons of oil equivalent by 2030 (IEA and OECD, 2007).

However, rising energy prices, dependence on oil imports, and environmental concerns are pushing the Chinese government and business enterprises to increase energy efficiency, raise productivity, and shift from highly energy-intensive industries to less energy-intensive ones (“China to Move Away from Energy-Intensive Growth,” 2007).

Reverse Water Shortages

China is a water-poor country overall and distribution is uneven, with the north in a perpetual dry spell while the south receives much of the rainfall. The north, with 42 percent of the coun-try’s population, has only 757 cubic meters (m3) per person (or access to 14 percent of its water). By comparison, the south enjoys 3,208 m3 per person (or access to 86 percent of the nation’s water) (“China to Move Away from Energy-Intensive Growth,” 2007). The lack of renewable freshwater in the north puts pressure on using groundwater to meet that population’s water needs, and, in some places, that supply could be ending soon. For example, in the north China plain, 60 billion m3 of nonrenewable groundwater were reduced by half in the past 50 years and could be used up in some places within 15 years (J. Ma, 2004). When ground is removed, ground subsidence can result and threaten residents’ lives and safety (Yueping Yin, Zhang, and Li, 2006; Zou, 2007).

But even in the south, supply can barely keep pace with rising residential and industrial use demands: In 1980, urban-resident water demand was 7 billion m3, or 1.5 percent of China’s total water consumption; by 2002, it had risen to 32 billion m3 or 6 percent. Industrial water use in the same period jumped from 46 billion m3 to 114 billion m3—almost a 250-percent increase. Apart from the geographical disparity in water distribution, a water divide also sepa-rates rural and urban residents, as the latter—but not the former—benefit from improved infrastructure and rising incomes.8

In 2003, according to a standard used by the United Nations, the World Bank and the World Resources Institute estimated that water availability on a national level in China just barely exceeded a level of water stress. On average, each person in China has access to 2,180 m3 of water, one-third the average for developing countries and one-fourth of the world average. In northern China, water availability was well below the level of water scarcity.9 More than 400 of China’s 600 cities are short of water, and about 100 face serious water-shortage problems. At the 2003 rate of population growth, China will be water stressed by 2010. Chinese scien-tists have predicted that, by 2020, water shortages may exceed 50 billion m3 (“Water Supply, Demand Imbalance Sharpens in China,” 2003).

8 On average, the southeast receives nine times the rainfall that the northwest receives every year. See Economy (2004); “Water Resources and Freshwater Ecosystems” (2003); “Northeast China Faces Water Shortage as Severe Drought Lingers” (2008); “Water Supply, Demand Imbalance Sharpens in China” (2003).9 Water stress is a level of 2,000 m3 or less per person per year. Water scarcity is a level of 1,000 m3 or less per person per year (“Water Supply, Demand Imbalance Sharpens in China,” 2003).

24 The Global Technology Revolution China, In-Depth Analyses

Reduce Pollution

China’s high-speed economic growth in the past three decades has imposed a heavy price on the environment and human health (Cost of Pollution in China, 2007; Kahn and Yardley, 2007). According to the World Bank, 16 of the world’s 20 most polluted cities are in China (Economy, 2004, p. 72).

China’s reliance on coal for energy production, for example, is a major source of acid rain in China and the region (Turner and Kim, 2007). According to China’s State Environmen-tal Protection Agency (SEPA), in 2007, 13 percent of cities in China experienced acid rain 75 percent or more of the time, 9.4 percent of cities experienced acid rain 50 to 75 percent of the time, and 11.8 percent of cities experienced acid rain 25 to 50 percent of the time. In total, 34.2 percent of cities in China experienced acid rain at least 25 percent of the time (SEPA, 2008). Sulfur dioxide (SO2) and nitrogen oxide (NOx), the pollutants in acid rain, can damage human health (by causing respiratory problems) (Goyer et al., 1985) as well as trees and soil (EPA, 2007a). Along with acid rain are air-pollution problems across China. Air pollution is especially severe in China’s larger cities, where higher incidence of lung disease (e.g., cancer and respiratory-system problems) is common. The World Bank and SEPA, in a joint study, estimated that air pollution costs China about $100 billion per year, or about 3.8 percent of China’s gross domestic product (GDP) in physical and human health damage and loss of pro-ductivity due to absenteeism (“WB: Air Pollution Costs 3.8% of China’s GDP,” 2007).

China’s lands, too, are under assault. Droughts, urban sprawl, and construction are major forces driving desertification and continuing losses in China’s scarce supply of arable land. A Chinese government survey in 2004 classified about 2.6 million square kilometers (sq km) as desert wasteland, up more than 50 percent in a decade (“Ancient Chinese Town on Front Lines of Desertification Battle,” 2007). Desert storms are destroying communities across north and northeast China, taking away farmers’ livelihoods (Gluckman, undated). The loss of arable land is an especially hot topic for the Chinese leadership due to food-security concerns. Con-sider this: China has only 7 percent of the world’s arable land to feed 22 percent of the world’s population. Its 1.3 billion population grows by 10 million annually, and, with only 122 million hectares of arable land, China has less than 40 percent of the world per capita average amount of arable land (Y. Liu, 2006).

Finally, many of China’s lakes and coastal waters are not blue, but red and green. Red tides are algal blooms caused by an excessive amount of nutrients in the water (“Harmful Algae,” 2008). These are linked largely to human activities in China. Natural toxins produced by the algal bloom can kill marine life, such as birds, fish, and marine mammals, and make consumption of seafood from the affected waters harmful to human health. China, which is the world’s top aquaculture producer, has seen red tides force closure at fish and shrimp farms and impose significant economic losses on aquaculture businesses (Langfitt and Dewar, 2000; Z. Zhu and Chen, 2002). The occurrence of red tide in major scenic lakes and coastal holiday spots (e.g., at Tai Lake and coastal waters of the Yellow Sea, where boating events of the 2008 Olympic games were held) has significantly raised public awareness of the severity of the pol-lution problems in China (Kahn, 2007; “East China Witnesses Most Serious Red Tide Since 2004,” 2004; Yardley, 2008).

Indeed, the most senior leadership of China recognizes that addressing pollution prob-lems is a high priority. President Hu Jintao explicitly called, for the first time, for a “conser-vation culture” in October 2007 and underscored the need for China to balance economic growth with environmental protection, while Prime Minister Wen Jiabao admitted to China’s

The Foundation for TBnA’s Growth into a Leading-edge Science and engineering Center 25

failure in controlling pollution in a state-of-the-nation speech to the people in March 2007 (“Hu Jintao Advocates ‘Conservation Culture’ for 1st Time,” 2007; Yardley, 2007).

Thus, in this phase of economic development and reform, the Chinese government emphasizes the need to embark on a new direction in economic development. The concept of a circular economy (use of energy, water, and raw materials in sustained cycles to minimize waste and pollution), for example, has taken center stage in Chinese national discussions of the balance between economic activities and the environment (McElwee, 2008; Yuan, Bi, and Moriguichi, 2008; Zhijun and Nailing, 2007). Loosely defined as balancing economic growth with environmental protection, China emphasizes the integration of clean production technologies in industrial and economic activities. Cutting-edge technology and innovations that will increase energy efficiency, remove effluents and toxins in air and water emissions, and reduce resource input will be especially important. In this connection, the passage and imple-mentation of a cleaner-production law and the use of a green GDP to evaluate performance of government officials are aimed at promoting a circular economy in China’s future (“China Seeks to Develop a ‘Circular Economy,’” 2005). It is also a concept championed by the State Council in a white paper (China Internet Information Center, 2006b) and the State Council’s 11th national five-year environmental-protection plan promulgated in November 2007 (see SEPA, 2008).

In line with this national goal to promote more–environmentally sustainable economic development, China is hosting experiments in building new ecocities, which emphasize the use of advanced technologies, such as multifunctional building materials, renewable-energy systems, green manufacturing processes, and recycling of water and waste, to build new environment-friendly urban centers. The two efforts—in Dongtan in Pudong and TBNA—are the most prominent, involving high-profile international partners.10 Demonstration efforts and lessons learned in these ecocities will guide the development of future generations of eco-cities that may become the models for new sustainable communities. But more importantly, these ecocities will help to put into practical use new technologies to promote their widespread commercial adoption.

Sustain High Economic Growth

Three decades of high-speed economic growth in China have lifted hundreds of millions of people out of dire poverty, turned tens of millions into the country’s expanding middle class, and created significant fortunes for tens of thousands of Chinese entrepreneurs (see, for exam-ple, Chang, 2008; and Hodgson, 2007). Yet, China needs to continue high economic growth to provide jobs and continue to improve the standard of living for its 1.3 billion people (see Prasad, 2004). Even if it is not the double-digit growth that has marked its meteoric rise in the past three decades, this economic dynamo cannot afford to slow down.

Increasing productivity is central to China’s continuing economic growth. But it can no longer (nor does it want to) compete on the basis of low-cost labor, cheap land, tax holidays,

10 “Shanghai Plans Eco-Metropolis on Its Mudflats” (2006). Dongtan is to be the first of four ecocities to be developed at this site with the involvement of a leading British urban design, architecture, and engineering firm (see Arup, undated). On Eco-City in Tianjin, see “China, Singapore Build Eco-City in Tianjin” (2008); MacLeod (2007); J. Wu (2008); and “Another Chinese Eco-City Planned” (2008).

26 The Global Technology Revolution China, In-Depth Analyses

low energy, and other resource inputs (Wolff, 2007).11 To continue to improve the quality of life for its people, their wages must rise. With economies in Vietnam, Cambodia, and else-where offering less-expensive labor, China must stay competitive in the global economy and attract investors—Chinese and foreign alike—by increasing productivity and the added value of goods and services produced in China (“China Needs Innovation,” 2007).

China is at a crossroads. While manufacturing will remain important, China has to forge a new path in economic development. China is the world’s top nation in the export of tech-nology products, but many of these products sit at the low end of the technology scale and frequently use technology licensed from foreign owners.12 China currently pays foreign entities to buy technology products and for licenses to use the technologies found in Chinese factories, banks, highways, and schools (Serger and Breidne, 2007; and “China and the World Economy Workshop,” 2005–2006). With payments for technology licenses factored in as a cost of pro-duction, the profit margin for Chinese enterprises greatly diminishes. Even if Chinese enter-prises are willing to pay high sums for foreign-owned technologies, purchase might not always be possible: Sellers’ national laws might bar export. Or sellers might refuse to sell to keep in their own countries that production and those jobs with the most value added.

For China as a whole, especially the coastal economic centers, knowledge-driven eco-nomic growth will be critical to the future. At its core is cutting-edge technology and innova-tion. China’s call for independent innovation is a rally to reduce the nation’s reliance on foreign sources for technology innovations (Linton, 2008; Serger and Breidne, 2007; see, e.g., Xin and Yidong, 2006). It is also a call for Chinese industry to develop technology innovations to meets its own needs, rather than continuing to borrow and adapt what external sources offer. Ultimately, innovation of this sort will enable China to stop trying to keep up with the world’s most scientifically advanced nations and to join their ranks as they define S&E frontiers. Its needs are made clear in the major S&T projects in the five-year plan for 2006–2010.13

There are two other major reasons that cutting-edge technology and innovation will be important to China in the coming years. Not only will Chinese manufacturing need to go higher in value added; it will also have to first repair the Chinese “brand” tarnished by multiple incidents demonstrating lack of quality assurance in the past several years (see, e.g.,

11 China’s labor supply could contract in the coming decades as population growth continues to decline. This would add pressure on the price of labor, and that increased cost, without efforts to increase productivity, would undercut China’s eco-nomic competitiveness (see Nielsen and Fang, 2007).12 For example, in the telecom sector, see J. Ng (2006); “Premier Wen Stresses Innovation” (2005); and Xu (2005).13 See China Internet Information Center (2006a) for more on these major S&T projects in the plan. These projects are (1) integrated circuits and software (establishing integrated-circuit R&D centers, industrializing the technology for 90-nano-meter (nm) and smaller integrated circuits, and developing basic software, middleware, large key applied software and integrated systems); (2) new-generation network (building next-generation Internet demonstration projects, a nationwide digital TV network, and mobile-communication demonstration networks with independent property rights); (3) advanced computing (making breakthroughs in technology for petaflop computer systems, building grid-based advanced computing platforms, and commercializing the production of teraflop computers); (4) biomedicine (building demonstration projects for commercial production of vaccines for major diseases and gene-modified medicines, improving the modern traditional Chinese medicine system, and enhancing the capability for new medicine invention and production); (5) civil airplane (developing planes for trunk and feeder lines, general-purpose planes and helicopters, and advanced engines); (6) satellite applications (developing new meteorological, oceanographic, resource, and telecommunication satellites and poison- and pollution-free thrust-augmented carrier rockets; building earth-observation and navigation-positioning satellite systems and facilities and application-demonstration projects for civil satellite ground systems); and (7) new materials (building demonstration projects for commercial production of high-performance new materials needed badly in information, bio-logical, and aerospace industries).

The Foundation for TBnA’s Growth into a Leading-edge Science and engineering Center 27

Lipton and Barboza, 2007; “China Exports Lead Poisoning,” 2007; Skelton, 2007; and Story, 2008) and establish a new brand image that will command trust from consumers in China and worldwide.

Building into a trusted brand will not be an overnight exercise. More likely, it may take even a couple of decades to firmly establish that reputation. For example, the “made in Japan” brand was regarded poorly in the 1950s and 1960s in the North American market. It was not until the 1970s and 1980s with persistent effort to improve product quality and reliability that the Japanese brand gained consumer confidence, and maintaining that brand trust demands continuous vigilance.

While improvements in management had a big role in improving the quality of Japanese-made products, technology had an equally important role. Improved precision controls and monitoring devices contributed to superior product quality, and new technology created new products, such as Sony® Walkman® cassette players, Panasonic® video-recording machines, and Nintendo® Game Boy® handheld video games that forever changed the world’s image of “made in Japan” (see Morita, 1986; Imai, 1986).

National Drivers of and Barriers to Cutting-Edge R&D and Innovation

In GTR 2020, we analyzed 10 areas that can be drivers for or barriers to the implementation of TAs: cost and financing; laws and policies; social values, public opinion, and politics; infra-structure; privacy concerns; resources and environmental health; R&D investment; education and literacy; population and demographics; and governance and stability. On the basis of the analysis of these drivers and barriers for China in GTR 2020 (In-Depth Analysis, pp. 78–84), updated with information from our reviews of recent Chinese- and English-language literature and the data gathered from our interviews and workshops, we believe that the following areas encompass the most-important drivers and barriers that will influence TBNA and TEDA’s development and implementation of the selected TAs.

First are China’s needs. These are the issues described in the preceding section. Increasing productivity, raising energy efficiency, reducing impact on the environment, improving public and individual health, and rising incomes and consumption are all drivers for TBNA and TEDA for developing cutting-edge R&D and innovation as enablers and problem-solvers. The greater the need, the greater will be the demand for cutting-edge R&D and innovation. And the more likely there will be receptivity to adopting new technologies.

Second are national S&T policies. The emphasis on using cutting-edge R&D and innova-tion to address national needs and achieve national goals will likely continue in the coming years. While market forces may have some influence on the direction of cutting-edge R&D and innovation, the national priorities that the government sets will likely have an even greater impact because the Chinese government is the most important source of funding for these activities (and the vast majority of research institutions in China are government-owned, e.g., universities, national research institutes and laboratories, S&T incubators). While having a set of national priorities helps to guide funding decisions, the flip side of this is that potentially important breakthrough research that does not fall under the national priorities would not be funded. Until the private financing mechanisms in China for cutting-edge R&D and innova-tion mature, researchers and entrepreneurs will have to rely largely on public support, alloca-

28 The Global Technology Revolution China, In-Depth Analyses

tions of which are driven by national policy guidelines.14 Thus, national R&D policy will be a driver for only those TAs that are consistent with it, and we have taken this into account in our selection of TAs for TBNA and TEDA to pursue.

Also, where the national resources for cutting-edge R&D and innovation will be avail-able and accessible will affect the advancement of cutting-edge R&D and innovation in China. Beijing is where the most-advanced R&D and innovation activities occur in China because the majority of the nation’s premier universities and research centers are concentrated in this city. The building of national S&T industrial parks in many Chinese cities is an effort to tap talent where it exists, support the needs of industries at a more local level, and, ultimately, expand national R&D capacity beyond Beijing. In this connection, the degree of ease with which researchers can work with domestic peers and international counterparts can affect success and speed in examining complex problems and finding solutions.

Third are other national policies that can be drivers by generating the “push” and “pull” for cutting-edge R&D and innovation. Apart from S&T promotion (policies that directly emphasize cutting-edge R&D and innovation), other national policies can exert important influence in pushing the direction of cutting-edge R&D and innovation and generating pull (demand) for the use of TAs that emerge from them. For example, stricter air quality–control laws could spur the development and adoption of advanced technologies to reduce industrial and automotive emissions (e.g., “China Passes New Green Laws Aimed at Businesses,” 2008; and Ash, 2008). Also, removing government subsidies for fuels (“China Should Stop Energy Subsidies,” 2006; Bradsher, 2008c) or other types of production inputs could have a positive effect on increasing private investment in cutting-edge R&D and on the adoption of innova-tions to ensure competitiveness.

Fourth is intellectual property rights (IPR) protection. Having robust, transparent, and trusted IPR laws and regulations is critical to promoting cutting-edge R&D and innovation activities by Chinese researchers and entrepreneurs and to attracting foreign capital and talent to be involved in such activities in China (or even to involve Chinese researchers and entre-preneurs). This area remains a barrier, because China’s IPR system is weak, a point cited by many foreign investors as a deterrence to investing in higher-tech enterprises in China (“EU, China Co-Operate on Illegal Trade,” 2008; ACCI, 2006; Ben-Artzi, 2007; Plasmans and Tan, 2004; Javorcik, 2004). It is improving, and much more needs to be done, especially in enforce-ment.15 The Chinese leadership has underscored the need to improve IPR protection in China to promote innovation at home and attract high-tech investment from overseas (“Hu Visits Microsoft,” 2006; Ding, 2006). But enforcement requires political will, leadership, trained personnel, and the right tools and resources at all levels of the Chinese government, and it must be nationally rigorous. For example, experts in China whom we interviewed underscored the shortage of trained personnel in IPR (e.g., lawyers, paralegals, administrators) as a seri-ous hindrance to the government in enforcing IPR laws and regulations and to businesses in complying with IPR laws and regulations.16 In the past decade, Chinese universities trained

14 Public support includes R&D grants and access to publicly funded R&D and innovation facilities, such as laboratories, incubators, travel grants to attend international scientific meetings, and all other forms of government funds and facilities for the promotion of R&D and innovation.15 For more details on IPR in China, see McCormick (2006) and G. Zhang (2005). For specifics on IPR laws and regula-tions, see China International Electronic Commerce Center (undated).16 RAND interviews with technology-enterprise owners and operators in China.

The Foundation for TBnA’s Growth into a Leading-edge Science and engineering Center 29

only 3,000 IPR experts, and China is estimated to need 50,000 to 60,000 IPR experts by 2010 (“China Needs More Experts in Intellectual Property Rights,” 2007).

Fifth are finance and banking laws and regulations. Again, like IPR laws and regulations, these must be robust, transparent, and trusted. Continuing emphasis on reform in the finan-cial and banking sectors are positive signs, but this area remains a barrier, since much more needs to be done, as underscored by a recent Organisation for Economic Co-Operation and Development (OECD) study on China’s innovation system (“Wen Calls for More Financial Reform,” 2007; Davies, 2006; see also OECD, 2008). The Chinese government is clearly aware that financial- and banking-sector reforms are essential to mobilizing capital from domestic and overseas sources to fund cutting-edge R&D and innovation. As the IPR environment improves and other conditions that will motivate investment in cutting-edge R&D and inno-vation mature, private venture capital for cutting-edge R&D and innovation may follow. In the meantime, the Chinese government’s creation and funding of venture-capital funds for R&D and innovation might fill a need, but it is yet to be seen whether this will catalyze or hinder the emergence of private venture-capital funds in China.

Sixth are policies, laws, and regulations that could directly affect the conduct of cutting-edge R&D and innovation activities and the commercialization of the results of cutting-edge R&D and innovations. These can be drivers—e.g., if they enable R&D activities or help to create markets for innovative products. However, they can be barriers in several ways. Research-ers need to be able to access materials, equipment, and test subjects for their R&D activi-ties. Laws and regulations that impose high import taxes for laboratory equipments; onerous requirements for the storage, use, and disposal of research materials; or offer no protection to researchers or their subjects in clinical trials can all be hindrances to the conduct of cutting-edge R&D and innovation activities. At the same time, the absence of laws and regulations to certify product performance and safety and offer consumer protection might deter or slow market adoption.

Seventh is human capital, which can also be a driver or a barrier, depending on whether the necessary talent for cutting-edge R&D and innovation is available. Cutting-edge R&D and innovation are knowledge-based enterprises. Apart from knowledge in S&E, knowledge in banking and finance, business and personnel management, legal and regulatory affairs, and marketing and sales are all important to support such activities in the entire chain, from recruiting scientists to commercializing the products of research. While debate may continue about the exact number of scientists and engineers China produces annually and the quality of this talent,17 such companies as Microsoft, Motorola, and IBM would not have research opera-tions in China if they could not find a pool of human talent there. China also produces tens of thousands of university graduates in other fields annually. Many of the tens of thousands of Chinese university students who have gone overseas to study are also returning to China to pursue their career goals and fortunes.

But with a growing economy and an aging society, competition for the most talented—already intense—will be even more so for enterprises involved in technological innovation.18 In addition to competition within China for this human talent from other sectors and enterprises,

17 See, for example, Gereffi et al. (2005), which questions the number of engineers produced in China annually. Its authors propose that China produces about 350,000 graduates in engineering, computer science, and information technology—half the number that other sources have reported (see also Wadhwa et al., 2007).18 RAND interviews with Chinese researchers and entrepreneurs in TEDA and Beijing.

30 The Global Technology Revolution China, In-Depth Analyses

trained professionals in any country in the world today are also a commodity that will attract buyers in markets other than their own country. In short, there will be competition for China’s best and brightest from employers across the world. Whoever will offer them the best profes-sional opportunities, wages, and perhaps quality of life, will secure this talent.

In the longer term, the question for China may be whether youth in the future will choose to work in the R&D and innovation enterprise and in what form (e.g., as engineers, as IPR lawyers, or as high-tech-innovation entrepreneurs) and what policies might motivate them to enter the R&D and innovation enterprise. There is also the question of how China might find the human talent it needs from other sources if there is an internal shortage. For example, policies that will encourage youth overseas to come to China to train and work in cutting-edge R&D and innovation (as the United States has been successful in accomplishing) might be one option.

Eighth, the last but certainly not the least, is a culture of R&D and innovation. This goes beyond the worldview or mind-set of researchers and innovation entrepreneurs. The central issue is whether the government, researchers, entrepreneurs, investors, and end users are all risk takers who will look to cutting-edge R&D and innovation to create high-impact solutions and opportunities and how accepting they are of the risk of failures and losses. Cutting-edge R&D and innovation can offer potentially high payoffs, but the path of discovery and success in commercialization will involve a great deal of failure and loss. Many of the issues, to vary-ing degrees and in different ways, will affect the development of such a culture in China, and this will remain a barrier until this culture develops (Lynton, 2006; Angel, 2006; CAS, 2008). Such a culture can influence investors’ decisions to put their money in venture-capital funds for cutting-edge R&D and innovation.

Capacity Available to TBNA and TEDA: R&D, Manufacturing, and S&T Commercialization

TBNA and TEDA’s success in becoming a state-of-the-art center for high-impact R&D and innovation will hinge on their capacity in three areas: (1) R&D, (2) manufacturing, and (3) S&T commercialization. Local capacity—within TBNA, TEDA, and the Tianjin municipality—will be critical in this regard. But to achieve the level of innovation and influence to which TBNA and TEDA aspire, they will need to be able to draw on capacity well beyond their own locale as well, from elsewhere in China and the rest of the world.

R&D Capacity

At the heart of R&D capacity in S&T—an intensively knowledge-based endeavor—is a pro-fessional cadre of highly trained scientists and engineers and cutting-edge facilities equipped to enable them to carry out their work. TBNA and TEDA are home to a growing number of such institutions, ranging from enterprise parks to engineering centers, such as the following:19

China National Academy of Nanotechnology and Engineering (CNANE):• This nanotech-nology center based in TEDA is equipped with state-of-the-art instrumentation for fab-ricating and measuring nanoscale materials and devices. Its research programs include

19 See a complete list at TEDA (undated[b]).

The Foundation for TBnA’s Growth into a Leading-edge Science and engineering Center 31

work on nanoscale filters, chemical and biological sensors, energy-storage devices, and bioassays, as well as the development of nanoscale-formulated pharmaceuticals.20

Tianjin Biochip Corporation (TBC):• Founded in 2003, TBC is one of five national bio-chip R&D centers funded by the National High-Technology Research and Development Program of China (863 Program).Tianjin University’s (TU’s) School of Chemical Engineering and Technology: • This college at TU has ongoing research programs in such disciplines as resource-chemical engineering, environmental chemical engineering, pharmaceutical engineering, and material-chemical engineering. From 2005 to 2008, researchers at the university published 920 Science Citation Index (SCI) papers, 894 Engineering Index (EI) papers, applied for 292 patents, and authorized the use of 125 patents (TU School of Chemical Engineering and Tech-nology, 2003).Tianjin Institute of Power Sources: • The institute does R&D on advanced batteries and fuel cells, including nickel-metal hydride (NiMH), lithium-ion (Li-ion), and direct-methanol fuel cells (DMFCs). It is affiliated with the China Industrial Association of Power Sources (CIAPS).China Automotive Technology and Research Center (CATARC) Auto High Tech Company •(CAH) and Tianjin Huanke Auto-Catalytic Purification Hi-Tech Co. Ltd.: These two com-panies perform R&D on catalytic converters.

Prominent research groups in Tianjin are conducting high-caliber R&D at the interna-tional level on a variety of topics:

Zhang Fengbao at TU, along with colleagues at Nankai University• , has recently isolated carbon nanohorns and demonstrated in the lab that they can be used for drug delivery (Xiaobin Fan et al., 2007).Lu Zhang and Wei Feng from TU’s School of Materials Science and Engineering• are working on dendritic conjugated polymers to improve the performance of organic light-emitting diodes (OLEDs).Jing Wang, also from TU• , is investigating the characteristics of E-ink particles for elec-tronic paper.Shichang Wang• leads a substantial R&D program in desalination at TU’s School of Chemical Engineering and Technology.

Tianjin scientists have also established partnerships with researchers in other parts of China and internationally. Several examples include the following:

In collaboration with a group at the Beijing Solar Energy Institute led by Yuwen Zhao, •Geng Xinhua’s research group at Nankai University has published on thin-film silicon photovoltaic (PV) materials.The national R&D center at TBC has partnered with the U.S. company Affymetrix to •develop new uses of rapid bioassays based on microchips.

20 Technical discussions and laboratory tour with Autumn Wei, deputy director of CNANE (2006) and interview with Meng Ce, vice director of the Nanotechnology Industrial Base Company (NIBC) and the Nanotechnology Venture Capital Company (NVCC) (2007).

32 The Global Technology Revolution China, In-Depth Analyses

High-impact R&D—both academic and industrial—is going on elsewhere in China as well. Potential Chinese capacity on which TBNA and TEDA might draw from further afield includes the following:

Researchers at the Beijing National Laboratory for Molecular Sciences and the College of •Chemistry and Molecular Engineering at Peking University are researching flexible dye-sensitized (third-generation) solar cells (Xing Fan et al., 2008).The Electric Research Institute of the Chinese Academy of Sciences (CAS)• does R&D on elec-tric motors and motor control–research systems.The Computer Design Institute of Tsinghua University• does R&D on onboard charging and battery management.Researchers at the South China University of Technology• are developing environmentally friendly chemical precursors for polymer light-emitting diode (PLED) applications (F. Huang et al., 2007).Researchers at Peking University• are investigating carbon-nanotube switches (Chen et al., 2008) for memory devices.Researchers at the Huazhong University of Science and Technology and Tsinghua University• are investigating integrated ferroelectric capacitors with possible applications for ferro-electric random access memory (FeRAM) (L. Wang et al., 2007).Researchers from Tsinghua University• are developing designs and microfabrication tech-niques for micro fuel cells (Zhong et al., 2008).Researchers with the CAS, Shanghai Jiao Tong University, and Fudan University are part-•nering with a U.S. corporation, Silicon Storage Technology, to investigate issues related to phase-change material memory (Shen et al., 2008; J. Feng et al., 2007).

A Well-Educated S&E Workforce. A workforce educated in S&E-related fields is another vital element of capacity for top-level R&D, as a source of technicians and other laboratory workers as well as of engineering researchers and research managers. There are 43 colleges and universities in the Tianjin municipality. As of this writing, 245,000 undergraduate students are enrolled, along with 40,000 graduate students. The universities include the following:

TU (first established in 1895 as Beiyang University) (TU, undated)•Nankai University (founded in 1919) (Nankai University, undated)•TU of Finance and Economics (founded in 1958) (TU of Finance and Economics, •undated)TU of Technology (founded in 1981) (TU of Technology, undated).•

In TEDA itself, the TU of Science and Technology has maintained one of its three cam-puses since 2004. Nankai University established its School of Biological Science and Bio-technology in TEDA in 2003, with specialized programs in genomics, functional genom-ics, microarray, bioinformatics, and molecular virology (see TU of Science and Technology, undated, and TEDA School of Biological Science and Biotechnology, undated).

In 2007, 45,627 people graduated with undergraduate degrees in the Tianjin municipal-ity. Their degrees span a wide range of fields in the sciences and engineering, including infor-mation and computer science, natural sciences, biotechnology, microelectronics, material sci-

The Foundation for TBnA’s Growth into a Leading-edge Science and engineering Center 33

ences, software engineering, telecommunication engineering, civil engineering, and industrial engineering (Investteda, undated).

China’s residence-registration system requires that many of these graduates remain in Tianjin and thus contribute to local capacity. This registration system controls the internal migration of the Chinese population. A person is classified as a rural or urban resident of a particular province based on his or her birthplace or on his or her parents’ resident registra-tion. This classification determines where someone can legally reside and work. When a person obtains a job outside of his or her legal residence area, including a move from a rural village to an urban center in the same province, the Chinese government must approve a transfer of residence registration. These transfers are not easily granted.

A university education does allow Chinese to bypass this system, at least temporarily. A rural youth, for example, can go to a city in his or her own province or outside it to study with-out needing to obtain a new residence registration. The youth then has up to three years after graduating to find a permanent job and use that to request a change of residence-registration status. But after that three-year period, if the graduate has not received a transfer approval, he or she is required to return to the rural area where he or she is a legal resident. TBNA could provide the permanent jobs that graduates of Tianjin universities require to remain in the region.

Incentives to Attract Needed Human Capital. Designated to lead the effort to transform TBNA into a hub for cutting-edge R&D, TEDA provides a model for incentives designed to attract top-quality S&E talent with the needed expertise and training. It has in place a broad range of funding and programs targeted toward this end:21

Incentives for companies include the following:

The TEDA Special Fund for Quality Human Resources provides subsidies to enterprises •for hiring S&E experts as well as technical and management personnel.Companies that establish postdoctoral positions (called • workstations) receive RMB 50,000 ($7,292.50)22 in financial aid for scientific research.Companies that establish “innovation and practice bases” receive RMB 30,000.•Postdoctoral topical research groups get RMB 100,000 for national awards and •RMB 50,000 for provincial awards received during their tenure.Each year, 100 awards are given to enterprises that cover up to RMB 20,000 per person •or 20 percent of the cost of providing someone with technical training overseas.Plans are being developed to establish cofunded and conamed scholarships of up to •RMB 50,000 at prominent universities and colleges. These scholarships are intended to raise the visibility of TBNA and TEDA and help their enterprises access talent.

Incentives for individuals include the following:

The Post-Doctorate Research Support Program provides financial support to individual •researchers and places them in enterprises and postdoctoral innovation bases. Those con-

21 The information for these descriptions of incentive programs was derived from TEDA annual reports and interviews with TEDA corporate management in June and August 2007.22 As of September 16, 2008, RMB 1 was equivalent to US$0.14585 (OANDA, undated). We give monetary values in RMB hereafter.

34 The Global Technology Revolution China, In-Depth Analyses

ducting research in an enterprise receive up to RMB 50,000 in annual support; in a post-doctoral base, up to RMB 30,000. Publication in a top international journal will garner additional awards of up to RMB 10,000 per person.A Ph.D. holder who comes out of a postdoctoral position or postdoctoral innovation base, •signs a two-year contract with a company in TEDA, and buys a house in TEDA receives RMB 100,000.An additional financial incentive of up to RMB 400,000 goes to any Ph.D. who signs a •long-term contract (five years or more) with an employer in TEDA and purchases a home in TEDA.

A number of these incentives have generated ample payoffs. From 2000, when the postdoc-toral positions were first established, until today, TEDA has invested RMB 39,770,000 in fund-ing for postdoctoral scientific research. The outcome has been more than RMB 150,000,000 in net profit for TEDA enterprises. In short, each RMB invested has created RMB 4 in net profit (TEDA, 2007).

Shortfalls in R&D Capacity. TBNA and TEDA’s ability to attract the human talent essen-tial to the cutting-edge R&D and innovation enterprise is promising. But competition is also intense, both at home and abroad. As enterprises across China continue to grow and demand high-quality knowledge workers in the coming years, this situation is unlikely to ease. In par-ticular, foreign-owned firms in China often seek to reduce cost and localize operation manage-ment by hiring more Chinese professionals (“Getting Ahead of the Gang,” 2008). McKinsey and Company reported that, between 1998 and 2002, employment at large foreign-owned companies in China rose 12 percent per year, while at joint ventures it rose 23 percent annu-ally, totaling 2.7 million new employees. McKinsey projected that, assuming that 30 percent of these employees have undergraduate degrees and that growth in demand for labor continues at the same rates, these two types of companies would have to employ an additional 750,000 graduates between 2003 and 2008. McKinsey estimated that China would produce 1.1 mil-lion graduates suitable for employment in world-class service companies during that period. Of these graduates, 70 percent would go to large multinational firms or joint ventures, leaving only 30 percent of graduates for small multinationals or Chinese companies (McKinsey Global Institute, 2005).

Competition from overseas is also substantial. Today, the world is an open job market for China’s knowledge workers. According to The Report on the Development of Chinese Talent in 2006, published by the Chinese Academy of Social Sciences, approximately 1.06 million Chinese went abroad to study between 1978 and 2006. Of that total, just 275,000 returned to China during that period (F. Li, 2007).

TBNA and TEDA’s long-term success in sustaining the needed capacity for high-impact R&D will likely depend on whether TBNA and TEDA can offer top-quality S&E talent—from within China and overseas—the professional opportunities, economic prospects, and quality of life that they seek for themselves and their families. Many Chinese professionals whom we interviewed told us that Beijing and Shanghai are considered the most-attractive places to work and live in the country. The concentration of top-class research institutes and researchers in these cities, the many opportunities they offer for professional networking, and their higher rates of pay make them stand out as magnets for human talent in China.23

23 We draw these views from interviews with many individuals in TEDA and Beijing between May and August 2007.

The Foundation for TBnA’s Growth into a Leading-edge Science and engineering Center 35

The spouses of S&E professionals might also more easily find superior employment and professional opportunities in these urban hubs. And the importance of high-quality primary and secondary schools in these cities cannot be understated. Attractive educational opportuni-ties for their children can also play a role in attracting Chinese professionals.24

Manufacturing Capacity

The core of manufacturing capacity is the presence of industry, with a growing number of companies (including members of the Fortune 500), a track record of increasing industrial output, and growing GDP. Physical infrastructure to support the manufacturing enterprise also plays a role—utilities to enable smooth operations and facilities to handle logistics and cargo transport. As pollution and waste management become increasingly important for both industry and government, efforts to establish a circular economy and use of green manufactur-ing techniques take on more weight as well.

TEDA is currently TBNA’s commercial and manufacturing hub. Consequently, it houses the majority of TBNA’s industrial capacity. The facilities required to support the rapidly grow-ing demand for efficient handling and distribution of products are found in the Tianjin Port free-trade zone and Tianjin Port. Together, these three zones make up TBNA’s manufacturing capacity.

Presence of Industry. The following are factors of the presence of industry in the region.Current Industries and Companies. TEDA’s current industrial base is built on four pillar

industries that make up more than 90 percent of TEDA’s total industrial output (Figure 3.1):

electronics and telecommunications•machinery, including automobiles and automotive parts•biotech and chemicals (including pharmaceuticals)•food and beverages.•

Electronics and telecom is by far the largest of the four, accounting for 50 percent of industrial output in 2007. Machinery and automotive follows at 32 percent. Biopharmaceuticals gener-ated 6 percent, and food and beverages was 4 percent that same year. Overall, while the elec-tronics and telecom sector continues to hold the biggest share of industrial output in TEDA, its share of the total is also continuing to decline as TEDA continues its strategy to diversify and increase investments in the other pillar industries.25

By the end of 2007, 4,485 foreign-, Hong Kong–, Macau-, and Taiwan-invested enter-prises were operating in TEDA, with a total accumulated investment of $40.32 billion (TEDA Investment Promotion Center, 2008). And the roster of enterprises in TEDA with invest-ments from Fortune 500 companies (62 multinationals from 10 countries) had grown to reach 139 by July 2008 (TEDA, 2008; see Table 3.1). The growth shows a dramatic upward trend, given that, until 1991, there were only five such companies in TEDA (Figure 3.2) (“Fortune 500 Companies Invest in Over 100 Enterprises in TEDA,” 2005). The influx of these large multinationals has driven this expansion considerably, as the smaller companies that supply them also came to TEDA to establish manufacturing operations. Toyota is a prime example.

24 We draw these views from discussions with many individuals in TEDA and Beijing between May and August 2007.25 TEDA’s 2005 annual report (TEDA Investment Promotion Center, 2006) puts 2004 industrial output for electronics and telecom industries at 68 percent and for machinery and automotive industries at 21 percent.

36 The Global Technology Revolution China, In-Depth Analyses

Figure 3.1TEDA Industrial Output (%), by Industry, 2007

RAND TR649-3.1

Machineryand automotive

(32%)

Food andbeverage

(4%)Electronicsand telecom

(50%)

Biopharma +chemical

(6%)

Other(8%)

SOURCE: 2007 Annual Report on Economic and Social Development in Tianjin.

Figure 3.2Increase in the Number of Enterprises in TEDA with Investment from Fortune 500 Companies, 1984–2005

RAND TR649-3.2

SOURCE: TEDA-provided data, 2008.

Nu

mb

er o

f en

terp

rise

s

100

80

60

40

20

120

0

42

53

5

1984–1991 1992–1999

Time period

2000–2005

The Foundation for TBnA’s Growth into a Leading-edge Science and engineering Center 37

Table 3.1Some Fortune 500 Companies Invested in TEDA

Industry Type Name Country

Machinery and automotive John Deere United States

Korea Kumho petrochemical Korea

nippon Yusen Kaisha Japan

pOSCO Mill Korea Korea

Sew-eURODRIVe Germany

Sumitomo Corporation Japan

Toyota Motor Corporation Japan

United Technologies United States

Volkswagen AG Germany

Light industry (food and beverage) Coca-Cola Global United States

Kraft Foods United States

nestlé SA Switzerland

Otsuka pharmaceutical Japan

pepsiCo United States

electronics and telecom Alcatel-Lucent France

Canon Global Japan

honeywell United States

hyundai Motor Company Korea

IBM United States

Kyocera Global Japan

LG Group Korea

Motorola USA United States

panasonic Corporation Japan

Sanyo electric Japan

Samsung electronics Korea

Yamaha Corporation Japan

Biopharmaceuticals Archer Daniels Midland United States

novozymes Denmark

novo nordisk A/S Denmark

GlaxoSmithKline United Kingdom

Tanabe Seiyaku Japan

38 The Global Technology Revolution China, In-Depth Analyses

Industry Type Name Country

Other halliburton United States

Idemitsu Kosan Japan

Mitsubishi Companies Japan

Daiei Japan

energizer Battery Company United States

Owens Corning United States

According to Yong Li, then chair of TEDA’s Administrative Commission, “[B]ecause Toyota Motor Corp. located its manufacturing base in TEDA, TEDA already has more than 100 auto-parts suppliers” (“TEDA Wants You,” undated).

Table 3.1 lists some of the Fortune 500 companies invested in TEDA. Foreign investors clearly have a major presence in TEDA and play a major role in promoting industrial devel-opment in the area, but Chinese companies are also important players in TEDA. Tianjin First Auto Works, a manufacturer of the Toyota Corolla and other vehicles, has the greatest industrial output of all enterprises in TEDA. Other leading Chinese companies in TEDA are active in other pillar industries as well—e.g., Tianjin Tingyi Food and Tianjin Jinya Electron-ics. Table 3.2 shows Chinese domestic enterprises among the top 100 investors in TEDA in 2007.

In addition, manufacturing capacity for high-tech goods is increasing in TEDA. For example, CATARC set up Tianjin Qingyuan Electric Vehicle Research Center in TEDA to conduct R&D on electric vehicles. Its success has led to the creation of Tianjin Qingyuan Electric Automotive Vehicle to manufacture a range of electric vehicles, including cars, buses,

Table 3.2Chinese Enterprises with Greatest Investment in TEDA, 2007

Enterprise Rank

First Auto works 1

Bohai Securities 7

Tianjin Jinya electronics 10

Tianjin Intex Auto parts 11

Bank of China, Binhai subbranch 16

Tianjin Golden Bridge welding Materials Group 21

Tianjin Tingyi International Food Co. 30

Continental Automotive Systems 31

northsea Oils and Grains Industries 36

Tianjin CIMC north Ocean Containers 37

Jiangsu Jinhu haozhenwang Tingyin Food 38

Zhenhua Logistics Group 61

Table 3.1—Continued

The Foundation for TBnA’s Growth into a Leading-edge Science and engineering Center 39

and vans. Not only are these vehicles marketed in China, they have also found overseas clients, including the U.S. National Aeronautics and Space Administration (NASA).26

Many of these companies are housed in a diverse array of industrial parks located in TEDA and a variety of special industrial zones that form a part of it. For example, in the elec-tronics sector, these include the following:

Communications Industrial Park•Slice Component Industrial Park•Integrated Circuit Industrial Park•TEDA Micro-Electronics Industrial Park•TEDA Yat-Sen Scientific Industrial Park (electronics, auto parts, and packaging).•

In the biopharm and chemical sector, TEDA has the following:

TEDA Chemical Industrial Park•Watson Biotechnological Park•Modern Chinese Traditional Medicine Industrial Park•Hualida Biological Park•Jinbin Medical Park (TEDA, undated[a]).•

TEDA’s Industrial Output. TEDA’s success in attracting investments from foreign, Hong Kong, Macau, and Taiwan firms as well as Fortune 500 companies has sustained rapid growth throughout its 20-plus-year history.

Between 2003 and 2007, TEDA’s gross industrial output grew from RMB 125 billion to RMB 335 billion. Large and medium-sized enterprises and enterprises with investment from foreign, Hong Kong, Macau, and Taiwan firms make up a sizable share of its gross industrial output, as shown in Table 3.3. High-tech products (biopharmaceuticals, new materials, and new energy), too, assume an increasing share of the gross industrial output.

We find that TEDA’s gross industrial output by its four pillar industries (mechanical and automotive, electronics and telecom, food and beverages and other light industry, and bio

Table 3.3Breaking Down TEDA’s Gross Industrial Output

Industrial Output 2003 2005 2007

Gross (RMB billions) 125 231 335

Amount from foreign, hong Kong, Macau, or Taiwan investments (RMB billions)

121 225 323

percentage from large and medium-sized firms 91.8 95.0 96.2

Amount from high-tech products (RMB billions) 72 143 197

percentage from high-tech products 57.5 62.1 58.9

SOURCeS: TeDA Investment promotion Center (2004, 2006, 2008).

26 RAND interview with Qingyuan Electric Automotive Research Center officials. NASA buys these nonemission electric vehicles for use inside its large facilities (e.g., hangers).

40 The Global Technology Revolution China, In-Depth Analyses

pharmaceuticals and chemical) continue to dominate, with the first two categories being the biggest contributors to TEDA’s gross industrial output (Table 3.4).

Activities at the three industrial parks—namely, the Micro-Electronics Industrial Park, the Yat-Sen Industrial Park, and the Chemical Industrial Park—have also increased substan-tially during this period, as shown in Table 3.5.

TEDA’s Growing GDP. With the secondary industries being the backbone of TEDA’s economy, the steady growth described in the preceding paragraphs explains the correspond-ing rise in TEDA’s GDP. As illustrated in Figure 3.3, with growth rates of nearly 30 percent in some years and overall more than 20 percent per year since 2000, TEDA’s GDP reached a total of RMB 93.3 billion by 2007.

A breakdown of TEDA’s GDP also shows that its economy, though still dominated by the secondary industries, is registering considerable growth in the tertiary sector. (Here, secondary and tertiary refer to positions on the supply and services chain for the primary manufacturing industries.) Table 3.6 shows the details.

Table 3.4Four Pillar Industries and TEDA’s Gross Industrial Output

Industrial Output 2003 2005 2007

Gross (RMB billions) 125 231 335

From four pillar industries

Amount (RMB billions) 115 214 309

percentage 91.8 92.8 91.9

From machinery and automotive

Amount (RMB billions) 21 49 109

percentage 44 21.4 32.4

From electronics and telecom

Amount (RMB billions) 78 145 164

percentage 62.2 62.7 49

SOURCeS: TeDA Investment promotion Center (2004, 2006, 2008).

Table 3.5Industrial Output of the Three Industrial Parks (RMB millions)

Park 2003 2005 2007

Micro-electronics 20,000 40,800 78,000

Yat-Sen 4,900 6,200 4,200

Chemical 51 263 2,700

Total 25,500 49,000 85,000

SOURCeS: TeDA Investment promotion Center (2004, 2006, 2008).

The Foundation for TBnA’s Growth into a Leading-edge Science and engineering Center 41

Figure 3.3TEDA GDP Growth, 2001–2007

RAND TR649-3.3

SOURCE: 2007 Annual Report on Economic and Social Development of Tianjin Economic-Technological Development Area.

100

mill

ion

RM

B

Gro

wth

rat

e (%

)

800

600

400

200

1,000

30

20

10

40

00

Growth rate

GDP

200620052004200320022001 2007

Year

Table 3.6Breakdown of TEDA’s GDP, by Sector (RMB billions)

GDP 2003 2005 2007

Total 44.5 64.2 93.9

Secondary sector 35.5 54.1 77.4

Tertiary sector 9.0 10.1 16.5

SOURCeS: TeDA Investment promotion Center (2004, 2006, 2008).

Also worthy of note is the rising labor productivity in TEDA as measured in monetary terms. In 2003, per capita labor productivity in TEDA was 192,300 RMB. By 2005, it had risen to RMB 214,100; by 2007, it reached RMB 299,200. This rise in per capita labor pro-ductivity may be attributed to the increasingly value-added nature of TEDA’s manufacturing industries, as well as the expansion of tertiary-sector industries, such as banking and finance (TEDA Investment Promotion Center, 2004, 2006, 2008).

Physical Infrastructure. This section details aspects of the area’s physical infrastructure.Utilities. At the same time, TEDA has expanded the facilities supplying utilities for indus-

trial and commercial use to keep pace with this rapid manufacturing growth (TEDA Invest-ment Promotion Center, 2004, 2006, 2008). More than RMB 10 billion (US$1.5 billion) have

42 The Global Technology Revolution China, In-Depth Analyses

been invested to this end—electricity, water, gas, sewage-treatment plants and infrastructure, and broadband networks27—in the past 20-plus years (TEDA, 2008).

Electricity illustrates the growth in capacity. Figure 3.4 summarizes the trends in elec-tricity consumption in TEDA from 2004 to 2007, as well as the growth in electric-generating capacity available to TEDA in the same period. Electricity consumption has more than doubled in this time frame, and available capacity has continued to be more than triple consumption.

Logistics and Cargo Handling. A thriving manufacturing base must have well-running logistics centers to handle the storage, processing, and distribution of high volumes of goods. Reliable and efficient networks to receive and transport cargo are also a key element.

TBNA’s growing capacity for logistics revolves around TBNA’s Tianjin Port Free Trade Zone. The largest and oldest zone of its sort in north China, it includes logistics, bonded warehousing, and processing areas. Several thousand companies have a presence in the zone, including Fortune 500 multinationals, such as Toyota, Kawasaki, Mercedes Benz, and UPS (TEDA Investment Promotion Center, 2008). Leading representatives of the logistics industry include the following:

Tang Fang Global (Tianjin) Logistics•Tianjin Port Haifeng Bonded Logistics•Schneider Logistics•

Figure 3.4Electricity Consumption and Supply Capacity in TEDA, 2004–2007

RAND TR649-3.4

SOURCE: TBNA-TEDA annual reports.NOTE: The numbers in parentheses represent the minimum supply capacity needed to meet the demand.

Meg

avo

lt-a

mp

s

Bill

ion

s o

f ki

low

att

ho

urs

1,200

1,000

800

600

1,400

4

2

1

5

00

400

200

3

Electricity supply capacity

Electricity consumption

200620052004 2007

Year

424

1.2291(140.31)

877

1.497(170.89)

831.8

1.85487(211.74)

1181.8

2.822(322.15)

27 TEDA is entirely covered by a broadband network of about 40 km of optical fiber, operating at 2G. The TEDA Internet Data Center is the largest and most advanced in north China. Robust e-government and e-commerce services support com-mercial users.

The Foundation for TBnA’s Growth into a Leading-edge Science and engineering Center 43

Jiali Logistics•Tianjin YCH Logistics (TEDA Investment Promotion Center, 2008).•

The Tianjin Port Free Trade Zone is well connected with transport routes to the Tianjin Port, the Tianjin International Airport, and the Tianjin rail and road networks, providing conduits for goods processed in the zone to be moved efficiently into multiple land- and sea-based ship-ping networks.

The Tianjin Port Free Trade Zone is also linked to two other logistics centers in the Tian-jin municipality. The Tianjin Airport Free Trade Zone houses both bonded warehousing areas and industrial parks. The Tianjin Airport International Logistics Zone is slated to eventually become the largest air-freight base in China (TEDA Investment Promotion Center, 2008). Domestic and foreign companies are also investing in these two zones.

As the largest port in north China and the fourth largest in China, Tianjin Port is at the center of TBNA’s capacity for handling and transporting cargo. The volume of freight moving through the port is increasing prodigiously. By the end of 2007, Tianjin Port had reached an annual total handling capacity of 310 million tons, with an annual growth rate of 20 percent. For container volume, its 16 container berths handled a throughput of 7.1 million 20-foot equivalent units (TEUs)28 in the same year, growing annually at a rate of 19 percent (Tianjin Port Development Holdings Limited, 2008).

In line with the goal of making TBNA a hub of international shipping and logistics, pre-sented in the 2006 five-year plan, the Chinese government will infuse a total of RMB 36.6 bil-lion to further develop Tianjin Port’s infrastructure (Tianjin Port Development Holdings Lim-ited, 2008). Thirty-four projects for Tianjin Port are in the works, including a 250,000-ton deepwater channel and a 300,000-ton terminal for crude oil.

Although port development is a high priority, it alone is insufficient to handle the level of container transport envisioned for TBNA. China generally is “struggling to keep up with the growth of water-borne freight” (US-China Business Council, 2006). Other conduits are essential, particularly in a rapidly developing region like Tianjin:

[D]ependable, well-coordinated intermodal logistics services [are] crucial to easing trans-portation bottlenecks. Tianjin’s major markets for container transport are Beijing, inland China, and Mongolia, but little is being transported by rail to these destinations. In 2003, Tianjin transported more than 56 million tons of freight by rail, compared with 200 mil-lion tons transported by highway. This means that much of the freight is being moved on the roads, which are severely congested. . . . Without proper planning, bottlenecks like these will . . . dampen Tianjin’s growth and make shippers turn to alternative port cities. (US-China Business Council, 2006)

Consequently, to ease the transport burden on Tianjin Port, the Chinese government is imple-menting plans to expand and modernize both rail lines and motorways linking TBNA and the Tianjin municipality to other parts of China.

Major road-building projects include expansion of the Beijing-Tianjin-Tanggu Express-way and construction of a coastal expressway, the latter of which will provide an alternative route to neighboring provinces and bolster development along the coast of the Bohai Bay.

28 This is a 20-foot-long, standard steel ocean shipping container.

44 The Global Technology Revolution China, In-Depth Analyses

Air cargo is currently TBNA’s second principal means of freight transport. Already, the Tianjin Binhai International Airport is China’s largest port for air cargo (Tianjin Port Free Trade Zone and Airport Industrial Park of Binhai New Area, undated[a]). Further develop-ment of its facilities will boost that capacity. Toward this end, a project announced by the Tianjin municipal government in 2004 allocated approximately $3.1 billion to renovate and expand the airport (US-China Business Council, 2006). In the first three months of 2008, it handled 33,000 tonnes (metric tons) of cargo, with an annual growth rate of approximately 25 percent per year (“Tianjin’s New Air Terminal Begins Operation,” 2008).

Circular Economy and Green Manufacturing Efforts. Pollution and waste management are increasingly important parts of modern, high-tech manufacturing capacity. TEDA is cur-rently spearheading TBNA’s efforts in this regard. It has ample government support for this mandate. In 2004, SEPA and the ministries of commerce and S&T named it one of China’s first eco-industrial zones. The following year, another group of Chinese ministries and com-missions designated it among the country’s first group of pilot zones for a circular economy (Brubaker, 2008). It is rapidly developing the capacity to support manufacturing that reuses resources and reduces pollution while raising profits—all toward the goal of “forg[ing] a new mode of green development” (“Tianjin Investment News,” 2008).

Illustrative examples include several TEDA initiatives to reuse wastewater and imple-ment other innovative water treatments.29 TEDA has built a sewage infrastructure that recycles wastewater for manufacturing and agriculture. By 2005, it had developed the ability to recycle 40,000 tons of wastewater and raise the amount of water recycled by 30 percent (“Creating an Eco-Industrial Park,” 2005). In the words of the manager of the Tianjin TEDA Sewage Fac-tory, interviewed that year,

Our [operation] may be the biggest in the country by far. Since it started to operate, the system has received positive comments from clients. Some users think it is very convenient to use the recycled water. Above all, it also helps save some costs during . . . production. (“Creating an Eco-Industrial Park,” 2005)

TEDA has also entered into a joint venture with France’s Veolia Water. The two signed an agreement in 2007 to form a jointly owned company, the Tianjin Teda Veolia Water Co., that specializes in

integrating water-processing systems•disposing of urban sewage and industrial wastewater•desalination•recycling water•selling, operating, and managing water equipment•providing technical service (“France’s Veolia Water Inks JV Agreement with China’s •TEDA Investment,” 2007).

Another initiative is an advanced seawater-desalination plant expected to process 0.5 metric tons of seawater daily as part of a long-term plan for sustainable development in TBNA (“Cre-ating an Eco-Industrial Park,” 2005).

29 See Qian, Wen, and Huang (2007) for an article in which TEDA comes up in a discussion of examples of applications of innovative technologies in water and sewage treatment generally.

The Foundation for TBnA’s Growth into a Leading-edge Science and engineering Center 45

Green manufacturing is a pivotal part of this aspect of manufacturing capacity. A number of TEDA companies in the automotive, electronics, chemical, and biopharma sectors are already using certain green manufacturing principles for industrial recycling. Examples include the following:

Tianjin Toyota’s practice of reusing waste steel•Taiding Environmental Technology’s practice of recycling IBM’s electronic waste•Novozymes’s reuse of wastewater for irrigation and use of residues as fertilizer.•

Otis Elevator and Motorola, two other companies located in TEDA, have programs in green chemistry and have experience with green manufacturing.

Challenges to Manufacturing Capacity. Competition for the technicians and other skilled workers needed for a thriving, modern manufacturing enterprise is intense and comes from elsewhere in China and the world. In China, more youths, encouraged by their parents, aspire for a college education, and fewer young people are going to vocational and technical schools.30 Table 3.7 shows the rapid expansion of college and university enrollment since the late 1990s, surpassing vocational-school enrollment in 2000. By 2004, new-student enrollment at the col-lege and university levels nearly doubled that of vocational-school enrollment, and the reverse was true just seven years earlier in 1998.

Further, Chinese census data show that, by 2003, more people had graduated from col-leges and universities than from vocational schools. This dramatic rise is the result of the gov-ernment’s decision to shift from an elite model of higher education to a mass-access one to

Table 3.7New Enrollment at Postsecondary Institutions and Vocational Schools, 1994–2004 (thousands)

YearPostsecondary

Institutions Vocational Schools

1994 900 1,753

1995 926 1,901

1996 966 1,889

1997 1,000 2,112

1998 1,084 2,176

1999 1,597 1,941

2000 2,206 1,827

2001 2,653 1,850

2002 3,205 2,169

2003 3,822 2,221

2004 4,473 2,291

SOURCe: China census (2005).

30 RAND interviews with Chinese experts; see data for number of students enrolled in postsecondary-education institu-tions versus those enrolled in vocational schools from the China census (2005).

46 The Global Technology Revolution China, In-Depth Analyses

accelerate growth and to produce more workers able to support the country’s transition into a knowledge-based economy (Table 3.8) (Mohrman, 2008; Duan, 2003; Waldman, 2005, 2008).

This rapid growth in postsecondary education in China demands a great deal of resources. Part of this new resource need has come at the expense of vocational schools. However, the importance of technicians and other skilled workers capable of working in manufacturing operations, especially modern manufacturing industries, cannot be ignored (T. Fuller, 2005; Wiseman, 2005; “Chinese Manufacturing Slowed by Skilled Worker Shortage,” 2002; “China in Serious Shortage of Skilled Workers,” 2004). The problem has not escaped the attention of the Chinese government, and plans are afoot to address this shortage (J. Wu, 2006).

Another issue is the capacity to train skilled workers. Whether pursued independently by workers or paid for by employers, the availability of training capacity in TBNA and TEDA could be an attraction to investors and workers alike. The establishment in 2006 of a voca-tional training and appraisal center for outsourced services in TBNA has seen TBNA working with Microsoft, Hewlett-Packard, IBM, Worksoft, and other companies to develop training in such areas as business-process outsourcing and call centers. The goal is to position TBNA and TEDA to host more outsourced services (Brubaker, 2007). Expansion of TBNA and TEDA’s capacity to train skilled workers for modern manufacturing may be equally important if TBNA and TEDA aim to build modern manufacturing enterprises.

Finally, the use of new technologies in manufacturing, especially green technologies, should not further harm human health or the environment, as occurred in manufacturing solar-energy cells in Henan province (Cha, 2008). Consequently, the implementation of green technologies in commercial production may demand that TBNA and TEDA build an even more sophisticated infrastructure to handle the types and volume of solid waste and sewage produced in manufacturing.

Table 3.8Graduates of Postsecondary Institutions and Vocational Schools, 1994–2004 (thousands)

Year Postsecondary Institutions Vocational Schools

1994 637 1,076

1995 805 1,240

1996 839 1,396

1997 829 1,501

1998 830 1,628

1999 848 1,678

2000 950 1,763

2001 1,036 1,665

2002 1,337 1,454

2003 1,877 1,355

2004 2,391 1,425

SOURCe: China census (2005).

The Foundation for TBnA’s Growth into a Leading-edge Science and engineering Center 47

Capacity for S&T Commercialization

Capacity for S&T commercialization includes a variety of institutional capabilities and the organizations, networks, and environment that can bring R&D and high-tech manufacturing together to create and mass-produce marketable knowledge-based products.

Building this capacity for cutting-edge R&D and technology incubation will involve, at its core, creating new human capacity—that is, scientists, engineers, innovative entrepre-neurs, and administrators, among others—to pursue the R&D and to integrate technology innovations into manufacturing processes and products. Indeed, the head of China’s National Committee of Development and Reform underscored this fact: “TBNA should increase the introduction of new talent and the building of innovation capacity[,] introduce more modern technology, management experience and high-quality talent [and] create a multi-layered inno-vation cooperation structure” (Central People’s Government of the People’s Republic of China, 2006).

Institutional Capacity. TEDA is home to several institutions whose mission is to promote S&T commercialization.31 For example, the TU Science Park is host to four high-tech incu-bators and 30 high-tech small and medium-sized enterprises. In the coming years, a patent-industrialization base will be added to the TU Science Park. Indeed, in China’s economic reform, Chinese universities and research institutions have long had a major role in commer-cializing S&T. Many new technology-based companies in China had their beginnings at Chi-nese universities and research facilities (Sunami, 2005; Pigott, 2002; Ming, 2002). Then there are the TEDA Watson Biopark (for industrializing biomedicine), the National Nanotechnol-ogy Industrialization Center (for industrializing nanotechnology), and the Software Mansion (on commercializing independent software IPR).

The National Nanometer-Technology Industrialization Base (NNTIB)

was officially founded on Dec. 6th, 2000 after the site-investigation of Ministry of Science & Technology, and is under the direct [sponsorship] of CCP [Chinese Communist Party] and the State Council. By the means of providing favorable policy environment and plat-form of human resource, capital, technology and information, NNTIB allies with various universities, research institutes, and big companies to form a dynamic new R & D mecha-nism, which is in favor of developing nanometer technologies, incubating/fostering hi-tech enterprises, and boosting the development of China nanometer industry. The China Undertaking Research Center of Qinghua University now bases NNTIB as its research pool to carry out case tracking, research and directing for the momentous technology inno-vation and industrialization.

NNTIB works on R&D-management methods to achieve compliance with international standards and has commissions of management and technology specialists to support its efforts. The technology specialists include those from CAS, Tsinghua University, Beijing University, and other Chinese government sources.

There is also the Science and Technology Garden of TU that was established by TU and TEDA in October 1999. This facility hosts new and high-tech enterprises, and TEDA provides numerous types of financial incentives, including multiyear tax exemptions and reductions, financial assistance for patent-application and maintenance fees, financial support to launch

31 The history and missions of these institutions are described at TEDA (undated[b]). The discussion in this subsection is based on these descriptions.

48 The Global Technology Revolution China, In-Depth Analyses

initial public offerings, and discounts and subsidies for office rentals. Indeed, TEDA’s financial support to improve R&D infrastructure has been substantial. According to TEDA manage-ment, at least RMB 1 billion has been allocated for investment in infrastructure, facilities, and equipment. To attract overseas-trained Chinese scholars to come to TEDA to conduct advanced R&D and start new high-tech enterprises, TEDA also created the Returned Stu-dent Entrepreneurship Garden in 1996. Located in the TEDA International Business Start-Up Center, it focuses on promoting R&D and industrialization of advanced technologies in information technology and biotechnology. It currently hosts eight companies, three focused on communications and electronics, one on machinery, one on biotechnology, two on bio-medicine, and one on chemistry.

As noted in the previous section, TEDA is home to the national nanotechnology labora-tory, CNANE. To facilitate the commercialization of S&T advances at CNANE, two orga-nizations have been established: the NIBC and the NVCC. These are state companies with investment from local governments and other sources. The NIBC provides support for technol-ogy transfer into product development of applied research results from CNANE, while NVCC provides the capital to form companies to manufacture and market the products. Their plans include serving as an incubator for companies that can reform existing industries and create new industries while building institutes that will attract world-class technologists and entre-preneurs (Ce, 2007).

Financial Incentives. Although private venture capital in China for high-tech R&D is very limited at this time, TBNA and TEDA have stepped in to give the initial push. Here, we highlight several funding mechanisms in TEDA:

The Science and Technology Development Fund develops R&D centers and high-tech •incubators and enterprises, encourages returned overseas scholars to start S&T enterprises in TEDA, and supports public S&T-education campaigns.32

The Scientific and Technological Venture Fund encourages the creation of venture capi-•tal, venture businesses, and S&T-related management companies in TEDA and provides seed money for high-tech enterprises in the incubation stage.33

The Scientific and Technological Venture Capital Stock Company invests in information •technology, communication engineering, biology and pharmaceuticals, environmental engineering, and new materials.34

The Small Enterprise Credit Guarantee Center provides a fee-based credit guarantee for •short-term operating-fund loans to high-tech and high-yield small enterprises.35

TEDA also gives financial support to enterprises and R&D facilities in patent application, patent commissioning, and the commercialization of patented products. The latest data from TEDA report that, between 2002 and 2005, the number of patent applications from TEDA-based organizations grew at an annual rate of 73 percent and increased 500 percent. Further, their invention applications, on average, account for 38 percent of all patent applications, which

32 TEDA allocates 5 percent of its annual financial revenues to this fund and gives out awards of up to RMB 200,000.33 TEDA allocates 1 percent of its annual financial revenues to this fund.34 This company is owned jointly by several TEDA, Tianjin, and Beijing entities.35 The Science and Technology Development Fund provides RMB 200 million for this center.

The Foundation for TBnA’s Growth into a Leading-edge Science and engineering Center 49

is higher than the average in China. As for the industrialization of new technologies, the Patent Industrialization Base will be located at the TU Science Park. Already, this park has hosted 60 projects (and more than 50 have received financial support from state and municipal agencies), four professional incubators, and 30 high-tech enterprises. Of the 300-plus patented technolo-gies developed in facilities at this park, 50 are already industrialized and commercially sold. In the coming years, TEDA’s financial support for industrializing patents will emphasize selected industries, and different incubators are in place or will be built to foster their development. For example, the TEDA Watson Biotechnology Park will focus on industrializing biomedicine patents, the National Nanotechnology Industrialization Center will focus on nanotechnology patents, and the Software Mansion will focus on independent software copyright. Toward this end, several funding mechanisms to promote S&T are already in place:

TEDA Science and Technology Development Fund:• In 2000, TEDA created this fund to support the development of R&D centers and high-tech incubators and enterprises, returned overseas scholars starting up S&T ventures in TEDA, and initiated public S&T education campaigns. TEDA allocates 5 percent of its annual financial revenues to this fund and gives out awards of up to RMB 200,000.TEDA Scientific and Technological Venture Fund: • TEDA allocates 1 percent of its revenues to this fund to attract and encourage financial institutions, investment companies, and other economic organizations and individuals to set up venture-capital, venture business–investment, and S&T-related management companies in TEDA. This venture fund will also include seed money to support high-tech enterprises in their incubation stages. A successful applicant can receive up to RMB 1 million (but not exceeding 30 percent of its total equity capital).Tianjin TEDA Scientific and Technological Venture Capital Stock Company Limited: • This company, jointly owned by several TEDA, Tianjin, and Beijing entities, focuses on invest-ments in information technology and communication engineering, biology and pharma-ceuticals, environmental protection, and new materials. TEDA Small Enterprise Credit Guarantee Center:• This center, with RMB 200 million in assets, provides a fee-based credit guarantee for short-term operating-fund loans to high-tech and high-yield small enterprises. The money for this comes from the TEDA Science and Technology Development Fund.

Culture of Innovation. In the section on national drivers and barriers, we discussed the need to develop a culture of innovation, which requires opportunities to take risks and dem-onstrate new products and processes to encourage their adoption. TBNA and TEDA, being brand-new entities built from the ground up, with continuing expansion and plans to develop modern manufacturing and international shipping and logistics, can offer many opportuni-ties to try out new technologies. For example, public entities could become the early adopters of new technologies, or laws, policies, regulations, or standards might be used to spur new-technology adoption. TEDA’s decision to be the first city in China to adopt the use of energy-efficient light-emitting diodes (LEDs) in all street lighting is a good example of the former.36

36 Already, 1,500 LED streetlights have been installed at the Tianjin Polytechnic University, the result of a TEDA part-nership with a professor at the university and 20 of his graduate students. The graduate students designed, produced, and installed the LED streetlights (“LED City,” 2008).

50 The Global Technology Revolution China, In-Depth Analyses

Challenges to S&T Commercialization. This section outlines some of the challenges that the region will face in commercializing S&T.

Intellectual Property Rights. In commercializing S&T, it is essential to have robust, transparent, and trustworthy IPR laws and regulations. Resources for their enforcement, good governance, and financial and human capital are also essential. Also critical is support from the national innovation system, including national laws and policies that can spur or impede S&T commercialization. TBNA and TEDA will likely be constrained, to a greater or lesser degree, by conditions in the national environment. As noted in the section on national drivers and barriers, the IPR system in China is still developing. Personnel available nationwide to sup-port IPR enforcement are also limited, and so is the overall supply of professionals. Financial mechanisms to support S&T commercialization are just beginning to develop in China. Even where governance is concerned, excellence in TBNA and TEDA must be complemented by excellence outside TBNA and TEDA if technologies developed there are to have the necessary IPR support.

The TEDA Intellectual Property Office administers IPR laws and regulations and pro-motes IPR awareness. Other offices with responsibility for IPR in TEDA are the TEDA Branch of the Tianjin Industry and Commerce Administrative Bureau, the TEDA Social Develop-ment Bureau, the TEDA Customs House, and the TEDA Court. TEDA is also working with neighboring administrative regions along the Beijing-Tianjin-Tanggu Expressway to boost transregional cooperation in IPR protection and to create a corridor for high-tech R&D and industrialization activities. This endeavor would leverage the strengths and advantages of more than a dozen state- and provincial-level development zones, numerous high-tech parks, and more than 300 tertiary education and training institutions along this corridor.

Nevertheless, experts and entrepreneurs with whom we spoke underscored that much more needs to be done to build and implement a robust IPR system. Also, in enforcing IPR, TEDA has authority only within its legal boundaries. What happens outside TEDA requires the involvement of other government entities in China.

Finance and Banking Reform. As discussed in the section on national drivers and barri-ers, a recent OECD (2008) review of China’s innovation system concluded that reform of the financial and banking sectors is essential to attract needed capital from domestic and overseas sources for cutting-edge R&D and innovation. In the meantime, the Chinese central govern-ment and local authorities have created venture-capital funds. One such fund that TEDA might be able to access, especially if it pursues the development of such TAs as solar energy, electric and hybrid vehicles, and green manufacturing, is Tsing Capital, the green venture-capital fund associated with Tsingua University (P. Tam, 2007). TEDA can also access local sources of capital for innovative ventures, such as NIBC and NVCC.

Links Between R&D and Industry. Links between R&D institutions and industrial con-cerns that might commercialize the results of innovative R&D are critical ties that facili-tate S&T commercialization. Our interviews with researchers and managers of enterprises in TEDA did not suggest that they have or are developing strong ties with industry. Chinese firms are frequently state-owned companies that might use services from affiliated entities rather than looking to other sources for solutions. Thus, researchers and independent small and medium-sized enterprises can experience considerable difficulties in marketing their services and products. Although Chinese government reforms are working to change this, old habits die hard, and personal and institutional relationships can be deeply embedded (J. Zhang, 2006). Perhaps in time and with increasing demand on industry to use technology to improve

The Foundation for TBnA’s Growth into a Leading-edge Science and engineering Center 51

productivity and product quality and meet environmental standards, companies will be driven to go farther and wider to look for partners to provide their R&D and technology solution needs. For researchers and S&T innovation enterprises in TBNA and TEDA, TBNA and TEDA’s increasing profile as a center for high-tech R&D and innovation and the presence of university parks, industrial S&T parks, and S&T incubators are all positive forces for attract-ing industry to come to them to find partners.

53

pART TwO

Analysis of the Most-Promising Technology Applications for TBNA and TEDA

55

ChApTeR FOUR

Cheap Solar Energy

The beneficial effects of cheap solar energy—“solar energy systems inexpensive enough to be widely available to developing and undeveloped countries, as well as disadvantaged popula-tions” (GTR 2020 In-Depth Analyses, p. 19)—reach many sectors of society. Such energy can be used to pump water for irrigation. The power it can provide can be used for cottage indus-tries, distance learning, lighting to educate off-grid rural populations, and refrigeration of food and drugs to improve nutrition and medical treatment (see, e.g., Soboyejo and Taylor, 2008).

Solar-energy systems fall principally into two categories: (1) solar-thermal systems and (2) solar-electric systems (also called photovoltaic [PV] systems). In solar-thermal systems, the solar energy is collected as heat. Then, with the aid of a heat-transfer material, it is used for home heating, cooling, or water heating. Or it can be concentrated to run a boiler to produce electricity.

Solar-electric systems are based on materials that show a photoelectric effect, through which illumination produces an electric current.1 Our focus for TEDA is on solar-electric sys-tems. In particular, we look at approaches to lowering the costs of these systems by collecting solar energy more efficiently and reducing manufacturing expenses.

Importance to TBNA and TEDA

The transformative capabilities of low-cost solar power continue to make it a focus for research and development (R&D) and manufacturing worldwide. At a recent American Chemical Soci-ety conference, California Institute of Technology professor Harry Gray noted that the energy represented by just one hour of sunlight striking the earth is greater than all energy consumed globally in one year. But the biggest challenge to capturing that energy, he explained, is to reduce the cost of solar electric, or PV, power so that it is competitive with traditional forms of energy (ACS, 2008).

There are three broad categories of PV technology:

First-generation technology• is based on silicon and manufacturing methods borrowed from the semiconductor industry.Second-generation technology• is based on thin-film materials and manufacturing methods developed in the film and coating industries.

1 There are many other possible uses of solar energy, including the photosynthesis of water and the production of indus-trial chemicals or chemical feedstocks, which we do not consider in this chapter. For a detailed description of alternative approaches to the use of solar energy, see, for example, NREL (2007).

56 The Global Technology Revolution China, In-Depth Analyses

Third-generation PVs• represent a broad range of new and sometimes novel technologies and manufacturing approaches that hold the promise of higher conversion efficiencies, lower manufacturing costs, and, sometimes both (Slaoui and Collins, 2007, pp. 211–214).

Many believe that the best strategy for realizing the enormous energy potential of sun-light is through second- and third-generation technologies that could increase efficiency and reduce costs beyond first-generation silicon technologies (see, e.g., Slaoui and Collins, 2007). As government policies increasingly drive the demand for clean energy technologies, there is an opportunity for TBNA and TEDA to attract the second- and third-generation firms pursuing innovations that could transform the industry. TBNA and TEDA’s skilled workforce, techni-cal capabilities, access to ports, and other supply-and-demand–oriented incentives leave them well positioned to attract these firms and become the manufacturing base for the near-term export market. These firms would then also be positioned to succeed in the Chinese market, which is expected to grow over the longer term.

Current Scientific and Market Status and Future Prospects

Technology Overview

The definitions of the three categories, or “generations,” of PV technology are based loosely on (1) the materials and manufacturing processes used and (2) the maximum conversion effi-ciencies that they are theoretically capable of attaining. The boundaries between second- and third-generation technology are sometimes unclear. For the purposes of this report, we define second-generation technologies as single-junction, thin-film PVs, without any equipment to con-centrate or magnify the light hitting the cell. Third-generation technology includes all other approaches.

These three generations and the individual technologies within them are competing to increase efficiency and lower their material and manufacturing costs. First-generation technol-ogies represented more than 90 percent of sales in 2006. They generally have the highest con-version efficiencies, but they also have high material and manufacturing costs. The cost of PV modules based on first-generation materials is estimated to be $3–$4 per watt at peak. When other balance-of-system components, such as inverters that change the direct-current (DC) solar power to alternating current (AC) for home use, and batteries or other energy-storage systems are included, the estimate increases to $6–$8 per watt at peak. This corresponds to roughly $0.25–$0.65 per kilowatt-hour (kWh) of electricity produced, or roughly an order of magnitude greater than the current cost of coal-based electricity (Slaoui and Collins, 2007),2 typically the benchmark against which electricity-generation technologies are compared.

Second-generation technologies—often described as thin-film PVs because they are based on thin-film materials—grew from 7 percent of sales in 2006 to 11 percent in 2007, in part due to the rising cost of silicon (Navigant Consulting, 2008). Although thin-film materials typically provide lower efficiency, they can also lower material costs (1) by reducing or elimi-

2 These figures are in rough accord with those quoted by the Chinese Academy of Sciences Institute of Electrical Engi-neering (CASIEE) (Zhao, 2007). CASIEE is familiar with the costs of PV installations in China because it has designed, built, and installed several solar-electric systems using first-generation PV collectors in such places as Beijing, Shenzhen, and Tibet. CASIEE also worked on systems for the 2008 Olympic Games.

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nating the amount of silicon or other material needed and (2) by using potentially lower-cost manufacturing methods developed in the film and coating industries. For this reason, thin-film technologies have benefited from the high price of silicon.

The diverse range of third-generation technologies is primarily in the research phase but holds the promise of even higher efficiencies and still lower costs. These technologies seek to convert a larger portion of the solar spectrum to electricity through an array of new materials, technologies, and manufacturing methods (Slaoui and Collins, 2007; Cheyney, 2008).3

While the prices of first-generation technologies are high, both their cost and efficiency have improved significantly in the past few decades. Among commercially available solar cells, efficiency has increased from 6 percent to more than 15 percent. And costs have fallen from $20 per watt in the 1970s to as low as $2.70 per watt in 2004, before rising silicon prices forced PV costs upward (“Sunlit Uplands,” 2007; “Sunny Side Down,” 2008).4 In the laboratory and in space-based applications, advanced materials and techniques have reached efficiencies as high as 35 to 45 percent (“Sunny Side Down,” 2008).

First-Generation Technologies. Of the more than 90 percent of PV-cell production based on first-generation silicon technology in 2006, 52.3 percent was from polycrystalline silicon and 38.3 percent from single-crystal silicon (Slaoui and Collins, 2007). These materials have traditionally been produced using expensive manufacturing methods borrowed from the semi-conductor industry. Many firms are working to improve those manufacturing methods or find new ones.

SCHOTT Solar, a manufacturer of polycrystalline cells and panels, continues to inno-vate by refining its products. In December 2007, it announced a new surface structure that can “convert more of the sunlight falling on [the cells] into energy.” As a result, these solar cells can reduce the amount of silicon needed per watt (“SCHOTT Solar,” 2007).

Other companies are focused on improving the upstream supply of silicon. SunPower, which is majority owned by Cypress Semiconductor, is seeking to bring the latest innovations to its first 25-megawatt (MW) cell-fabrication facility, in the Philippines (Hering, 2007). Simi-larly, Solaicx has developed a continuous process for growing monocrystalline silicon ingots that it claims has 5.5 times the throughput of batch growers. Solaicx began production in November 2007, with a 40 MW–capacity facility that it planned to expand to 160 MW by the end of 2008 (Hering, 2007).

Other firms are pursuing fluidized bed approaches to producing silicon. AE Polysilicon in the United States is using an “environmentally friendly,” closed-loop, fluidized-bed reactor to produce granular silicon at an 1,800-ton/year facility expected to open in 2009. If successful, capacity will be expanded to 12,000 tons by 2010 (Hering, 2008; AE Polysilicon, undated). Wacker Chemie of Germany has also developed a new polysilicon-production facility (650 metric ton/year capacity) that uses a continuous fluidized-bed process and is planned for open-ing in 2008 (Reisch, 2007).

In addition, some of the largest producers are actively innovating or increasing production and lowering costs through learning and economies of scale. Germany’s Q-Cells SE has a 300-person R&D department actively pursuing improvements in both first- and second-generation

3 Again, the differences between second- and third-generation technologies are sometimes unclear. One of the most spe-cific definitions is that third-generation technologies are focused on exceeding the “Shockley-Queisser theoretical limit of around 31% for single-junction solar photovoltaic efficiency” (“Third Generation Solar Cell,” 2007).4 Recent forecasts suggest that new silicon-production plants may bring silicon prices back down (see Arnoldy, 2008).

58 The Global Technology Revolution China, In-Depth Analyses

technologies, as are more than 160 other organizations in Germany (“German Lessons,” 2008). In March 2007, BP announced that it would build a 300-MW/year factory in Spain. It also formed a joint venture with India’s Tata to produce 300 MW/year of solar energy by 2010 (“Sunlit Uplands,” 2007).

Finally, several small firms in the United States (e.g., Blue Square Energy and CaliSolar) are focused on developing methods to transform lower-quality, metallurgic-grade silicon into a feedstock that can be used for competitive PV conversion (Hering, 2007).

Second-Generation Technologies. The most common of the thin-film technologies is based on amorphous silicon. Such firms as Sharp, United Solar Ovonic, and Mitsubishi use this technology. Because it relies on silicon, it has experienced price increases, even though it uses much less of that material than first-generation technology does (von Roedern, 2008).

According to Manufacturing and Technology News, First Solar is the fastest-growing PV company in the world (McCormack, 2008). Its growth is driven, in part, by its reliance on cadmium telluride (CdTe) rather than silicon. However, First Solar is not the only company pursuing CdTe PVs, and its competition is growing. For example, in September 2007, AVA Solar announced that it would build a 200 MW–capacity plant for CdTe thin-film modules in the United States, with plans to start production by the end of 2008 (Hering, 2007). Other small firms conducting research in this area include PrimeStar Solar.

SoloPower, Miasolé, Nanosolar, HelioVolt, and Ascent Solar are developing thin-film panels based on copper indium gallium selenide (CIGS). SoloPower planned to have 20 MW of manufacturing capacity (using electrochemical deposition) by 2008. It hopes to expand to 120 MW by the end of 2010 (Hering, 2007). Miasolé is also planning to begin manufacturing, using a vacuum-deposition sputtering–based approach. However, there was a December 2007 report that it failed to begin commercial production at its 50-MW facility because of unac-ceptably low efficiencies (Hering, 2007). As of December 2007, Nanosolar appeared to be “on the brink of commercializing CIGS thin-film PV . . . with module efficiency over 10 percent.” Its approach is based on high-throughput nanoparticle-ink printing onto a metal foil substrate. The firm planned to both start and reach full production at its 430 MW–cell manufacturing facility in California in 2008 (Hering, 2007).

HelioVolt uses a rapid semiconductor printing process to coat CIGS materials onto a glass substrate. It has obtained 10- to 12-percent efficiencies from a pilot production facility it opened in 2006 (Hering, 2007). It opened a 122,400 sq. ft. manufacturing facility in Austin, Texas, in October 2008 (HelioVolt, 2008).

Ascent Solar is developing thin-film CIGS technology that can be applied to a plastic substrate (Hering, 2007). This product is lightweight and flexible and can be integrated into building materials. Ascent recently reached an agreement with Giscosa Sociedad Limitada of Spain to integrate Ascent’s technology into the Spanish company’s rubber roofing products distributed throughout Europe (“Ascent Solar Tapping European Market,” 2008).

Third-Generation Technologies. A partial listing of the approaches used for third- generation technologies includes the following:

dye-sensitized solar cells•quantum dots and wells• 5

5 Materials that, because of the reduction of one or more of their dimensions to micrometer or nanometer size, show quan-tum mechanical effects on charge carriers that can significantly influence PV properties.

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organic PVs•other nanobased technologies•concentrating PVs (which use materials from all three generations of technology).•

As a sign of the industry’s sophistication, many of these technologies combine two or more of these approaches at once.

Dye-Sensitized Solar Cells. One of the most discussed third-generation technologies is the dye-sensitized solar cell, or Grätzel cell. Developed in 1991 by Michael Grätzel and a col-league from the École Polytechnique Fédérale de Lausanne, the cell is made of titanium diox-ide nanoparticles coated with an organic dye (Saxl, 2007; “Dye-Sensitized Solar Cell,” 2008). According to Grätzel (in Saxl, 2007, pp. 28–29),

The main advantage is easy fabrication, low cost, and a short energy pay-back time, that is, the energy used to make the cells is recuperated in less than a year, compared to 3–4 years for silicon solar cells. They can be screen printed on glass, foil, and plastic materials, rendering roll-to-roll production possible. They can also be made transparent and in differ-ent colors, which is attractive for building integration. Their main disadvantage is that they are at present a factor of two less efficient than silicon under standard reporting conditions, that is, 25°C and 1000 [watts per square meter] light intensity. However, this efficiency gap is narrowed significantly when our cells are compared to silicon PV under real outdoor conditions.

Additional benefits include a high-speed, roll-to-roll process similar to inkjet printing. And while the cells use advanced materials, manufacturing is relatively inexpensive and much less energy-intensive than other PV-manufacturing processes. As a result, the environmental impact of these cells is much lower.

Several firms in Japan, Australia, the United States, and Europe have developed applica-tions of the Grätzel solar cell. For example, G24 Innovations (G24i) has built a 30 MW/year production facility in Cardiff, Wales, which it planned to expand to 200 MW by the end of 2008 (Saxl, 2007).

Quantum Dots and Wells. The use of quantum dots and quantum wells in solar cells is a relatively new area of research. These technologies can raise the conversion efficiency and have the potential to substantially lower the cost to manufacture. The British firm QuantaSol uses tiny quantum wells sandwiched between layers of gallium arsenide (GaAs) to more than double the PV efficiency of its silicon-based cells. These and other improvements could take the efficiency of a single cell to 30 percent (“Harnessing the Sun,” 2007; “Quantum Dot Diversity Gives Solar Cells a New Octave,” 2008).

Organic Photovoltaics. Konarka Technologies and Air Products and Chemicals are jointly advancing organic PVs. These firms received U.S. government funding to develop advanced polymers to enable organic-PV technologies (Konarka, 2007). In March 2008, Konarka announced that it had succeeded in using inkjet printing to manufacture solar cells (Konarka, 2008). The chief scientist and cofounder of Konarka, Nobel laureate Alan J. Heeger of the Uni-versity of California, Santa Barbara, recently gave a keynote address at the International Mate-rials Research Conference in Chongqing, China. Heeger described R&D on self-assembling polymer PVs with the goal of achieving roll-to-roll processing of printable, flexible solar cells with an efficiency of 10–15 percent (MRS, 2008).

60 The Global Technology Revolution China, In-Depth Analyses

Other Nanobased Technologies. Other third-generation technologies include nanocrys-talline ink, nanowires, and nanoantennas. Innovalight is using silicon nanocrystals in the form of printable silicon ink. It plans to introduce its first thin-film modules in 2009 (Hering, 2007). GE Global Research has demonstrated a nanowire-based solar cell that has the poten-tial to reach 18-percent efficiency and can be produced at a much lower cost than current cells (“GE Confident in Future of Its New Low-Cost Solar Cell,” 2008). Researchers at Idaho National Laboratory and MicroContinuum have developed a way to print nanoantenna arrays on plastic sheets. Due to the small size, the nanoantennas absorb infrared energy, which means that they can absorb energy from both sunlight and the earth’s heat, in contrast to cells that are based on solar energy alone (INL, undated).

Concentrating Photovoltaics. Finally, a broad range of concentrating photovoltaics (CPVs) is also under development. These systems concentrate the sun’s rays by a factor of any-where from 2 to more than 1,000 and then focus that light on high-efficiency PV cells. Some of these systems also use one- and two-axis tracking systems (Hering, 2007; LaMonica, 2006). CPV manufacturers include EnFocus Engineering, SolFocus, and Solaria.

SolFocus’s first design uses hexagon-shaped, two-mirror modules to amplify the sun 500 times and focus it on high-efficiency, GaAS-based cells manufactured by Spectrolab. Esti-mated system efficiency is 17 percent, although an improved design may reach 26 percent. SolFocus currently operates a 2-MW pilot manufacturing plant in the United States and is preparing to begin volume production at a 100 MW/year–capacity facility in India in 2008 with its partner, Moser Baer. The two companies hope to expand their Indian facility to 400 MW/year by 2010 (LaMonica, 2006).

Solaria has developed a process to slice mono- or polycrystalline cells into narrow strips that are then inserted into low-cost, injection-molded, linear plastic troughs. By substituting a low-concentrating plastic for expensive silicon, Solaria’s modules are 15- to 30-percent less expensive than conventional flat-plate modules. Solaria has a 2.5-MW pilot facility in Califor-nia. In July 2007, it signed a 10-year contract with Germany’s Q-Cells for up to 1.35 gigawatts (GW) (Hering, 2007).

Other CPV developers that focus on high-performance cells include Amonix, Boeing (Spectrolab), Soliant (also known as Practical Instruments), GreenVolts, Emcore, Prism Solar Technologies, Energy Innovations, Cool Earth Solar, MicroLink Devices, and Wakonda Tech-nologies. Cool Earth Solar planned to build a 2-MW plant by the end of 2008 to fulfill a contract with Pacific Gas and Electric, the California investor-owned utility (Hering, 2007; LaMonica, 2006). MicroLink Devices seeks to use a less expensive dual-junction GaAs-based cell for use in a 500x concentrator. Wakonda Technologies seeks to replace the single-crystal germanium substrate in multijunction cells with a low-cost metal foil (Hering, 2007).

Environmental Dimensions

To date, much of the analysis of the environmental effects of solar power has focused on the energy-payback time needed to recover the amount of energy used to manufacture the PV panel. But other environmental dimensions are beginning to get increased attention. First-generation technologies are generally believed to be the most energy intensive of the three cat-egories. If not properly regulated and controlled, the production of silicon can have significant environmental effects (Cha, 2008; Alsema, de Wild-Scholten, and Fthenakis, 2006; Fthenakis

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and Bulawka, 2004). Still, first-generation technologies can be manufactured safely and have been for more than 50 years (Resch, 2008).6

Second-generation technologies appear to be less energy intensive. Their environmen-tal impact is potentially less than first-generation technologies, although some of the mate-rials that are used in small amounts can be toxic and must be managed properly. Among third-generation technologies, the uncertainties are even greater. But these approaches appear to be much less energy intensive, which suggests that this is an important area to continue to monitor.

Market Overview

The PV industry grew 55 percent in 2007 and had a compound average growth rate of 44 percent over the past five years (Navigant Consulting, 2008). A market-research firm, BCC Research, estimated the 2007 market for PV systems at nearly $13 billion and that it could continue to grow at 15 percent per year and reach $32 billion by 2012 (McCormack, 2008). These significant growth rates have been driven by government incentives and subsidies for renewable energy, which, in some cases, have been quite large. While Japan ended its feed-in tariff7 in 2005, Europe—Germany in particular—has progressive policies and has driven the market (see, e.g., “Photovoltaics,” 2008). In 2007, Germany became the first country to install more than 1 GW of PV power in one year (McCormack, 2008).

As of the first half of 2007, the 10 largest commercial manufacturers of PV panels (Table 4.1) were primarily in Japan and Germany. Suntech, in China, recently became the third-largest manufacturer (McCormack, 2008).

Given the rising demand, especially in Europe, it is not surprising that Germany pur-chases 90 percent of Suntech’s production (“Sunlit Uplands,” 2007). Nor is it surprising that the rapid growth in demand has helped push the price of high-quality silicon from $25 per kilogram (kg) in 2003 to $400/kg in April 2008 (“German Lessons,” 2008; Shieber and Cher-nova, 2007).

But new silicon factories continue to come on line, and the production capacity for sili-con may double by 2010 (“Solar Power,” 2007). This could lead the price of first- and second-generation technologies based on silicon to drop to as low as $2 per watt for first-generation technologies and $1 per watt for some second-generation technologies (McCormack, 2008). If so, these technologies could become cost-competitive with traditional power-generation tech-nologies (e.g., coal-fired power plants) even without government subsidies (“More Light Than Heat,” 2008).8 One challenge for companies producing second-generation technologies not based on silicon and those producing third-generation technologies is to lower their prices or improve their performance so that they can compete with first- and second-generation tech-nologies based on silicon, even if silicon prices fall. And should the cost of silicon remain high, the window of opportunity lies in finding new designs for second- and third-generation tech-nologies that reduce the need for silicon or that substitute other materials.

6 Recent experience in China suggests that safe manufacturing processes, including controlling toxic pollutants and waste streams, may not always be followed (see, e.g., Cha, 2008).7 A guaranteed rate for electricity generated by solar energy and fed into the grid.8 Note that these estimates do not include the $3–$4 per peak watt balance-of-system costs. Unless these costs can also be reduced, solar-PV systems will not be cost-competitive with traditional generation, even if the PV cells are free.

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Table 4.1Top 10 Producers of Photovoltaics, January–June 2007

Rank Firm (Country) Production Estimate (MW)

1 Sharp (Japan) 225

2 Q-Cells (Germany)a 160

3 Suntech (China) 145

4 Kyocera (Japan) 108

5 Sanyo (Japan) 87

6 Motech Solar (Taipei) 85

7 Deutsche Solar/Shell (Germany) 66

8 First Solar (United States) 61

9 Mitsubishi (Japan) 55

10 Sunpower (philippines) 54

SOURCe: McCormack (2008).a According to The Economist, Germany’s Q-Cells has now overtaken Sharp as the largest producer of photovoltaics (“German Lessons,” 2008).

As companies compete to lower costs and increase efficiency, R&D is under way world-wide. It is believed that venture-capital investment in North American solar companies alone surged from $318 million in 2006 to more than $1 billion in 2007 (Hering, 2007).

Industry publications, company literature, and our meetings in China make it clear that there is already a substantial first-generation solar-PV industry in China (Kong Li, 2007).9 It is for this reasonthat we do not recommend that TEDA set out to become a manufacturer of these first-generation systems. Instead, we recommend that TEDA actively pursue second- and third-generation PVs. It has the scientific and technical capacity to build a research and devel-opment (R&D) program in these areas. In doing so, it can attract leading-edge firms as they begin to scale up their manufacturing for Europe and Japan in the near future and the United States and China over the longer term.

Relevant Capacity Available to TBNA and TEDA

The scientific and technical capacity available to TBNA and TEDA includes a research group led by Xinhua Geng at Nankai University in Tianjin. Geng’s group has published on thin-film silicon PVs in collaboration with a group at the Beijing Solar Energy Institute led by Yuwen Zhao (Yuwen Zhao et al., 2006).

The China National Academy of Nanotechnology and Engineering (CNANE) is also based in TEDA. This institute has the technical and instrumentation capacity on the nano-scale level required to engage in R&D on third-generation PV materials, including nanoscale

9 For example, Richard McCormack (2008) estimates that China is second in the world in solar-PV production, with more than 400 companies positioning China to be the largest producer of PV in 2008.

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material fabrication and microscopy and organic- and biological-material development (Wei, 2006).

As described in Chapter Three, TEDA has substantial manufacturing infrastructure, including industrial-park facilities, utilities, transportation, an established manufacturing base,10 easy access to the Tianjin Port for bringing in raw materials and exporting finished products, and a track record of economic growth based on manufacturing in related areas, such as electronics and materials,11 that should be attractive to PV companies looking to locate new plants.

Drivers and Barriers

In Chapter Three, we identified eight factors that we believe encompass the most-significant drivers and barriers for TBNA to develop and implement the seven selected technology appli-cations (TAs). We now discuss how those factors may influence TBNA’s development and implementation of cheap solar energy.

China’s needs will be a driver because solar-energy systems can provide energy with reduced environmental impact, one of China’s significant national needs and in concert with national policy (see, e.g., “China Passes Renewable Energy Law,” 2005).

China’s national R&D policy will be a driver because funding priority has been given to solar-energy development through special programs, such as the RMB 20 billion Song Dian Dao Cun, which will provide PV power for 20 million people.12

Other national policies, such as those aimed at improving air quality (see, e.g., EPA, 2008), will also be a driver because solar energy is a green technology that does not require combus-tion and produces energy without emissions other than those stemming from manufacturing and transporting the systems and their raw materials. In this context, the second- and third-generation systems that we suggest that TBNA pursue are anticipated to have less environmen-tal impact than first-generation systems because they are typically composed of thin films or nanoscale materials and consequently use less material. However, we note that, in some cases, the existing first-generation solar energy–manufacturing industry in China has been reported to be the source of substantial environmental impact (see, e.g., Cha, 2008).

Intellectual property rights (IPR) protection remains a barrier in China both to indigenous innovation and to the involvement of foreign capital and talent in innovative R&D and ven-tures (see, e.g., Davies, 2006; OECD, 2008). TBNA enforcement of existing laws would con-tribute momentum to what has been described as an improving situation (S. Jang, 2007).

Finance and banking laws and regulations remain a barrier in China. Organisation for Economic Co-Operation and Development (OECD) concluded that, while the situation is improving, much more remains to be done to emplace the robust, transparent, and trusted laws and regulations necessary to draw capital from global sources for cutting-edge R&D and innovation (OECD, 2008). TEDA’s nanotechnology venture fund (Ce, 2007) and the green

10 For more details, see TEDA Investment Promotion Center (2004, 2006, 2008).11 Pertinent examples include IBM, Freescale, Honeywell, PPG, and Owens Corning. For details on economic growth, see TEDA Investment Promotion Center (2004, 2006, 2008).12 Discussion at CASIEE in Beijing in 2007.

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venture-capital fund of Tsinghua University, Tsing Capital (P. Tam, 2007), are both potential sources of venture capital for TBNA.

In the past, other policies and laws—in particular, building codes and regulations for electric-utility connections to buildings—have been a barrier to the implementation of solar-PV systems globally. However, TBNA has the opportunity to mitigate these problems and per-haps even turn these policies and laws into a driver. Experiences in the United States emphasize the importance of reviewing building codes and utility-interconnection regulations to ensure that the balance-of-system requirements for solar electricity provide needed safety without increasing costs.

Human capital should be a driver for TBNA, although TBNA’s proximity to the grow-ing metropolis of Beijing will provide strong competition for talent. The current workforce in TBNA, TEDA, and the Tianjin municipality more broadly provides a ready source of skilled labor with manufacturing experience, although the current trend in China for students to attend universities rather than technical and vocational schools (T. Fuller, 2005; Wiseman, 2005; “Chinese Manufacturing Slowed by Skilled Worker Shortage,” 2002; “China in Serious Shortage of Skilled Workers,” 2004) will be a challenge for TBNA as it ramps up production. This problem has been recognized by China’s central government, which has taken steps to address it (J. Wu, 2006). Access to university graduates in the Tianjin municipality and in Bei-jing, especially those with science and engineering (S&E) backgrounds can potentially provide the needed R&D staff. TEDA has recognized the importance of attracting such talent locally, from elsewhere in China, and internationally and has established incentive programs.13

The development of a culture of R&D and innovation remains a barrier for TBNA as for other organizations in China that seek to develop into state-of-the-art S&E centers (CAS, 2006). For both its existing and new initiatives, TBNA should encourage risk-taking and flexibility to change course as dictated by technical, economic, political, and market developments.

A Possible Path Forward

The suggested long-term goal is for TBNA to become an R&D and manufacturing center for second- and third-generation PV modules. It should focus initially on the global export market, eventually followed by the domestic Chinese market as it develops.

We suggest that TBNA and TEDA take the following actions:

Build a state-of-the-art R&D effort on the thin-film technologies described in this chap-•ter. Key scientists with whom to consult in beginning this endeavor include the thin-film silicon group at Nankai University and collaborators at the Beijing Solar Energy Institute. However, in establishing a state-of-the-art R&D program, TBNA must reach out beyond its local contacts and establish relationships with leading organizations and individuals as described in this chapter.Build a state-of-the-art R&D effort on the nanoscale second- and third-generation PV •materials described in this chapter. Key local assets on which to build include the nano-material group at CNANE and the companies vested with the authority to transfer and

13 These include incentives to enterprises and to individuals to bring in Ph.D. graduates and awards for outstanding per-formance. For details, see the section on the educated S&E workforce in Chapter Three.

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commercialize nanotechnologies developed there.14 As noted in the preceding paragraph, relationships with R&D leaders outside Tianjin will also be necessary.Using TBNA and TEDA’s existing promotional materials, begin a dialogue with the •second- and third-generation PV manufacturers mentioned in this chapter to ascertain their plans and needs for new manufacturing facilities. TBNA and TEDA should priori-tize the firms based on the development of the two R&D efforts we have recommended, including working with local universities and CNANE and developing relationships with outside experts and organizations. This will help them to focus on those firms that would best match the technical capabilities that already exist or are developing within TEDA and TBNA more broadly.Review how U.S. states and municipalities are competing with each other for clean-tech •investments. For example, San Jose, California, is stimulating demand for clean technolo-gies by adopting green building policies. They are also creating local supply through tax breaks and hiring a clean-tech staff person at the city’s economic-development agency. As a result of these policies, San Jose won Nanosolar’s 430-MW manufacturing facility by offering the company expedited business permits, a $1.5 million grant, and a program to retrain local workers to work in the plant (P.-W. Tam and Carlton (2007).15 Similarly, the state of Pennsylvania won an investment by AE Polysilicon by providing more than $7 million in low-interest loans and grants and a 13-year tax holiday from most state and local taxes (Hering, 2008; AE Polysilicon, undated).Review the applicable building codes and regulations for electric-utility interconnections •within TBNA to ensure that they provide the proper balance between safety and cost. U.S. building codes and utility regulations often prevented those seeking to install PV systems from doing so or imposed higher-than-necessary costs. It is important for TBNA and TEDA to avoid this. Further, the two should consider the benefits of adopting a net-metering law that would pay the PV systems’ owner company for any power it added to the electric-power grid. They could also consider setting a feed-in tariff like those found in Europe. Finally, if TBNA and TEDA are interested in improving the overall efficiency and sustainability of all construction on their premises, they should consider revising their building codes.Consider the environmental dimensions of solar-PV technologies, and advocate with •appropriate Chinese government authorities for appropriate levels of environmental regu-lation to protect (1) the health of citizens and firms from liabilities stemming from a lacking or poor regulation and (2) the sustainability of the industry. We recommend that TBNA work with its universities, research partners, and manufacturing companies to identify, early on, environmental issues and the best approaches to implementing envi-ronmental safeguards. Showing such leadership may attract industry investment and help differentiate TBNA’s and TEDA’s solar firms within the Chinese and global markets because one of the key assets of solar power is its environmental benefits.

These actions are aimed at initially building a manufacturing base by attracting second- and third-generation PV manufacturers to locate in TBNA. Inducements include a combination

14 The Nanotechnology Industrial Base Company (NIBC) and the Nanotechnology Venture Capital Company (NVCC) (Ce, 2007).15 However, at roughly the same time, Miasolé left San Jose for a nearby municipality with lower electricity rates.

66 The Global Technology Revolution China, In-Depth Analyses

of scientific and technical expertise and R&D programs that can support innovative product development; TBNA’s existing manufacturing infrastructure; an attractive package of incen-tives, such as tax subsidies and favorable building codes and electric utility–interconnection regulations; and the potential to have direct access to a local demonstration market that can help position TBNA’s firms to compete in the current international market and open the potentially large Chinese market.

If these actions are successful, TBNA’s R&D programs in this field could expand to such an extent that emerging new ideas and technologies for next-generation solar-electric systems can make it possible for TBNA to seed companies that could operate domestically or inter-nationally. We note that this latter possibility, to the extent that it involves advances made at CNANE, is consistent with the mission of TEDA’s NIBC and NVCC (Ce, 2007).

67

ChApTeR FIVe

Advanced Mobile-Communication and RFID Applications

The basic functionality of mobile-communication devices has expanded dramatically in the past decade. Devices once intended solely to exchange voice data have become multifunctional sensing, processing, storage, and communication platforms capable of exchanging multiple types of data, using multiple modes of communication. Recent advances in both technology and design suggest that this trend will continue in the coming decade.

The emergence of cheap, sophisticated radio-frequency identification (RFID) systems is further reshaping the mobile-communication landscape. RFID devices have already become widespread in such applications as inventory tracking, personal identification, access control, and a variety of commercial transactions (see GTR 2020 In-Depth Analyses, pp. 26–27). Now they are poised for integration into mobile-communication devices as well (Gardner, 2007).

Mobile-communication devices incorporate many different technologies, including dis-plays, memory and data storage and integrated circuits, and advanced sensors. Developments in these technologies will determine the direction that wireless mobile-computing platforms take for the foreseeable future.

Importance to TBNA and TEDA

In 2006, more than 1 billion mobile phones were sold worldwide (“Over 1 Billion Phones Sold Last Year,” 2007). TEDA produced more than 105 million cell-phone handsets—approximately 10 percent of the total number sold (TEDA, 2007). If TEDA is to retain and increase this already-significant market share, it must keep abreast of the rapid developments in mobile-phone technology, especially the trend toward increased functionality.

In 2007, the total number of phones sold around the world increased to more than 1.15 bil-lion (Zeman, 2008). Although initial data for the first quarter of 2008 suggest that worldwide cell-phone sales are slowing overall (Zeman, 2008), emerging cell-phone markets, such as the Middle East, the Asia-Pacific region, Africa, and China, are still dynamic and considered very important for future sales. Each of these regions is both strategically and geographically impor-tant to China and represents an opportunity for TBNA and TEDA to capitalize on local and regional markets and increase their percentage of global sales of mobile phones.

While many types of sensors may be incorporated into mobile-communication devices, we focus on RFID in particular because of its potential importance to TBNA’s goal of becom-ing an international leader in logistics and shipping. In 2006, the Tianjin Port, one of TBNA’s other two administrative zones, was the sixth largest in the world in terms of total tonnage and 17th in terms of container traffic (AAPA, 2007). Advanced mobile-communication and RFID

68 The Global Technology Revolution China, In-Depth Analyses

technologies present the opportunity to improve logistics, reduce the cost of port operations, and improve the efficiency of commercial shipping.

Given the relative dominance of Chinese ports in global shipping,1 the RFID and mobile-communication standards, practices, and technologies developed for Tianjin Port could also usefully be adopted in other Chinese ports engaged in regional and global commercial ship-ping. This would be consistent with the directive that TBNA serve as a pilot zone for other areas of China (see State Council, 2006) and would provide opportunities for RFID-related technologies developed in TBNA and TEDA to be applied in markets elsewhere in China and well beyond.

Current Scientific and Market Status and Future Prospects

Advanced mobile-communication devices and RFID systems are each composed of many individual component technologies. Within each component technology, better performance or enhanced functionality may be achieved by improving the processing of existing materials or by introducing new advanced materials. Changing the way a component is manufactured or improving the integration of components may also bring benefits. We discuss advances in four key component technologies that contribute to mobile-communication and RFID systems:

displays•memory•batteries and power storage•sensors and antennas.•

We also address recent trends in integrated-circuit design, mobile-communication protocols, and the integration of RFID into mobile-communication devices.

Displays

Four emerging display technologies are of particular interest:

organic light-emitting diode (OLED) displays•polymer light-emitting diodes (PLED), also know as light-emitting polymers (LEPs)•electronic paper using e-ink•video-projection systems.•

OLED and PLED displays have the potential to have the most significant effect on mobile computing and communication devices. Both technologies have the advantage of consuming less power than conventional display technologies. Both also eliminate the need for a back-light, enabling smaller and thinner form factors, and can be printed on flexible substrates, which can reduce manufacturing costs.

OLED Displays. Currently, research to improve OLED efficiency and performance is focusing on the use of metal, organic dopants to improve quantum and display efficiencies (Sun and Forrest, 2007; X. R. Wang et al., 2008). Recent research has also investigated how to

1 According to AAPA (2007), nine of the top 16 ports in terms of total tonnage shipped are located in China.

Advanced Mobile-Communication and RFID Applications 69

incorporate fluorescent or phosphorescent dendrimers into OLEDs to improve charge trans-port and light emissions (Burn, Lo, and Samuel, 2007; G. Zhou et al., 2007; Lu Zhang and Feng, 2007).

In May 2008, 11 of the leading corporations in the field of OLED technology and manu-facturing formed the OLED Association (OLED-A, 2008). These founding members were Cambridge Display Technology, Corning, DuPont, Eastman Kodak, eMagin, IGNIS Innova-tions, MicroEmissive Displays, Novaled AG, OLED-T, Samsung SDI, and Universal Display. The OLED Association’s mission is to facilitate the exchange of technical information, serve as a resource to investors, promote the development of OLED standards, and promote and market OLED technologies and applications. The technical and geographical breadth and the presence of both large and small businesses provide a strong foundation for the advancement of OLED applications.

PLED Displays. PLED (or LEP) displays are similar to OLED displays, except that they can be fabricated on large, flexible substrates using techniques derived from inkjet printing (Hebner et al., 1998) and spin-coating (Niu et al., 2008). This can lower manufacturing costs. PLED displays were originally developed in 1989 by Cambridge Display Technology.2 Recent research has also demonstrated the ability to integrate active-matrix PLED with a polysilicon thin-film transistor (TFT) backplane to produce a high-resolution (230 dots per inch, or dpi) display on a flexible, stainless steel–foil substrate (Chuang et al., 2007).

Research is ongoing to develop more–environmentally friendly chemical precursors for PLED applications (F. Huang et al., 2007). Scientific advances that enhance performance, minimize potentially hazardous chemicals associated with fabrication, and extend the range of possible substrates will make both PLED and OLED displays even more attractive for mobile-communication applications. Given the similarities between the two, several compa-nies involved with OLED displays are also developing PLED technologies. Current manu-facturers include MicroEmissive Displays, Add-Vision, and the industry leader, Cambridge Display Technologies.

Electronic Paper Using E-Ink. Another emerging display technology for mobile- communication devices is electronic paper using e-ink.3 E-ink operates with very little power and can be printed on a wide variety of substrates. This allows for displays that can be physi-cally rolled up, enabling larger, expandable viewing screens typically unattainable using con-ventional mobile-phone form factors and size.

Several commercial devices that employ various implementations of e-ink are already available. Hitachi’s W61H mobile phone allows the user to alter the phone’s external appear-ance by using e-ink to display up to 95 preset graphics on its front screen (Troaca, 2008). Seiko’s Spectrum watch uses e-ink to display the time, and Art Technology’s PHOSPHOR™ e-ink watch allows the user to switch the face from white-on-black to black-on-white and dis-play the time, date, or just the logo (see McNulty, 2005; N. Patel, 2007). One branch of active research is focused on characterizing the charged particles that provide the e-ink displays (Jing Wang et al., 2007). Another is aimed at developing e-ink implementations that would allow for color images (Ito et al., 2007).

2 For more information on the history of PLEDs, see CDT (undated).3 Electronic ink, or e-ink, technology uses microscale capsules that contain suspensions of high-contrast, charged par-ticles. The e-ink microcapsules can then be printed on various surfaces, and the images are controlled by applying a charge. For more information, see E Ink Corporation (2008).

70 The Global Technology Revolution China, In-Depth Analyses

E Ink Corporation is currently the industry leader in e-ink paper display technologies. It recently partnered with LG.Philips LCD to demonstrate high-resolution 14.3-inch flexible displays (E Ink Corporation, 2008). It is also actively partnering with other electronics manu-facturers around the world, such as Wacom® (2008), to extend e-ink display technologies to various mobile display applications (E Ink Corporation, undated[a]).

Video-Projection Systems. A video-projection system can be either integrated into a mobile phone or used as an auxiliary projector (Bajarin, 2007). Three companies are proposing separate technology approaches:

Microvision uses diode lasers with a micromechanical scanning mirror to form the •image.Texas Instruments uses its Digital Light Processing® (DLP®) technology, in which arrays •of micromirrors project the image.Explay uses a combination of light-emitting diodes (LEDs), laser diodes, and microlens •arrays.

Several technologies are being explored to improve micromirror arrays and other optical components that enable projection (K. Wang et al., 2007; Friese, Werber, et al., 2007). These include the following:

LEDs•improved high-powered red, green, and blue laser light sources for mobile systems (Bergh, •2004)microelectromechanical systems (MEMSs) (Z. Wang et al. 2007), including polymer •MEMSs (C. Liu, 2007; Friese and Zappe, 2008).

In the future, improvements in nanoelectromechanical systems (NEMS) may allow for fully tunable lasers, further enhancing projection displays (M. Huang, Zhou, and Chang-Hasnain, 2008).

Memory

Rapid advances in memory and data-storage devices have done much to drive the widespread proliferation of mobile-computing devices. In 1998, nonvolatile4 flash-memory devices, such as those typically used in digital cameras, for example, could hold up to 256 megabytes (MB) of data. Today’s commercial flash-memory devices hold up to 16 gigabytes (GB) of data using the same form factor—a 62.5-fold increase in data-storage capacity from just a decade ago.

In addition to flash memory, some emerging technologies are under development:

carbon nanotube–enabled memory or nanotube-based random-access memory (RAM) •(such as Nantero’s NRAM®)resistive random-access memory (RRAM)•silicon-oxide-nitride-oxide-silicon (SONOS)•phase-change memory (PCM)•magnetoresistive RAM (MRAM)•

4 Contents of volatile memory disappear when power is removed; that in nonvolatile memory persists.

Advanced Mobile-Communication and RFID Applications 71

ferroelectric RAM (FeRAM).•

Carbon Nanotube–Enabled Memory or NRAM. Emerging nonvolatile data-storage tech-nologies aimed at improving memory capacity or reducing the cost of manufacturing portable electronics, including mobile phones and RFID devices, include carbon nanotube–enabled memory (Maslov, 2006; Chen et al., 2008; J. Jang et al., 2008; Bichoutskaia, 2007) and NRAM.5

Nantero owns the intellectual property rights (IPR) to NRAM. It has been actively licens-ing its technologies and developing partnerships with such companies as Hewlett-Packard to develop carbon nanotube–enabled applications. Examples include inexpensive memory for low-cost RFID tags (Nantero, 2007b) and components for medical sensors (Nantero, 2007a).

Resistive Random-Access Memory. One approach to RRAM involves the use of metal oxides (Sato et al., 2008). Current research is also investigating the use of polymer-based diodes for RRAM applications (Gomes et al., 2008; J. C. Scott and Bozano, 2007), which has the potential to further reduce manufacturing costs.

Since 2005, several electronics companies have been investigating RRAM uses. These include Sharp Electronics, Sony, Samsung, LSI Corporation, Matsushita Electric (now Pana-sonic), Winbond Electronics (Clarke, 2006a), Unity Semiconductor (Clarke, 2006b), and Spansion. By some reports, Fujitsu (Ooshita, 2006; “Fujitsu Advances ReRAM,” 2007) has achieved considerable success in developing RRAM technology.

SONOS. A solid-state memory technology with possible applications for mobile- communication devices is SONOS (Ooshita, 2006; Seo et al., 2008; Saraf et al., 2007). One of the advantages of SONOS memory devices over conventional flash memory is that they con-sume less power, making them more desirable for use in mobile-communication devices.

Several commercial electronics companies are currently pursuing SONOS devices, including Toshiba (Clendenin, 2007), Spansion (Spansion, 2007), and Samsung Electronics (Clendenin, 2007). In addition, two companies in Taiwan—United Microelectronics Corpo-ration (UMC) (“UMC Delivers New SONOS Memory to Solid State System Co.,” 2006) and Macronix International (Clendenin, 2006)—are both developing next-generation memory devices based on SONOS designs.

Phase-Change Memory. Another important low-cost option for nonvolatile memory in mobile-communication devices is PCM (Yin et al., 2008; Shen et al., 2008). PCM is distinct from other nonvolatile-memory devices in that the device’s operation depends on heat that trig-gers the phase change. Although heat management is an important issue for most electronic devices (e.g., to avoid overheating and degraded performance), it is especially important for PCM devices. Successful research on heat insulation (C. Kim et al., 2008) and heat manage-ment (J. Feng et al., 2007) would enable PCM technology to be used in mobile-communication devices for the mass market.

PCM would be especially useful for mobilecommunication devices because it is capable of replacing both executing code and storing information in cell phones. In addition, unlike current flash memory, it does not degrade over time, eventually losing information (Greene, 2008).

Intel and STMicroelectronics have recently formed a joint venture called Numonyx Memory Solutions, with the intention of commercializing PCM for use in flash-memory appli-

5 For more information, see Nantero (undated).

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cations (e.g., iPod® devices and mobile phones) (Greene, 2008). Other companies pursuing PCM applications include Hitachi, Renesas Technology (Hitachi, 2006), IBM, Macronix, and Qimonda (“IBM, Macronix, Qimonda,” 2006).

An area of active research related to PCM devices is identifying alternative, environmen-tally friendly materials for PCM (T. Zhang et al., 2008).

Magnetoresistive Random-Access Memory. The primary difference between MRAM and other types of flash-memory technologies is that, with MRAM, the information is stored as a magnetic element, and with flash memory, information is stored as an electric charge.

MRAM’s architecture allows it to achieve very high memory densities—comparable to dynamic random-access memory (DRAM)—while using only a fraction of the power required by DRAM. While it uses the same amount of power as other types of flash memory for read operations, it requires less power than they do to write data (i.e., place it in memory). Ulti-mately, some look to MRAM to become the universal memory technology, able to achieve den-sities useful for data storage (i.e., replacing hard drives) and fast enough for working-memory applications (i.e., able to replace current flash-memory devices) (Royal Swedish Academy of Sciences, 2007).

Numerous companies are currently developing MRAM for commercial electronics appli-cations (Mertens, 2008; Memory Strategies International, 2008). Intel, Samsung, Toshiba, and Honeywell are several. Freescale appears to be one of the few companies currently market-ing MRAM devices (Jarman, 2008). In 2002, the Taiwanese Semiconductor Manufacturing Company (TSMC) partnered with ERSO Labs to develop MRAM devices (“ERSO, TSMC Join Forces on MRAM,” 2002; Clendenin, 2002); to date, however, they have not brought any products to market.

Ferroelectric Random-Access Memory. FeRAM is similar to MRAM and, in many ways, is viewed as its competitor. FeRAM uses an electric field to alter the polarization of the atoms within a ferroelectric material. The information is then stored as a polarization state, which can be changed in response to a variation in the electric field.

Though companies are exploring both MRAM and FeRAM, both technologies have advantages and disadvantages that will affect their eventual commercial use (J. F. Scott, 2007). One of the current challenges associated with FeRAM is integrating it with conventional com-plementary metal-oxide semiconductor (CMOS) devices (Kato et al., 2007; L. Wang et al., 2007), which will be necessary in many mobile-communication applications. Implementing FeRAM with passive-RFID tags to increase their available information-storage capacity is an active area of current research (H. Kang et al., 2007; Park et al., 2007; Nakamoto et al., 2007).

Among the leading companies already developing products based on FeRAM is Fujitsu. In January 2008, it announced that it had developed a 64-kilobyte (kB) FeRAM for RFID tags (Fujitsu, 2008). In 2007, Fujitsu also began volume production of 2-megabit (Mbit) FeRAM chips (Yam, 2007). Ramtron International, the first company to produce commercially avail-able FeRAM back in 1997 (“Ramtron Ships First FRAM Memory Samples from Japan-Based Foundry,” 1997), has partnered with Texas Instruments to produce 4-Mbit FeRAM (Lapedus, 2007b). Texas Instruments is also targeting FeRAM for use in its RFID tags, for such appli-cations as creating secure government documents and secure forms of government identifica-tion (TI, undated). Other companies developing or potentially developing FeRAM for com-mercial applications include Samsung, Matsushita, Seiko-Epson, and Micron Technology. In 2007, Micron Technology (2007) opened an integrated-circuit manufacturing plant in China;

Advanced Mobile-Communication and RFID Applications 73

Matsushita is expanding its current manufacturing capacity in the country as well (Lapedus, 2007a).

Batteries and Power Storage

Of the four component technologies we discuss, batteries and power-storage devices—because they determine the length of time that mobile devices can operate without recharging—have the greatest potential to influence the future growth of mobile-computing devices. While it is true that battery performance has not improved in the past decade to the same degree as memory or integrated circuits have, recent advances in the use of nanostructured materials have set the stage for significant gains in the coming years. In particular, nanostructured elec-trodes comprise an extremely active area of research (Shukla and Kumar, 2008; Larcher et al., 2007). Numerous studies are investigating various chemical compositions and structures for nanostructured lithium-ion (Li-ion) battery electrodes.6

The most-promising emerging technologies in the area of power storage for mobile- communication devices are as follows:

thin-film batteries•ultracapacitors•fuel cells.• 7

Thin-Film Batteries. Recent advances made toward nanostructured and nanoenabled bat-teries have allowed researchers and engineers to reduce battery size in multiple dimensions. One important advance is the reduction of thickness. Thin-film batteries have several advan-tages over conventional batteries (“Through Nanotechnology,” 2007):

They are composed of solid-state materials and do not rely on wet chemistry.•They can operate over a wide range of temperatures.•They have a longer shelf life.•They can be produced with many different form factors.•It does not become more expensive to manufacture them with decreasing size (i.e., they •have fixed cost per area) (Oak Ridge Micro-Energy, 2008; Titus, 2006).

Ongoing research on (1) electrode design and (2) fundamental materials across a wide range of material systems is aimed at enabling the development of Li-ion, nickel-cadmium, and other types of thin-film batteries.8 In addition to mobile-communication devices, these types of

6 An exhaustive list of all the possible electrode materials currently being investigated is beyond the scope of this chap-ter. A sample includes ferrous oxide (Fe2O3)–loaded carbon (Hang et al., 2007); tin-oxide nanotubes (Jian-Hua Wang et al., 2007); Sb and Sb oxides (Simonin et al., 2007); nanoporous silicon, graphite, and carbon composite anodes (Zheng et al., 2007); and lead-oxide minitubular electrodes (Bervas et al., 2007). Hua Kun Liu et al. (2007) explain how nano-materials have influenced the development of Li-ion batteries.7 In addition, there are many improvements being made to photovoltaic (PV) cells that also have the potential to enable smaller and lighter mobile-communication and mobile-computing devices. We describe these in Chapter Four.8 A fully comprehensive list of research efforts in every area related to thin-film batteries is beyond the scope of this article. However, a sample of the types of research efforts under way includes electrode design (Chi-Lin Li and Fu, 2008; Ho et al., 2008; Yanguang Li, Tan, and Wu, 2008; Yi-Xiao Li, Gong, and Yang, 2007; Marcinek et al., 2007) and cycle performance (S.-W. Song et al., 2008; Chiung-Nan Li et al., 2008).

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batteries could also be used for embedded power on printed circuit boards (e.g., microfluidic devices), smart cards, and smaller active-RFID tags (Bullis, 2006j).9

A number of market researchers predict that the market for thin-film batteries will expe-rience large growth in 2009 (Curtiss and Eustis, 2006; Jaques, 2007). Most of the companies currently developing commercial thin-film batteries are smaller, start-up companies. But large companies, such as NEC and IBM, are providing support to small thin-film-battery ventures.10 Several companies involved in thin-film battery manufacturing are active in China:

Enfucell: • The chief technology officer of this Finnish company, Zhang Xiachang, was nominated in 2007 as one of the 11 Chinese who made a difference to the world in 2006 in an award organized by 10 major Chinese media organizations (“Zhang Xiachang’s Battery Breakthrough,” 2008).Solicore: • In 2007, this leading U.S. manufacturer of thin-film batteries partnered with Chinese manufacturer HisenseSoft (also known as HierStar) to provide thin-film bat-teries for use in smart-card applications targeted for use in Chinese markets (Solicore, 2007).Ultralife Batteries: • In January 2006, another leading U.S. manufacturer of thin-film batteries, Ultralife, acquired Able New Energy, a lithium-battery manufacturer located in Shenzhen, China (“Ultralife Batteries to Acquire Chinese Battery Manufacturer for Approximately $4.2 Million,” 2006).

Ultracapacitors. Often viewed as an alternative to batteries in electric vehicles, ultracapac-itors are also being considered for use in future mobile-communication devices (Halber, 2006). They have long been desirable for this use because they are resistant to shock and temperature. However, previous limitations on the ultracapacitor electrode surface meant that capacitors needed to be much larger to hold the same amount of charge as most batteries. Recent research in the use of single-walled carbon nanotubes (SWCNTs) (Halber, 2006; Schindall, 2007), carbon nanotube (CNT) composites (Albina et al., 2006), and other nanostructured materi-als has allowed researchers to achieve electrodes with more surface area, which creates greater capacity to store a charge.

Two of the leading companies developing ultracapacitors are Maxwell Technologies and EEstor. In 1999, Maxwell Technologies received a grant from the National Institute of Stan-dards and Technology’s Advanced Technology Program to reduce the cost and improve the performance of materials used in ultracapacitors for automobile and electronic applications (ATP, 2006). In July 2007, the Chinese government certified its BOOSTCAP® products for energy-storage applications in vehicles (Maxwell Technologies, 2007a). Four months later, Maxwell Technologies announced an alliance with Tianjin Lishen Battery Joint-Stock, a lead-ing producer of Li-ion batteries in China, to develop a hybrid product that would combine both ultracapacitor and Li-ion technologies (Maxwell Technologies, 2007b).

To date, Maxwell Technologies’ primary competitor in the field of ultracapacitors, EEstor, has revealed relatively little information about its commercialization plans (Hamilton, 2008). But according to an article in Technology Review, EEstor has recently licensed its ultracapacitor

9 Active-RFID tags are used widely for inventory control. In current active-RFID tags, the battery occupies most of the device. Integrating thin-film batteries may allow active-RFID tags that resemble passive-RFID tags.10 A complete list of thin-film-battery manufacturers can be found in NanoMarkets (2007).

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technology to Lockheed Martin for use in everything from remote sensors to mobile power packs (Hamilton, 2008).

Fuel Cells. Fuel cells are another technology being explored for powering mobile- communication devices (Sistek, 2008). Companies are already beginning to market fuel-cell products that can be used to recharge existing electronic devices (Sistek, 2008; Yomogida, 2008). However, the future vision is to replace the current battery in mobile-communication devices with a fuel-cell power source. Researchers at the Massachusetts Institute of Technol-ogy (MIT) have recently developed new materials to enhance the power output from fuel cells, making them more attractive for mobile electronics in general and mobile-communication applications specifically (Thomson, 2008).

Although the technology holds great promise, before fuel cells can become widespread in consumer electronic and mobile-communication devices, additional research is needed into their design and characterization, and solutions must be found to several market challenges (e.g., how to deliver the fuel needed, such as methanol) (Tasa and Aapro, 2006; Gangeri, Pera-thoner, and Centi, 2006; Stone, 2007; Zhong et al., 2008; Kundu, Sharma, and Shul, 2007; Neburchilov et al., 2007; H. S. Liu et al., 2006). Nonetheless, several major companies are actively developing and marketing methanol-fuel-cell technologies for use in mobile electron-ics. They include Sony (Yomogida, 2008) and MTI Micro (Sistek, 2008). In addition, Sam-sung is developing fuel cells for mobile electronic devices that use water instead of methanol. The company anticipates that this technology will be available for commercial use by 2010 (Samsung Electro-Mechanics, 2007).

Sensors and Antennas

Sensors. The area of micro- and nanoenabled sensors has received significant attention from both academia and industry in the past few years.11 Ongoing focus is being placed on research, development, and commercialization of micro- and nanoenabled sensors that can be used to detect movement, biological substances, and chemicals. Many of these sensors are find-ing applications in mobile-communication devices—e.g., to enable them to transmit informa-tion on personal health (“Nano Sensor Could Predict Asthma Attacks,” 2007; Kuzmych, Allen, and Star, 2007)—and RFID systems—e.g., to enable networked surveillance (Ferrer-Vidal et al., 2006). Although concern has been growing about the potential threat to individual pri-vacy (van den Hoven and Vermaas, 2007) posed by ubiquitous networked sensors, many view these technologies as a means of improving the security and efficiency of supply chains (Burger, 2007; Kevan, 2004); monitoring degradation of infrastructures, such as bridges and electrical power plants; and monitoring the environment for threats to ecosystems, public health, and safety (Cho et al., 2005).

However, many research challenges remain. For example, Microsoft Research recently published a paper on using mobile phones as the framework for wireless sensor networks (Kansal, Goraczko, and Zhao, 2007). The challenges include making the sensor data available and finding an optimal way to store those data so that they can be available for other services and applications.

11 For a review of the different types of nanosensors, see Materials Today (2005); Bogue (2008); Berven and Dobrokhotov (2008); Grieshaber et al. (2008); and Waggoner and Craighead (2007). Hundreds of small and medium-sized companies are developing nanoenabled and microenabled sensing components and devices worldwide. Useful resources for learning about companies involved in this area of work include NIA (undated) and Nano Business Alliance (undated).

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Antennas. Significant work is being done in antenna design for mobile- communication devices. An especially difficult challenge for today’s cell phones and other mobile-communication devices is the range of antennas needed to communicate across mul-tiple components of the electromagnetic spectrum that are used in different communication protocols. Each of these protocols for exchanging data (e.g., 802.11, code division multiple access [CDMA], Groupe Spécial Mobile [GSM], RFID) has unique hardware and software requirements.

Recent research has investigated the use of carbon nanotubes, coupled with development in software-programmable radios, to create a dynamic, programmable antenna or filter capable of operating across a much wider range of frequencies than possible with conventional antenna designs (Greene, 2006; Perlman et al., 2006; Jensen et al., 2007). A fully programmable single antenna and filter able to take the place of multiple cell-phone components would permit more flexibility and smaller designs for mobile-communication devices.

Other approaches and material systems to further enhance mobile-communication capa-bilities are also being pursued (Su and Chou, 2008; Lin and Wong, 2008; R. Wang et al., 2007; Costantine et al., 2007). Developments in software-defined radio (SDR)12 for mobile phones, for example, may allow for more flexible, adaptive, and versatile mobile-communication devices in the future (Del Re et al., 2007; Wolf, 2005).

Integrated Circuits

The striking spread of cell-phone use and rapid growth of the mobile-communication com-mercial market in the past few years has captured the attention of many leading companies in the semiconductor and integrated-circuit industries. Scientists and engineers have begun to pursue methods of improving the overall power efficiency of integrated circuits for mobile-communication devices. The goal is to increase the capability and computational power of these dedicated chips while minimizing the power they consume.

In partnership with Texas Instruments, researchers at MIT have recently developed new designs for integrated circuits for mobile-communication devices and cell phones that are 10 times more efficient than today’s chips (“Low-Voltage Chip May Power Future Portability,” 2008). Given how important low power consumption and effective power management will be to future mobile-communication devices, other industry leaders, such as Intel and NXP Semiconductor (formerly Philips Semiconductor), are also pursuing research to improve inte-grated-circuit efficiency. One approach is to leverage advances associated with switching to 65-nanometer (nm) processing techniques to help reduce leakage currents (Y. Wang et al., 2008). Another is looking at new architectures to improve low-power operation (Charlon et al., 2005; Lueftner et al., 2007).

Many research needs in this field are highlighted in the International Technology Road-map for Semiconductors (ITRS) (SIA, 2007). The ITRS has been a significant resource for industries and universities involved in the research, development, and design of integrated cir-cuits in the past decade. It explores important issues and trends in semiconductor technology and identifies potential solutions to emerging obstacles. Part of its purpose is to foster interna-tional collaboration among institutions in the semiconductor industry, “so that the financial weight of pre-competitive technologies can be equitably shared by the whole industry” (SIA,

12 Radios that can change characteristics, such as frequency band, using software rather than hardware.

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2004). Starting in 2003, the ITRS included a section dedicated specifically to the development of radio-frequency and analog or mixed-signal technologies for wireless communications.13

According to the ITRS, future trends for mobile and wireless communication devices will require migration to new device structures that continue to improve the density and per-formance of integrated circuits. Examples of such new structures include dual-gate integrated circuits and fully depleted, silicon-on-insulator integrated circuits. The increasing demands on power amplifiers for mobile handsets present another important area of research. Future power amplifiers will have to maintain strict linear performance across an ever-increasing range of protocols without substantial increase in cost.

Mobile-Communication Protocols

Several wireless-communication protocols and technologies already exist. These are used to meet different requirements—e.g., range, power consumption, data rate—for different appli-cations. For the foreseeable future, a single mobile-communication device will need to be able to operate and communicate using multiple frequencies and protocols. Today, most cellular phones come Bluetooth®-enabled for communication over short distances—for example, via wireless headsets—as well as capable of operating on one or more cellular wireless networks, such as CDMA, GSM, or general packet radio service (GPRS). Cellular-phone manufacturers have also begun to integrate Wi-Fi (802.11) compatibility into their handsets, enabling users to place calls either through traditional cellular networks or by using Wi-Fi where available. The emergence of Worldwide Interoperability for Microwave Access (WiMAX) in China and elsewhere has the possibility of significantly changing the communication-standard landscape by introducing an additional needed compatibility. Both WiMAX and Wi-Fi are based on 802.11 standards but, in practice, are aimed at different applications. Because this diversifica-tion of wireless communication modes is likely to continue, an important direction for future research and development (R&D) is enabling mobile devices to communicate across multiple networks.

In addition, current wireless-communication applications are largely constrained within a particular segment of the spectrum. Future commercial mobile-communication devices will need to be able to sense available spectrum or optimize applications to take advantage of mul-tiple components of the spectrum at once, much like the U.S. Department of Defense’s Joint Tactical Radio System.14 As the available spectrum changes either due to local variation (e.g., local interference, obstruction of antennas) or macroscopic changes (e.g., the plan for television broadcasters to vacate the 700 MHz band in the United States in February 2009), mobile-communication devices will need to be capable of adapting in real time to local conditions. Such changes in the spectrum will continue to occur into the foreseeable future.

Recent changes in the nature of cellular and other wireless services also have possible implications for mobile-communication devices. Historically, cellular and other wireless pro-viders exercised strict control over the type of devices and applications allowed to run on their networks. In this way, they essentially dictated the types of features that cell-phone manufac-turers could offer in their handsets. This was in contrast to the approach taken by Internet

13 For a more comprehensive view of the material, design, and development challenges for mobile-communication inte-grated circuits, see SIA (2003).14 For more details, see JPEO (undated).

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providers, who allowed almost any entity with Internet access to write or develop applications and tools, as long as they adhered to basic standards.

With the introduction of the Apple® iPhone™ in 2007, wireless carriers have begun to rethink their approach to allowing mobile computing devices access to their networks, allow-ing for applications that can operate on multiple carriers and any device. In many ways, the cellular and other wireless networks of the future may look and feel more and more like the Internet (Vogelstein, 2008).

RFID Systems

All RFID systems are typically comprised of two components: the RFID reader and the RFID tag. The reader allows the user to interrogate the system, while the tag stores the data that will be read.

Initially, RFID was viewed as an alternative to bar codes for logistics and inventory pur-poses. But today, all the technology advances we have mentioned—especially improvements to integrated circuits and memory devices and the development of micro- and nanoenabled sensors—are allowing RFID tags to provide much more than just logistics information. They can now supply diagnostic data, such as container temperature or humidity, changes in condi-tions over time, rates of acceleration or deceleration, and even personal medical data. They can also provide information on transactions—for example, location and transit status. As RFID tags become routinely integrated into commercial devices and the integration of sensing com-ponents, memory, processing capabilities, and flexible communication tools makes them more sophisticated, mobile-communication devices will, in tandem, increasingly incorporate tools to read, process, share, and utilize this information.

Traditionally, RFID readers were considered a fixed node in a system. An RFID tag affixed to some object would need to pass within range of the RFID reader in order to be interrogated or read and have any information downloaded. The fixed RFID reader included wired network-communication capabilities to allow the information to be shared, stored, and searched. But recent trends in mobile-communication devices and wireless networking have led to a shift from fixed-node RFID readers to mobile RFID, also known as M-RFID.

Some wireless manufacturers are already integrating RFID readers into mobile- communication devices. For example, in 2004, Nokia began to market an M-RFID kit for its 5140 mobile phone (Thomas, 2004). Philips, Samsung, and other developers of mobile cell-phone handsets are also pursuing ways of integrating RFID readers directly into mobile-communication devices (Nystedt, 2007; H.-J. Kim, 2006). Some devices offer a combination of M-RFID, geopositioning, sensing, data exchange, and data services.

The Mobile-Communication Device of the Future

The future of the mobile-communication device is still being written. Scientists, engineers, politicians, and even artists are envisioning how evolving mobile communications may affect people’s lives. The recent unveiling of Morph, the concept phone from Nokia in conjunction with the University of Cambridge, reveals a future mobile-communication device that is flex-ible, transparent, stretchable, and energy harvesting (Noyes, 2008). One might also expect this future mobile-communication device to be nanoenabled with next-generation displays and sensors, RFID-enabled, and fully integrated into any available communication network for voice and data exchange. Morph is just one example of a class of future mobile-communication devices that redefine the rules for form and function.

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Relevant Capacity Available to TBNA and TEDA

TEDA already has a substantial manufacturing base for mobile phones. It is home to Samsung’s largest mobile phone–manufacturing facility, as well as cell phone–manufacturing plants for Motorola (Spak, 2006) and Sensetech (“Sensetech Opens Mobile Phone Ultra-Thin Keyboard Plant in TEDA,” 2005), a South Korean manufacturer of mobile-phone keyboards.

TBNA and TEDA have direct access to significant R&D capacity for mobile- communication devices in Tianjin municipality. In the area of display technologies, Lu Zhang and Wei Feng of Tianjin University’s (TU’s) School of Materials Science and Engineering are working on dendritic conjugated polymers for improved performance for OLEDs. Jing Wang, also from TU, is investigating the characteristics of e-ink particles, useful in emerging display technologies (Jing Wang et al., 2007).

TEDA is also home to Tianjin Highland Energy Technology Development Company, which produces hydrogen-storage tanks for fuel-cell applications. Tianjin Highland Energy makes the smallest hydrogen storage canister in the world, which is the size of a AA battery (Hugh, Todd, and Butler, 2007) and can provide the hydrogen storage for polymer electrolyte–membrane fuel cells for mobile-phone chargers (J. Huang, 2007).

Drivers and Barriers

In Chapter Three, we identified eight factors that we believe encompass the most-significant drivers and barriers for TBNA in developing and implementing the seven selected technology applications (TAs). We now discuss how those factors may influence TBNA’s development and implementation of advanced mobile-communication and RFID applications.

China’s need for increased productivity (e.g., through RFID supply-chain and logistics applications) and economic development to enable rising incomes and consumption (e.g., the growing mobile-phone market) are closely tied to the development of this TA. China already leads the world as the country with the most mobile cellular phones (CIA, 2008), and this fact, together with China’s large population, makes it a key area for market growth. On the other hand, Western news sources have turned a spotlight on China’s ability to monitor electronic communication within its country (August, 2007). Frequent media reports and studies detail the struggle between China’s central government to control information and Chinese citizens to gain access to more information through various mobile-communication devices (Petersen, 2006; Chase and Mulvenon, 2002). While the Chinese central government’s position on con-trolling information may have a mild dampening effect, the current trend in China toward ever-increasing usage of mobile phones makes this area a driver.

China’s national R&D policies will be a driver. China’s five-year plan for 2006–2010 includes major science and technology (S&T) projects that support this TA, such as the following:

integrated circuits and software: establishing integrated-circuit R&D centers, industrial-•izing the technology for 90-nm and smaller integrated circuits, and developing basic soft-ware, middleware, large-key applied software and integrated systems

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new-generation network: building next-generation Internet demonstration projects, a •nationwide digital TV network and mobile communication–demonstration networks with independent property rightsnew materials: demonstration projects for commercial production of high-performance •materials for the information industry (see China Internet Information Center, 2006a).

China’s other national policies, in particular its historical aversion to adopting interna-tional mobile-communication standards, will be a barrier. Sweeping cell phone–related leg-islation in China—such as the law requiring all cell phones to be equipped with a univer-sal serial bus (USB) connection for charging (C. Yan, 2007)—demonstrate that the Chinese central government wields strong influence over the Chinese market. This type of law may prevent China’s mobile communication–device manufacturers from meeting global market demands. China has also decided to develop and promote its own third-generation (3G) cell phone–protocol standard, time division–synchronous CDMA (TD-SCDMA), over the more mature 3G cell-phone protocols, wideband CDMA (WCDMA) and CDMA2000. But even though it made considerable progress toward deploying TD-SCDMA 3G cell-phone infra-structure and hardware by the opening of the 2008 Summer Olympic Games in Beijing, deployment is not anticipated to become widespread until well after that time (McDonald, 2008). In the meantime, China has approved WCDMA and CDMA2000. Consequently, manufacturers of mobile-communication devices seeking to leverage emerging 3G capabilities will need to develop hardware and software solutions for all three 3G standards. Taken as a whole, these conditions may be a disincentive for manufacturers of cell phones and mobile-communication devices to enter the Chinese commercial market. Or, to meet the demand for global 3G mobile-communication devices, manufacturers may opt to produce handsets only for WCDMA and CDMA2000, leaving local Chinese handset manufacturers to produce hardware for TD-SCDMA (Bukoveczky, 2008). Similarly, concerns that circulated in 2005 about the possibility of China establishing its own ultrahigh-frequency (UHF) RFID standard may dissuade foreign companies from investing heavily in manufacturing in China (Faber, 2007). On the other hand, China’s ruling to approve bandwidths compatible with U.S. and European UHF RFID standards does suggest that it is willing to adopt foreign standards, even as it continues to develop its own. TBNA needs to be cognizant of evolving Chinese standards in developing this TA and should take whatever actions are possible to move the momentum in China toward confluence with global standards.

IPR protection remains a barrier in China both to indigenous innovation and to the involvement of foreign capital and talent in innovative R&D and ventures (see, e.g., Davies, 2006; OECD, 2008). TBNA enforcement of existing laws would contribute momentum to what has been described as an improving situation (S. Jang, 2007).

Finance and banking laws and regulations remain a barrier in China. The Organisation for Economic Co-Operation and Development (OECD) concluded that, while the situation is improving, much more remains to be done to have the robust, transparent, and trusted laws and regulations in place that are necessary to draw capital from global sources for cutting-edge R&D and innovation (OECD, 2008). Nevertheless, there is evidence of recent investments in China in integrated-circuit manufacturing (Micron Technology, 2007; Lapedus, 2007a), and TEDA has established relationships and a strong manufacturing base relevant to this TA, as described in the earlier section on capacity.

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Human capital should be a driver for TBNA, although its proximity to the growing metropolis of Beijing will provide strong competition for talent. The current workforce in TBNA, TEDA, and the Tianjin municipality more broadly provides a ready source of skilled labor with manufacturing experience, although the current trend in China for students to attend universities rather than technical and vocational schools (T. Fuller, 2005; Wiseman, 2005; “Chinese Manufacturing Slowed by Skilled Worker Shortage,” 2002; “China in Seri-ous Shortage of Skilled Workers,” 2004) will be a challenge for TBNA as it ramps up pro-duction. China’s central government recognizes the problem and has taken steps to address it (J. Wu, 2006). Access to university graduates in the Tianjin municipality and in Beijing, espe-cially those with science and engineering (S&E) backgrounds may provide the needed R&D staff. TEDA has recognized the importance of attracting such talent locally, from elsewhere in China, and internationally and has established incentive programs to do so.15

The development of a culture of R&D and innovation remains a barrier for TBNA, as it does for other organizations in China that seek to develop into state-of-the-art S&E centers (CAS, 2006). For both its existing and new initiatives, TBNA should encourage risk-taking and flexibility to change course as dictated by technical, economic, political, and market developments.

A Possible Path Forward

The suggested long-term goal is for TBNA to become an R&D and manufacturing center for mobile-communication devices and RFID systems, initially for the domestic Chinese market and eventually the global market. In displays and power sources, TBNA and TEDA have an opportunity to build on local and regional R&D success and build a state-of-the-art capability. In integrated-circuit design and development, TBNA and TEDA may not have the influence to directly shape trends in research and engineering. But they would benefit in a number of ways from greater awareness of the emerging state of the art. In collaboration either with other economic regions in China or with local semiconductor-related industries, TBNA and TEDA could spearhead mainland China’s contribution to the ITRS development process.

We suggest that TBNA and TEDA take the following actions. If these steps are success-ful, their R&D programs in the mobile-communication field will expand to the extent that they may be able to seed companies that could operate domestically or internationally.

Develop a strategic plan that is based on detailed descriptions of current R&D and indus-•trial capacity in TBNA, TEDA, and the surrounding area in mobile communication– and RFID-related technologies. This should include separable subplans for each of the component-technology areas we describe, with exposition of the capacity to establish potential test-bed environments for RFID and mobile-communication devices. TBNA and TEDA should then share this overarching strategic plan with local commercial part-ners, such as Samsung, and other mobile-communication manufacturers active in China. The plan should serve as an incentive to build research and manufacturing capacity in TEDA and TBNA more broadly.

15 These include incentives to enterprises and to individuals to bring in Ph.D. graduates, as well as awards for outstanding performance. For details, see the section on the educated S&E workforce in Chapter Three.

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The subplans should be shared with the leading technology developers and industry asso-•ciations in each of the component areas, such as the following:16

Share subplans for OLED and other display technologies with the OLED –Association.Share subplans for sensors with the Nano Business Alliance and the Nanotechnology –Industry Association.Share subplans for batteries and power storage with leading companies engaged in bat- –tery and fuel-cell design that have connections in TBNA, in TEDA specifically, or in China. The list would include Enfucell, Solicore, Ultralife Batteries, Sony, MTI Micro, and Samsung.

Establish a mobile-communication test-bed environment that new mobile •communication–device manufacturers and integrators can use to research, develop, and prototype emerging technologies and applications.Actively pursue collaborations and partnerships with leading academic and industry •researchers in the field, both in China and abroad. A short list of possibilities includes the following:

researchers at the South China University of Technology developing environmentally –friendly chemical precursors for PLED applications (F. Huang et al., 2007)researchers at commercial companies involved in display technologies, such as Cam- –bridge Display Technology, Samsung SDI, E Ink, and businesses affiliated with the OLED Associationresearchers at Peking University investigating carbon-nanotube switches (Chen et al., –2008) for memory devicesresearchers with the Chinese Academy of Sciences (CAS), Shanghai Jiao Tong Univer- –sity, and Fudan University who are partnering with a U.S. corporation, Silicon Stor-age Technology, to investigate issues related to PCM (Shen et al., 2008; J. Feng et al., 2007)researchers at the Huazhong University of Science and Technology and Tsinghua Uni- –versity investigating integrated ferroelectric capacitors with possible applications for FeRAM (L. Wang et al., 2007)researchers from Tsinghua University developing designs and microfabrication tech- –niques for micro fuel cells that could benefit mobile-communication devices (Zhong et al., 2008).

Work with manufacturers of mobile-communication devices already in TEDA to increase •internal R&D on device components. Provide incentives, such as easier access to local universities and research centers, for working with them.Engage researchers from Tsinghua University who are developing designs and microfab-•rication techniques for micro fuel cells that could benefit mobile-communication devices (Zhong et al., 2008). TBNA should get these researchers to work together to build rela-tionships with companies, such as Sony, MTI Micro, and Samsung, that are currently conducting R&D on fuel cells.Leverage the Samsung cell phone–manufacturing center in Tianjin to build collabora-•tions with local scientists and engineers to work on RRAM for mobile applications. Sim-

16 For further possibilities, see the component-technology sections of “Current Scientific and Market Status and Future Prospects” earlier in this chapter.

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ilarly, collaborate and build relationships with UMC, Macronix, TSMC, Matsushita, Micron Technology, and other companies involved in next-generation memory storage in and around the Tianjin municipality and throughout China.Encourage academic institutions in TBNA and TEDA to partner with semiconductor-•related industries in TEDA, TBNA, and the Tianjin municipality to gain insight into emerging trends in integrated circuits for mobile-communication devices and RFID. Part of this effort should involve both staying abreast of and contributing to ITRS develop-ment. Because the ITRS is likely to be behind much of the drive to improve integrated-circuit design for mobile-communication devices, TBNA and TEDA may want to work with Samsung, Honeywell, Motorola (Motorola in China, undated), and other compa-nies in the semiconductor industry to remain aware of advances and changes in the ITRS that may benefit TBNA and TEDA industries. They should also look for opportunities to collaborate with local industries that contribute to the ITRS and with industry asso-ciations that sponsor it. Current ITRS sponsors include the European Semiconductor Industry Association (ESIA), the Japan Electronics and Information Technology Indus-try Association (JEITA), the Korean Semiconductor Industry Association (KSIA), the Taiwan Semiconductor Industry Association (TSIA), and the Semiconductor Industry Association (SIA), which represents the U.S. semiconductor industry (ITRS, 2008).Build on and publicize the existing RFID efforts in Tianjin under the RFID pilot pro-•grams announced in 2007 by China’s Ministry of Information Industries (Faber, 2007). In this context, Tianjin Port could provide opportunities for integrating and prototyping new micro- and nanoenabled RFID tags and mobile RFID-reader applications.

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ChApTeR SIx

Rapid Bioassays

Rapid bioassays, assays that offer “the capability to rapidly perform tests to detect the pres-ence or absence of specific biological substances, and to perform multiple tests simultaneously” (GTR 2020, In-Depth Analyses, p. 23), have considerable potential to address long-standing problems in public-health diagnostics, food safety, and environmental monitoring. This tech-nology application (TA) integrates exciting technology advances in bioassay instrumentation—for example, lab-on-a-chip microarrays, gene sequencing, and monitoring of chemical reac-tions in vivo.

Importance to TBNA and TEDA

The development of rapid-bioassay capabilities is highly relevant to the needs of TBNA’s grow-ing population and economy. Rapid bioassays could allow quick screening to identify or elimi-nate threats to public health, significantly improve patient outcomes, increase use of correct medicines, and permit pathogens in the environment or food supply to be accurately identified. This may be especially important in light of serious problems that have emerged recently con-cerning food safety and environmental pollution both within China (see, e.g., Zamiska, Leow, and Oster, 2007; Bradsher, 2008a; Wong, 2008) and associated with Chinese exports (see, e.g., Harris and Bogdanich, 2008).

Current Scientific and Market Status and Future Prospects

Technical Overview

The progression of bioassays from deoxyribonucleic acid (DNA) to proteins, and even human cells (e.g., liver cells, because they assist in observing the effects of toxicity) is enabling faster disease testing and testing for drug resistance in particular strains of pathogens. It may even lead to personalized medical tests. Technologies to conduct such tests are advancing rapidly. We describe current developments in the state-of-the-art of rapid nucleic-acid testing and then focus on emerging bioassay approaches based on biochips, which introduce the capability to perform many tests simultaneously. Lab-on-a-chip bioassays even allow the performance of laboratory operations on a small scale using miniaturized devices.

Current Technologies: Nucleic-Acid Testing. In the past, detecting an organism required that it be cultured. Depending on the organism’s growth rate, culturing could take anywhere from one day (e.g., for anthrax) to two months (e.g., for tuberculosis). But methods are now

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available that permit scientists and lab technicians to detect organisms within a matter of hours. The key to detecting organisms this quickly is the use of molecular diagnostic tech-niques that involve nucleic-acid testing.

The DNA probe is the basic component of most techniques of this type (Gen-Probe, 2000). It is a labeled DNA strand synthesized in the laboratory. Its purpose is to hybridize with whatever target nucleic-acid molecule one wants to identify. The target can be either DNA or ribonucleic acid (RNA),1 depending on which best shows the unique characteristics of the organism of interest.

A DNA probe is composed of a strand of 30–40 nucleotides called an oligonucleotide. The oligonucleotide is attached to a detector molecule. When hybridization occurs between the DNA probe and the target organism’s nucleic acid, the detector molecule detects the hybrid, revealing the presence of the organism.2

Until recently, DNA probes either required the target organism to be cultured or were introduced directly into the processed specimens taken from patients. While providing accu-rate identification, culturing the organism has the disadvantage of a delay caused by the time required to grow the culture. Direct introduction of the DNA probe can be used only in speci-mens in which the organism is in relatively high concentration, because otherwise there may not be enough of the target nucleic acid to detect.

Today, a new technique is in use: The current state of the art is the nucleic acid–amplification assay. This test employs a nucleic acid–amplification technique (such as the polymerase chain reaction, or PCR) that uses enzymes to exponentially multiply a specific nucleic-acid sequence. This produces billions of copies of the sequence in a short time. DNA probes can then easily detect this amplified target nucleic acid.

This assay can be used in a variety of ways:

to screen urine samples for Chlamydia and gonorrhea, which, in the past, could be •detected only in more invasive swab samples (D. Fuller et al., 2000). The nucleic acid–amplification assay has been shown to have high sensitivity for detecting these two dis-eases (Marshall et al., 2007; Munson et al., 2007).to screen routinely collected Papanicolaou (Pap) samples (Chernesky et al., 2007). For •example, Gen-Probe’s APTIMA Combo 2® assay can be used to simultaneously detect Chlamydia and gonorrhea on both the semiautomated and the high-throughput, fully automated TIGRIS® platforms (“Gen-Probe,” 2008, p. 666).to rapidly detect tuberculosis in respiratory specimens (Pfyffer et al., 1999)•to screen donor blood for human immunodeficiency virus (HIV), hepatitis B and C, •and the West Nile virus and to monitor these diseases in patients (Gen-Probe, 2008, pp. 22–26). Gen-Probe also markets assays for this purpose.

1 DNA is made of a pair of long-stranded, entwined molecules that can store information for a long time. DNA contains the instructions needed to construct other components of cells, such as proteins and RNA molecules. Chemically, DNA is a nucleic acid made from two long chains of nucleotide units.

Different types of RNA serve different purposes. For example, messenger RNA carries information from DNA to the ribo-somes to allow the synthesis of proteins. RNA is very similar to DNA but differs in a few important structural details: For example, it is single-stranded as opposed to double-stranded. Also, its nucleotide contains ribose, whereas DNA’s contains deoxyribose (i.e., ribose that lacks one oxygen atom).2 In the past, detector molecules were composed of a radioactive substance. Now, however, they tend to be chemilumines-cent or fluorescent.

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Emerging Technologies: Biochips. As useful as current nucleic-acid testing is, it has a number of limitations. In particular, it can probe only for a few specific genes.3 Biochips are emerging technologies that have a much greater capability to perform tests to verify the pres-ence or absence of specific biological substances. We discuss three types of biochips:

Biochips to analyze genes• (genomics) are much better able to perform multiple tests simul-taneously. By testing for many genes at once, it is possible not only to detect a specific organism but also to identify the strain of that organism, because a strain has a unique group of genes that differs from that in other strains. In addition, the ability to identify many nucleic acids simultaneously makes it possible to identify multiple organisms as well as multiple strains of the same organism.Biochips to analyze proteins• (proteomics) can be used to test for a wide variety of proteins with different functions.4 This is a more difficult task than gene testing because there are many more proteins than there are genes.The • lab on a chip provides the capability to perform laboratory procedures—for example, organic syntheses, bioanalysis, or drug screening—on a small scale using miniaturized devices.

Biochips to Analyze Genes. Biochips that analyze nucleic acids from various samples (e.g., patient specimens) are the most highly developed in this dynamic and rapidly changing field. They can be used in two principal ways:

to identify specific DNA sequences (• genotyping)to identify specific messenger-RNA sequences that allow one to determine not only •whether a certain gene is present in the sample but also how active that gene is (gene expression). The more active the gene, the more of its messenger RNA will be present.

Gene biochips have been used to map the human genome and locate defects and variations that may be associated with genetic disease—for example, single-nucleotide polymorphisms (SNPs). It is a measure of the power of this technology that it has recently discovered an impor-tant new type of genetic variation known as copy-number variation (Check, 2005). Research has already shown that this type of genetic error is responsible for some cases of autism (Weiss et al., 2008).

Genotyping technology is being applied to detect genes specific to certain pathogens. It can be used as a sensitive test (i.e., for detection, only a small number of pathogens need be present in a sample). It can also detect specific strains. For example, the U.S. Centers for Dis-ease Control and Prevention (CDC) has developed an experimental FluChip that can identify and type influenza viruses in just 12 hours (Townsend et al., 2006). In contrast, the older cul-ture method would take about four days. The CDC is also testing a biochip that can detect genes for antibiotic resistance in tuberculosis (Caoili et al., 2006). DNA testing for human papillomaviruses (HPVs) has the potential to replace Pap testing for cervical-cancer screening (Mayrand et al., 2007).

3 Genes are DNA segments that carry heredity information.4 Proteins are the dominant molecule in a cell and exist in a wide variety. Some proteins have an important structural func-tion. Others are enzymes, which catalyze chemical reactions. In addition, other proteins are important in cell signaling.

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Genotyping could also assist in testing for various pathogens in food. Currently, the only place where biochips are being used to test food is Europe, with its stringent bans on imports of genetically modified food. The technology is quite effective in finding the added genes contained in these food products (see Eppendorf, 2006). But the applications could be much broader.

Gene-expression technology has a wide variety of applications in the domain of human cancers:

Cancer cells have the same DNA as ordinary cells. But in the cancer cell, certain genes •are functioning at quite different rates. Gene expression allows one to detect those certain genes and determine how active they are.Gene expression allows cancers that used to be lumped together (some breast cancers, •for example) to be differentiated in ways never before imagined. It is now possible to pre-dict lymph-node metastasis and relapse in breast cancer with an accuracy of 90 percent (E. Huang et al. 2003).Gene expression holds the potential to sort breast cancers into those that do not need •chemotherapy; those that do need chemotherapy and will respond well to it; and those that need chemotherapy but will not respond well to it (Pawitan et al., 2005). This could facilitate well-informed decisions about whether a patient should undergo chemotherapy. For example, Genomic Health is a life-science company focused on developing and com-mercializing genomic-based clinical diagnostic tests for cancer. Its Oncotype DX® is being adopted rapidly in the United States. This test quantifies the risk of recurrence and the likelihood of chemotherapy benefit, allowing physicians and patients to make individual-ized treatment decisions (“Genomic Health,” 2008, p. 201).In some cases, a cancer has metastasized, but the location of the primary cancer is •unknown. Current technology to locate the primary cancer is difficult, expensive, and often unsuccessful. It now appears that gene expression may provide a way to solve this problem by determining the type of tissue from which the cancer originated (Dumur et al., 2008).

Gene-expression technology is being developed for some noncancer uses as well. Cur-rently, heart-transplant patients must undergo regular endomyocardial biopsy to screen for acute rejection of the transplant. This procedure presents various problems: It is invasive, com-plex, expensive, and prone to complications. It can also cause discomfort, support variable interpretations, and lead to late detection of rejection. Gene expression may soon make it pos-sible to perform this screening in a noninvasive manner (Cadeiras et al., 2007). Similarly, it may soon enable blood-based screening for Alzheimer’s disease as well as breast cancer (Adis International, 2005).

Technical Description of Gene Biochips. Using a biochip to analyze genes requires a system of several integrated components:

disposable probe arrays containing genetic information on a chip•reagents• 5 for extracting, amplifying, and labeling target nucleic acidsa fluidics station for introducing the test sample to the probe arrays•

5 A substance used in a chemical reaction to detect, measure, examine, or produce other substances.

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a hybridization oven for optimizing the binding of samples to the probe arrays•a scanner to read the fluorescent image from the probe arrays•software to analyze and manage the resulting genetic information (Affymetrix, 2007a).•

The first of these components, the probe arrays, can be manufactured in two principal ways: by using (1) photolithographic techniques and (2) bead-array technology involving 3 micrometer (µm) diameter silica beads.

Photolithographic Techniques. Affymetrix is the company currently using this approach. It derives its photolithographic techniques from the semiconductor industry. The general idea is to attach to a small area of a glass chip many copies of the DNA sequences required for detecting the target organism(s).

Photolithography uses light to create exposure patterns on the chip and direct chemical reactions. The process begins by coating the chip with light-sensitive chemical compounds that prevent chemical coupling (i.e., they keep any molecule from attaching to the chip). These compounds are called protecting groups. Lithographic masks consist of predetermined, trans-parent patterns etched into a glass plate that either block or transmit light; these are used to selectively illuminate the chip’s glass surface. Only those areas exposed to light are left unpro-tected (i.e., become sticky) as the light-sensitive protecting groups are removed. In this way, those unprotected areas are activated for chemical coupling (i.e., readied so that designated molecules or building blocks can be attached).

The entire surface of the chip is then flooded with a solution containing the first in a series of DNA building blocks (A, C, G, or T).6 Enzymatically mediated coupling occurs only in those areas that have been left unprotected through illumination. Each copy of the new DNA building block that has been attached also bears a light-sensitive protecting group (i.e., additional building blocks cannot be attached) so that the cycle can be repeated for the next building block.

This process of exposure to light and subsequent chemical coupling can be repeated many times on the same chip to generate a complex array of DNA sequences of defined length. These sequences can then act as probes. The intricate illumination patterns allow one to build high-density arrays of many diverse DNA probes in a very small area. By extracting and labeling nucleic acids from experimental samples and then hybridizing those prepared samples to the array, the amount of labeled nucleic acid at each location on the array can be determined with a scanner using a high-intensity light source.

Bead-Array Technology Involving 3 µm–Diameter Silica Beads. Illumina is the company currently using this approach (Illumina, 2008, pp. 219–220). Each bead is covered with hun-dreds of thousands of copies of a specific nucleic-acid sequence, or an oligonucleotide. Microw-ells are etched onto one of two substrates, which can be either fiber-optic bundles or planar silica slides. The silica beads self-assemble in the microwells at a uniform spacing of 5.7 µm.

The beads are not placed in any specific spot in the array; rather, after they have attached themselves to the substrate, they are decoded. This involves sequential hybridization (i.e., joining) of each target oligonucleotide with a decoder oligonucleotide that is its perfect match. The decoder oligonucleotide contains a fluorescent dye that allows the position of each bead in the array to be ascertained. This process allows for quality control because it verifies that

6 These are the four bases that make up the DNA substructure. A is adenine, C is cytosine, G is guanine, and T is thymine.

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the bead containing a specific target oligonucleotide is present and functioning in the array. Indeed, this method allows for high redundancy, because a bead with each target oligonucle-otide is present in the array, on average, 15 to 19 times.

When an extracted nucleic-acid sample is added to the array, the nucleic-acid molecules bind to their matching molecule on the coated bead. The molecules either in the sample or on the bead are labeled with a fluorescent dye either before or after binding takes place. The fluorescent dye is detected by shining a laser on the array. With the laser, the molecules can be detected, resulting in a quantitative analysis of the sample. An array can detect more than 1 million targets.

Biochips to Analyze Proteins. Biochips can also be used to detect various proteins in a manner broadly similar to that used to detect genes (DNA and RNA). However, protein bio-chips have to overcome challenges that do not apply to gene biochips (Sage, 2004):

There might be as many as 1 million different human proteins, compared with only •30,000 or so human genes.The human-genomics project has identified all human genes, whereas most human pro-•teins remain unknown.Protein biochips must be able to detect proteins in low abundance despite the lack of an •amplifying technology, such as PCR. Therefore, capture agents must have at least nano-molar (10–9 moles) affinities for proteins. But the development of capture agents can be lengthy and costly.7

These biochips must cope with the wide range (up to 8 orders of magnitude) of levels of •protein expression (i.e., activity rate).Protein biochips must also have surfaces that immobilize capture agents without causing •changes to the protein’s structure that would interfere with its normal interactions.Capture agents must interact with specific ligands (i.e., the type of proteins one wants to •detect) without cross-reacting with others.

For all of these reasons, biochips that detect proteins are not as well developed as those that detect genes. But progress is being made.

Protein biochips have a variety of promising applications:

Applications in which antibodies play a key role: • Not only can antibodies be used as capture agents on the arrays, but also the ability to detect auto-antibodies8 in serum samples can be used to identify allergies or autoimmune diseases (Harwanegg and Hiller, 2005).Detection of cytokines: Cytokines • are small, regulatory proteins produced by various cell types. They function as intercellular, chemical messenger proteins. Examples include interleukins, interferons, tumor-necrosis factors, growth factors, colony-stimulating fac-tors, and chemokines. Cytokines act as external controlling elements in hematopoiesis. They also mediate and control immune and inflammatory responses. It has been recently shown that a protein biochip can be used to simultaneously detect and quantify, at a high

7 This means that a capture of merely a nanomole of the protein in question is sufficient for its detection.8 An auto-antibody is an antibody (a type of protein) manufactured by the immune system that is directed against one or more of the individual’s own proteins.

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level of sensitivity, 12 circulating human cytokines in samples (FitzGerald, McConnell, and Huxley, 2008).Detection of kinases and their substrates: • A protein kinase is an enzyme that modifies other proteins by chemically adding phosphate groups to them. Phosphorylation usually results in a functional change of the target protein by changing enzyme activity, cellular loca-tion, or association with other proteins. Up to 30 percent of all proteins may be modified by kinase activity. Kinases are known to regulate the majority of cellular metabolic path-ways. The human genome contains at least 500 protein-kinase genes; these may constitute 2–4 percent of the total number of genes in a human body. Disregulated kinase activity can cause diseases that include cancer. Recently, it was shown that an SNP associated with a kinase resulted in a higher risk of stroke (Kubo et al., 2007). The company Invitro-gen has developed a biochip that allows thousands of proteins to be screened as potential targets of specific kinases (Schweitzer et al., 2004).Detection of pathogens that pose a biothreat: • These pathogens include hemorrhagic-fever viruses, poxviruses, anthrax, smallpox, and plague (Invitrogen, 2006).

Lab on a Chip. The third type of biochip on the horizon is the lab on a chip. This tech-nology offers the ability to perform laboratory operations on a small scale using miniaturized devices. This presents many advantages:

Small volumes reduce the time required to synthesize and analyze a product.•The unique behavior of liquids at the microscale allows greater control of molecular con-•centrations and interactions.Reagent costs and the amount of chemical waste can be much reduced.•Compact devices have the potential to allow samples to be analyzed at the point of need •rather than in a centralized laboratory.

Microfluidics is key to lab-on-a-chip technology (Whitesides, 2006). This is the science and technology (S&T) of systems that process or manipulate small (10–9 to 10–18 liters) amounts of fluids, using channels with dimensions of tens to hundreds of micrometers. A microfluidic system must have a series of generic components: (1) a method of introducing reagents and samples (probably as fluids, although ideally with the option to use powders as well), (2) meth-ods for moving these fluids around on the chip and for combining and mixing them, and (3) various other devices, such as detectors for most microanalytic work and components for purification of products for systems used in synthesis.

Labs on a chip can be put to multiple uses:

Screening various chemical conditions to find those that will permit protein crystallization:• This is the most highly developed application to date. To understand protein function, one must know not only the protein’s composition but also its three-dimensional struc-ture. This can be determined only by X-ray diffraction studies of protein crystals. Labs on a chip have now been produced that permit 1,300 crystallization trials in only 20 minutes (L. Li et al., 2006). These trials can even be performed on membrane proteins, which are the hardest proteins to crystallize.Aiding in screening during drug development: • This application seems to hold much prom-ise. In recent years, pharmaceutical companies have relied on high-throughput screening

92 The Global Technology Revolution China, In-Depth Analyses

(HTS) to discover potential new drugs. But the trade-off has been lower data quality and increased complexity of assays. Systems using microfluidics can allow scientists to per-form assays with greater experimental control and sophistication, resulting in high-quality data (Hrusovsky and Roskey, 2004). A variant of the lab on a chip is the data-analysis toxicology-assay chip. This chip contains human cells and can be used to screen potential new drugs for possible side effects (M.-Y. Lee et al., 2008). This technology could end the need to test new drugs on animals. At the same time, it could allow scientists to screen for side effects early in the drug-development process, before expending significant effort on drug candidates.Conducting various forms of bioanalysis• (Sia and Whitesides, 2003): These forms include immunoassays, enzymatic assays, and electrophoresis. Labs on a chip permit single cells to be examined and manipulated in a range of ways (Yue and Yin, 2006; Wheeler et al., 2003). They also enable individual molecules to be manipulated and measured (Craig-head, 2006).

A lab on a chip also offers advantages in performing some organic syntheses. Compared with conventional flow-through systems, a lab on a chip can better control cross-contamination of reagents and side reactions and produce higher overall yields. Their utility has already been demonstrated in the preparation of organic compounds bearing short-half-life radioactive iso-topes. These compounds are used for positron emission tomography (Chung-Cheng Lee et al., 2005).

Market Overview

The development of biochips is having important effects on biological research. There is every reason to think that their importance will continue to grow. The most-extensively developed biochips to date are those that perform nucleic-acid analysis. They have already led to signifi-cant discoveries, and the technology for these gene biochips continues to advance at a very rapid pace. Illumina’s product catalog in 2006–2007 contained 146 pages. In 2008, the size of the catalog nearly doubled, to 264 pages.

Indeed, the technology for rapid bioassays in general is advancing so fast that TBNA and TEDA should not expect to beat their competitors head-to-head by making technological improvements. Instead, we recommend that TBNA and TEDA companies license the technol-ogy for the Chinese market. This approach will create ample financing options not available to high-tech start-ups whose survival hinges on having the best technology. A high-tech start-up aiming to become a leader by improving technology requires a high initial outlay of capital and involves a much riskier and longer-term payback on an investment.

In contrast, a licensee can sell equipment and services, recoup its investment, and earn a profit quickly. Investors of all types will understand the benefit of this sort of licensing arrange-ment. TBNA, TEDA, and Chinese government sources could finance rapid bioassays, as they have many other ventures based in TEDA. But private-sector investors in China, who are likely to have confidence in lower-risk, fast, and sizable returns on their investment, may also find such ventures to be attractive investments.

Additional benefits of this approach for TBNA and TEDA are that rapid bioassays have a potentially high sales volume and that the licensing option would make the venture suitable for raising initial capital in foreign markets.

Rapid Bioassays 93

Currently, the main market for rapid-bioassay devices is still for basic research rather than medical treatment. A recent editorial in the New England Journal of Medicine, for example, contended that it is premature to consider replacing Pap testing for cervical cancer with DNA biochip testing, arguing that further testing of DNA biochips is required (Runowicz, 2007). Both Illumina and Affymetrix continue to see their primary market as researchers, not cli-nicians (see, e.g., Affymetrix, 2007a, p. 3). In this regard, devices for rapid bioassays can be sold to the research laboratories of pharmaceutical companies,9 universities, and government research centers in public health,10 environmental protection, food safety,11 and even forensics and criminology.

But while companies in the field share the same market, as we have seen, the technology they use to create biochips can differ from company to company. Affymetrix employs photo-lithography to manufacture its gene biochips, for example, whereas Illumina uses bead-array technology. Which of these technologies will eventually become dominant is unclear. Indeed, in the future, both could be replaced by some other as-yet-unknown technology. Nor is tech-nology the only uncertainty.

Under these circumstances, attempting to pick technology winners would be inadvisable. Although Tianjin Biochip Corporation (TBC) has already partnered with Affymetrix, that company may not be a survivor. A patent-related lawsuit between Affymetrix and Illumina was settled in early February 2008, with Illumina winning an award from Affymetrix of $90 mil-lion (“Affymetrix,” 2008; “Illumina,” 2008). Investors apparently feel that Illumina has better prospects, as its stock price rose from $40 at the beginning of 2007 to $79.01 at the end of April 2008. In contrast, the price of Affymetrix stock dropped in the same period from $25 to $10.68 per share.

Under license from leading companies in the field worldwide, TBC and other existing or new TBNA and TEDA companies would have a range of options both in the local and the larger Chinese markets:

Resell biochip scanners.•Provide maintenance and repair for the scanners.•Manufacture the disposables required to use nucleic-acid biochips, such as probe arrays •and reagents.Serve as laboratories for smaller research centers, either testing specimens for clients or •scanning and analyzing the test data on collected biochips sent back to TEDA by clients. The concept of a centralized laboratory at TEDA to serve clients throughout the Chinese market could work in cases in which the scanning equipment is expensive, experienced technicians are required, the biochips and other disposables are inexpensive to transport, and test results are not time-sensitive.

9 Rapid bioassays can aid in drug development by screening for drug side effects and allowing better data to be gained from high-throughput screening.10 Rapid bioassays can make an important contribution to China’s serious need for better access to safe drinking water by enabling water samples to be screened for disease organisms.11 Rapid-bioassay applications that enable food to be tested for the presence of disease organisms or genetically modified components would be of interest to food producers and packagers.

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Given all of the potential medical applications, eventually another market might be for clinical medicine. The end users for these devices would be hospitals, clinics, doctors’ offices, rehabilitation centers, and long-term-care facilities.

Relevant Capacity Available to TBNA and TEDA

TBNA and TEDA’s capacity in the area of rapid bioassays resides in TBC. Founded in 2003, TBC is one of five national biochip research and development (R&D) centers funded by the National High Technology Research and Development Program of China (863 Program). More importantly, “TBC is the only base devoting itself to the research and development of pathogenic microorganism detection biochips, and also the outsourcing base for technical ser-vices in biological medicine” (TBC, undated).

The company’s current biochip products include diagnostic kits to detect the following:

pathogenic bacteria in blood and the intestinal tract•Shigella•Pneumococcus•group B Streptococcus•bacteria in milk powder•sexually transmitted diseases•Escherichia coli• strains responsible for diarrhea and edema disease in weanling pigs.12

Food safety is one of the key focuses of this effort.TBC has partnered with the U.S. company Affymetrix, a global leader in the biochip

field, notwithstanding its recent stock-price drop. By installing Affymetrix’s GeneChip® Scan-ner 3000, TBC can now provide gene-expression profiling and SNP-detection services in China. TBC has also installed the SpotArray 72 produced by PerkinElmer. This permits TBC to produce its own biochips.

TBC also provides diagnostic antisera that can be used to detect Escherichia coli, Shigella, and Salmonella. TBC’s other products are reagents and other disposables,13 including a PCR product-purification kit, a total RNA-extraction kit, and glass slides.

Drivers and Barriers

In Chapter Three, we identified eight factors that we believe encompass the most-significant drivers and barriers for TBNA in developing and implementing the seven selected TAs. We now discuss how those factors may influence TBNA’s development and implementation of rapid bioassays.

China’s need for improved public health and reduced environmental impact will be a driver for rapid bioassays. Of particular importance is the need to improve the quality of Chi-na’s water supply. According to Zhai Haohui, vice minister for water resources, one-third of

12 For some examples of their work, see Yayue Li et al. (2006) and Han et al. (2007).13 In the analysis of this technology, we include the consumables in the disposables.

Rapid Bioassays 95

China’s rural population—about 360 million people—lack access to safe drinking water (Lim, 2005). Rapid bioassays can be used to identify sources of pathogens and other microorgan-isms that make water unsafe to drink and can be used to monitor and assess the effectiveness of mitigation measures. In the public-health arena, TBC is developing and implementing bio-assay methods for clinical testing applicable to samples of blood and milk powder, including tests for 166 serotypes of E. coli, as well as pathogens responsible for strep, staph, pneumonia, and emerging infectious diseases, such as shigellosis, and is providing hospitals with bioassays for cancer detection (Cao, 2007).

China’s national R&D policies will be a driver. Health, medicine, and biotechnology have long been focus areas in China’s R&D programs, and the recent emphasis on development of a commercial biotechnology sector is building on that momentum (Frew et al., 2008).

Other national policies, in particular the need for better regulation of food and drugs, may be a driver, because the ability of rapid bioassays to identify harmful microorganisms in food and drugs can facilitate this regulation. Experts say that the Chinese pharmaceutical industry has been mired in corruption for years. For example, journalists have reported that corrup-tion is responsible for numerous environmental, public-health, and public-safety disasters (Pei, 2006). According to David Zweig, a professor at the Hong Kong University of Science and Technology, food and drugs are underregulated in China (Barboza, 2007). However, mount-ing international criticism of the quality and safety of Chinese foods and drugs appears to have heightened the government’s interest in tackling corruption so as to avoid damaging China’s export business.14 Since 2002, the Chinese government has handed out severe sentences to a number of high-ranking officials at the State Food and Drug Administration, the Zhejiang Provincial Drug Administration, and other agencies. The most striking example was the execu-tion of Zheng Xiaoyu, the former head of China’s State Food and Drug Administration, who was convicted of taking numerous bribes to approve products (Barnes, 2007).

Intellectual property rights (IPR) protection remains a barrier in China both to indigenous innovation and to the involvement of foreign capital and talent in innovative R&D and ven-tures (see, e.g., Davies, 2006; OECD, 2008). TBNA enforcement of existing laws would con-tribute momentum to what has been described as an improving situation (S. Jang, 2007).

Finance and banking laws and regulations remain a barrier in China. The Organisation for Economic Co-Operation and Development (OECD) concluded that, while the situation is improving, much more remains to be done to have the robust, transparent, and trusted laws and regulations necessary to draw capital from global sources for cutting-edge R&D and innovation (OECD, 2008). Frew et al. (2008) point out that the unfavorable investment climate is the major factor impeding the growth of the health biotechnology sector in China. More specifically, TBC’s partner, Affymetrix, built a plant in Asia—specifically, in Singapore (Affymetrix, 2007b).

Human capital should be a driver for TBNA, although TBNA’s proximity to the grow-ing metropolis of Beijing will provide strong competition for talent. The current workforce in TBNA, TEDA, and the Tianjin municipality more broadly provides a ready source of skilled labor with manufacturing experience, although the current trend in China for students to attend universities rather than technical and vocational schools (T. Fuller, 2005; Wiseman,

14 In late June 2007, the U.S. Food and Drug Administration blocked imports of some Chinese seafood, including shrimp, catfish, and eel, after seeing a sharp rise in the amount of Chinese seafood tainted with carcinogens and excessive antibiotic residues (Barboza, 2007).

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2005; “Chinese Manufacturing Slowed by Skilled Worker Shortage,” 2002; “China in Seri-ous Shortage of Skilled Workers,” 2004) will be a challenge for TBNA as it ramps up pro-duction. China’s central government recognizes the problem and has taken steps to address it (J. Wu, 2006). Access to university graduates in the Tianjin municipality and in Beijing, especially those with science and engineering (S&E) backgrounds may be able to provide the needed R&D staff. TEDA has recognized the importance of attracting such talent locally, from elsewhere in China, and internationally, and has established incentive programs.15 TEDA has already demonstrated scientific capability relevant to this TA by publishing world-class research.16

The development of a culture of R&D and innovation remains a barrier for TBNA, as it is for other organizations in China that seek to develop into state-of-the-art S&E centers (CAS, 2006). For both its existing and new initiatives, TBNA should encourage risk-taking and flexibility to change course as dictated by technical, economic, political, and market developments.

A Possible Path Forward

The suggested long-term goal is for TBNA to become a leading player in the global market-place for state-of-the-art rapid bioassays. We propose that it work toward this goal through a staged plan in which the initial focus is on attracting leading companies through licensing and partnership agreements. During this stage, TBNA and TEDA would build up their capabili-ties as a reseller and then a producer of state-of-the-art bioassay disposables and equipment. Under this strategy, the initial market focus would be for the Chinese domestic market, with the eventual aim of manufacturing in TBNA and TEDA for the global market.

More specifically, we suggest that TBNA and TEDA take the following actions:

Identify leading companies worldwide in the field of rapid bioassays for possible licensing •and partnership agreements. For example, consider expanding existing relationships with Affymetrix and PerkinElmer and pursuing licensing agreements with Illumina, Gen-Probe, Genomic Health, and Invitrogen.Prepare a business plan built on a licensing strategy. TBNA and TEDA companies should •initially target the market in TBNA and the Tianjin municipality, then expand to the Chinese market as a whole. They should begin by providing specimen testing and col-lected-biochip reading and analysis from a centralized site in TEDA. After these services are well established in the TEDA location, they should set up service centers in large Chinese cities—either unilaterally or in partnership with other Chinese companies—to shorten the response time and capture the market segment for time-sensitive testing as well. The initial focus should be on reselling equipment and disposables. The next should be on producing disposables. Then, TBNA and TEDA companies can start to produce

15 These include incentives to enterprises and to individuals to bring in Ph.D. graduates, as well as awards for outstanding performance. For details, see Chapter Three.16 As just one example, researchers in TEDA’s biological laboratories have published the complete genome of a thermophilic bacillus found in a deep oil reservoir in Northern China (see L. Feng et al., 2007).

Rapid Bioassays 97

equipment for domestic consumption. Finally, licensers should decide whether to manu-facture in China for sales worldwide.Make the business plan known to the 25 universities and 140 research institutes in TBNA, •TEDA, and the Tianjin municipality so that they can educate and train professionals for this venture.Encourage TBC to significantly broaden the number of companies with which it part-•ners. TBC should structure agreements so that some companies can be dropped and others added as the technology for rapid bioassays develops. This strategy will allow TBC to avoid getting locked into a single technology that could rapidly become obsolete. It will add expense because each partner company will have its own equipment. But TBC may be able to lease this equipment instead of purchasing it.

99

ChApTeR SeVen

Membranes, Filters, and Catalysts for Water Purification

Achieving adequate access to clean water is one of the greatest challenges that any country faces today (Elimelech, 2006). This challenge is growing as populations enlarge, development increases demand, and existing water supplies are overdrawn. China faces one of the most severe water-scarcity challenges in the world (see, e.g., J. Ma, 2004). Ensuring that its citizens have access to a supply of safe water will be critical to China’s development.

One way to improve access to clean water is to develop and implement technologies for water purification (Service, 2006). Such technologies could provide clean water for residential, industrial, commercial, and agricultural applications. The key challenge involved is achieving adequate water quality at an economically feasible cost (Shannon and Semiat, 2008). Mem-branes, filters, and catalysts are emerging technologies that could enhance the effectiveness of water-purification methods and help meet this challenge.

Importance to TBNA and TEDA

China was recently listed as one of the world’s top five growth markets for water and wastewater technologies (“Report Highlights Growth Markets for Water Technologies,” 2008). Located in a region where water is scarce, TBNA has a pressing need for technologies that will enable it to use water resources as efficiently as possible, especially in the industrial and residential sectors (Y. Zhou and Tol, 2005). By pursuing water-purification technologies, TBNA and TEDA can address the growing need for access to clean water in China while positioning themselves at the forefront of an important, emerging area of science and technology (S&T).

Current Scientific and Market Status and Future Prospects

Emerging technologies for water purification have four principal applications:

desalination:• removing salt and other matter from sea or brackish watersdisinfection:• removing microorganisms from waterdecontamination:• removing toxic compounds from waterquality assurance:• detecting potentially harmful matter in water.

Of these applications, desalination warrants special comment. The capacity to desalinate seawater has expanded continuously in the past decades. In the Middle East, where energy costs are relatively low, thermal desalination processes tend to dominate. But elsewhere, reverse

100 The Global Technology Revolution China, In-Depth Analyses

osmosis—a process that forces salt water through semipermeable membranes, removing salts and leaving the water pure—is commonly used (Y. Zhou and Tol, 2004). Reverse osmosis is increasingly the preferred method for desalination, due largely to improvements in membranes, which, in turn, have led to a substantial reduction in costs (Voutchkov, 2007a). The capital investments needed to build a reverse-osmosis plant are considerably lower than those required for thermal alternatives. It is important to note, however, that thermal processes can become significantly more cost-effective when included in cogeneration applications, which make use of waste heat from other processes (Junjie Yan et al., 2007; Lin Zhang et al., 2005).

A key decision in reverse-osmosis plants concerns what types of membrane technolo-gies to employ. The most-common materials used for reverse-osmosis membranes are aromatic polyamides. Charged chemical groups in these polymers assist by repelling salt ions. Mean-while, neutral water molecules are absorbed by the nonporous surface of the membrane and diffused to the purified-water side of the membrane (Service, 2006).

The key trade-off for using membranes in desalination is balancing selectivity with flux (i.e., throughput) (Vainrot, Eisen, and Semiat, 2008). Membranes designed to increase the rejection of salts tend to do so at the cost of decreased flux. Likewise, membranes that increase flux do so at the cost of decreased selectivity. The challenge that researchers face is to develop new materials to create membranes that can increase both salt rejection and flux. In addi-tion, the environmental effects of desalination must be carefully assessed. Water intakes can threaten marine life, and brine disposal can pose broader threats to the ecosystem (Cotruvo, 2005; Voutchkov, 2007b).

TBNA and TEDA are located near the coast, which makes reverse-osmosis desalination of seawater a potentially strong component of their water-management strategies. Whether they should view this as an attractive investment depends on the current and future cost struc-tures of operating a reverse-osmosis plant.

Estimates indicate that it would be economically advantageous for China to invest in desalination if desalinated water could be provided at a cost of $1.00 or less per cubic meter (m3). However, government subsidies have kept the price of water significantly lower (e.g., $0.313/m3 in Tianjin for domestic use in 2003) (Y. Zhou and Tol, 2003). Thus, the potential attractiveness of desalination technologies for TBNA and TEDA will depend not only on advances in the technologies but also on the future status of government water subsidies.

The full range of emerging technologies for water purification includes the following:1

membranes•chlorine-resistant membranes –thin-film nanocomposite membranes –biomimetic membranes –

filters•fibrous media –carbon nanotubes –nanoporous ceramics –

1 The terms membrane and filter are sometimes used interchangeably, since membrane signifies a thin, sheet structure, while filter refers to the function that the structure provides (e.g., removal of contaminants from water). Under the discus-sion of filters later in this chapter, we accordingly use membrane to describe the structure of certain filters.

Membranes, Filters, and Catalysts for water purification 101

catalysts•nanocatalytic materials –trace-contaminant detection. –

Each of these emerging technologies addresses at least one of these four principal applications, as shown in Table 7.1.

The following sections describe the current status and future prospects for each of the tech-nologies shown in Table 7.1. A number of promising alternative methods for reverse-osmosis desalination, not shown in Table 7.1, are also discussed in a separate section.

Membranes

Chlorine-Resistant Membranes. Susceptibility to biofouling constitutes a considerable challenge for processes that use reverse-osmosis membranes to desalinate seawater. Biofouling occurs when organic materials, which are deposited on the surface of the membrane during use, accumulate over time and degrade the membrane’s ability to permeate water (Heng et al., 2008). Biofouling can be addressed by treating the water with chlorine, but this tends to cause the membrane surface itself to degrade (Henthorne, 2007).

Researchers have studied the effect of materials used to fabricate aromatic polyamides on the chlorine resistance of reverse-osmosis membranes. Membranes with enhanced chlorine resistance might be able to be produced by selecting optimum material properties for fabri-cation in a particular application (Shintani, Matsuyama, and Kurata, 2007). For example, Woongjin Chemical (formerly Saehan Industries; see “Saehan = Woongjin,” 2008) has devel-oped membranes that show a fivefold increase in chlorine tolerance (“A Chlorine-Resistant RO Membrane,” 2007).

Thin-Film Nanocomposite Membranes. Researchers at the University of California, Los Angeles (UCLA), have developed a thin-film nanocomposite membrane that can be used for desalination. The process disperses superhydrophilic nanoparticles onto a conventional reverse-osmosis membrane. The resulting membrane has twice the permeability of its traditional counterparts, with comparable rejection profiles and enhanced fouling-resistant characteris-tics (Jeong et al., 2007). NanoH2O is engaged in commercializing this technology, which could become available by 2009 (“Nanoparticles Boost Water Treatment,” 2007). The cost of manufacturing these thin-film nanocomposite membranes is expected to be similar to that

Table 7.1Water-Purification Applications Addressed by Emerging Technologies

TechnologyReverse-Osmosis

Desalination Disinfection DecontaminationQuality

Assurance

Chlorine-resistant membranes, thin-film nanocomposite membranes, biomimetic membranes

x

Fibrous media x x x

Carbon nanotubes x x

nanoporous ceramics x

nanocatalytic materials x

Trace-contaminant detection x

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of traditional reverse-osmosis membranes (“Today’s Seawater Is Tomorrow’s Drinking Water,” 2007).

Biomimetic Membranes. Biomimetic membranes (in this case, designed to mimic the function of kidneys) have been sought as a potential technology to vastly improve membrane efficiency (Bowen, 2006). Researchers at the University of Illinois at Urbana-Champaign have recently developed biomimetic membranes that show a tenfold increase in flux over traditional membranes (“Biomimetic Membrane Announced,” 2007). The process integrates a protein, aquaporin Z, into a self-assembled polymer to yield a membrane with enhanced flow charac-teristics. While this process shows promise, its commercial application is likely at least a decade away (“Kidney-Like Membrane Boosts Desalination,” 2008).

Filters

Fibrous Media. This technology has several applications: desalination, disinfection, and decontamination.

Reverse-Osmosis Desalination. Fibrous media have been used for many years in water purification as a pretreatment. Such pretreatment strategies seek to reduce, to an acceptable profile of components, the concentrations of larger contaminants in the feedwater. Fibrous nonwoven filters have randomly arranged fibers with an average size of 1 µm. These filters act as a first stage to prepare feedwater for the more sensitive, but also more selective, membranes downstream. There are alternatives to using a fibrous nonwoven filter as a pretreatment process (e.g., flocculation, sedimentation, sand filtration). However, some evidence suggests that these filters can provide considerable cost savings.

Theoretically, a fibrous nonwoven filter could be used in a one-step process to remove salt and other contaminants from seawater. But development of this technology has not yet come close to reaching that potential for several reasons. First, the average pore size on these filters is currently too great to remove all necessary contaminants. Second, contaminants become trapped in the filter and cannot be easily removed, causing filters to need replacement. Third, the rejection profiles of contaminants cannot be precisely characterized due to the random arrangement of fibers. Research aimed at developing nonwoven fibrous filters on a smaller scale could enhance their usefulness in water-purification applications.

Nanofibers have been produced with greatly enhanced properties. The use of nanofibers reduces a filter’s average pore size. This is done, in part, by adding more layers to the filter, com-pacting the media. Researchers have developed several methods to functionalize nanofibers to aid in separation processes (Kaur et al., January 2008). One group has pursued surface modi-fication by exposing membranes to plasma before polymerization. This creates an asymmetric membrane with smaller pores on the surface and improved flux capacity. Researchers have also performed surface modifications to develop three-tiered functional membranes. Composite membranes have been developed with a nonporous, hydrophilic, nanocomposite coating top layer; a nonwoven, nanofibrous middle layer; and a nonwoven, microfibrous support layer. These composite membranes offer increased flux while maintaining rejection characteristics that are similar to conventional membranes. In addition, they appear to be more resistant to fouling. However, whether they are sustainable in larger-scale applications over longer periods has yet to be determined (Xuefen Wang et al., 2005).

Disinfection. Another approach to functionalizing filters is to use electromagnetic proper-ties to attract targeted materials. Argonide Corporation developed a commercial product called NanoCeram®, which infuses electropositive nanopowders into fibrous media. NanoCeram has

Membranes, Filters, and Catalysts for water purification 103

been shown to remove pathogens in the submicron range (Tepper and Kaledin, 2006). Nano-Ceram currently costs $1.00 per square foot (ft2) to produce. This is comparable to the cost of producing conventional filters. Moreover, Argonide estimates that it could reduce the future cost of production to $0.30/ft2 (Tepper, Kaledin, and Hartmann, 2005).

NanoCeram also has a capacity to hold several orders of magnitude more dirt than con-ventional filters can, which would substantially reduce the need to change filters. Recently, Argonide developed the NanoCeram-PAC™, which incorporates a powdered activated carbon to enhance the filters’ absorption efficiency (Argonide, undated).

Decontamination. Inframat Corporation has developed a functional nanofibrous mate-rial that it describes as having a bird’s nest superstructure (Inframat, undated). This bird’s-nest structure is composed of a manganese dioxide porous structure, which acts as a chemical catalyst to oxidize arsenic. The material is being explored as a means of removing arsenic from drinking water (“A Soak Cycle at Inframat,” 2004).

Carbon Nanotubes. This technology also has several potential applications.Reverse-Osmosis Desalination. Carbon nanotubes are being actively explored as a means

of revolutionizing the use of membranes for various applications, including water purifica-tion. Carbon nanotubes with pore sizes in the 1–2 nanometer (nm) range have been used to make filters in the laboratory. The fabrication process uses chemical-vapor deposition to form carbon nanotubes, which are subsequently blanketed by a chemical vapor–deposited silicon-nitride matrix. In the initial laboratory tests, only 1 atmosphere (atm) (100 kilopascal, or kPa) of pressure was required to move freshwater through a membrane formed in this way. While higher pressure would be required to move salt water through the membrane, the most impor-tant result of the experiment was that water was traversing the membrane at rates 1,000 times greater than predicted (Holt et al., 2006).

A group at the University of Kentucky developed an alternative method that grows a carbon-nanotube array via chemical-vapor deposition within a polymer material (Hinds et al., 2004). The resultant nanoporous membrane also displayed flow rates several orders of mag-nitude greater than predicted (Majumder et al., 2005). The key challenge in developing these promising lab-scale results into a commercially feasible product is scaling up the fabrication processes to produce adequate-sized membranes for applications (Sholl and Johnson, 2006).

Seldon Technologies (formerly Seldon Laboratories) is working to commercialize carbon nanotube–based products for water purification. The filters use a nanomesh composed of carbon nanotubes on a porous substrate (Meridian Institute, 2006). While nanomesh products are usually designed for point-of-use applications, such as providing clean water to soldiers in the battlefield, Seldon has sought to apply this technology to larger-scale desalination projects (Leahy, 2005).

Disinfection. Carbon nanotubes have also been explored as a potential means of disin-fecting water. The disinfection efficacy of single-walled carbon nanotubes was recently tested in aqueous solution with Escherichia coli bacteria (S. Kang et al., 2007). The results suggested that damage to E. coli cell membranes occurred from physical interaction with the single-walled carbon nanotubes. Carbon-nanotube membranes are also being pursued in research aimed at finding a cure for human immunodeficiency virus (HIV) (H. Zhu, 2008).

Nanoporous Ceramics. The Pacific Northwest National Laboratory (PNNL) developed a novel material called self-assembled monolayers on mesoporous supports (SAMMS™). This material is functionalized to remove metal contaminants, such as mercury and arsenic, from water (PNNL, 2008a). In mercury-absorbing applications, the material has been shown to

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absorb 99 percent of the target contaminant (“A Soak Cycle at Inframat,” 2004). The material surfaces can be tailored to remove various contaminant metals with high selectivity. SAMMS technology is available commercially through Steward Environmental Solutions for remov-ing mercury and other heavy metals, as well as for precious metal–catalyst recovery (PNNL, 2008b).

Catalysts

Nanoscale Catalytic Materials. Groundwater exposing the public to elevated levels of arsenic is a serious issue in China (G. Yu et al., 2007). Zerovalent iron has been used for more than a decade as a catalyst to treat groundwater for arsenic. Researchers have now enhanced its performance characteristics by using nanoscale zerovalent iron (NZVI) (Meridian Institute, 2006). NZVI catalyzes the absorption of toxic compounds and heavy metals (e.g., arsenic) into the soil, producing water in which the presence of those substances is reduced. Tests of NZVI for removal of arsenic have been conducted in Bangladesh and Nepal (Kanel et al., 2005). These tests have shown NZVI to have improved ease of application and achieved quicker reac-tion times than conventional material have.

There are currently several commercial producers of NZVI. PARS Environmental uses bimetallic nanoscale–particle (BNP) technology, OnMaterials produces Z-Loy™, Polyflon manufactures PolyMetallix™, and Toda America implements reactive nanoscale iron particles (RNIPs) (Gavaskar, Tatar, and Condit, 2005).

SolmeteX® has also developed a commercial product called ArsenXnp for arsenic removal. ArsenX uses hydrous iron-oxide nanoparticles deposited on a polymer substrate as an absorbent resin. This material absorbs arsenic and other heavy metals in water. ArsenX is manufactured by Purolite®, which recently started a research and development (R&D) facility in Zhejiang, China (“New R&D Facility to Be Start Up in China,” 2007). Graver Technologies makes a similar product, MetSorb™. Both ArsenX and MetSorb displayed adequate physical properties to allow the product to be shipped with minimal degradation of performance (North, 2005). Graver estimated that using MetSorb heavy metal–removal granules would cost between $0.10 and $0.50 for each 1,000 gallons of treated water (Graver Technologies, undated).

Trace-Contaminant Detection. It is crucial to be able to ensure that water has been puri-fied to a sufficient degree that any remaining levels of trace contaminants, such as heavy metals, pharmaceuticals, chemicals, and biological organisms, pass safety standards. Detecting these contaminants in water can be a costly endeavor. Functional deoxyribonucleic acid (DNA)–based nanoscale materials have demonstrated promising properties in this regard (Wernette, Liu, et al., 2008).

Specific classes of DNA have been shown to exhibit catalytic properties and the ability to bind to targeted molecules. This has enabled researchers to isolate specific functional-DNA classes to respond to targeted chemical or biological contaminants in water. Once the desired reactive DNA elements have been isolated, they must also be given a mechanism to transmit a message when they react to a targeted molecule. Typically, this is done through fluorescent sensors. Functional DNA can be labeled with fluorophores to enable fluorescent detection of the sensor when it reacts to the desired molecule. Such materials have been used to detect con-taminants, such as lead and mercury, to a high degree of sensitivity and selectivity (J. Liu and Lu, 2006a, 2007).

Membranes, Filters, and Catalysts for water purification 105

Researchers have also deposited functional DNA onto gold surfaces using a thiol-gold self-assembly method.2 This has the effect of decreasing the background fluorescence, and, thus, increasing the detection limit, by an order of magnitude (Wernette, Swearingen, et al., 2006). Additionally, functionalized DNA has been attached to gold nanoparticles to create colorimetric sensors that are easier to use, providing the possibility for residential applica-tions (J. Liu and Lu, 2005). These methods have also been used to develop tests for chemicals, including cocaine (J. Liu and Lu, 2006b). Yi Lu has started a company, DzymeTech, whose objective is to develop these technologies commercially (Dodson, 2006).

Alternative Methods for Reverse-Osmosis Desalination

Forward Osmosis. Forward osmosis is a process that relies on freshwater concentrated with a solute to draw seawater across a membrane. Various draw solutions are possible, but major challenges have been membrane efficiency and removal of solute after desalting occurs (Cath, Childress, and Elimelech, 2006). The key benefit of forward osmosis is that it requires low or no pressure to operate, thus lowering energy requirements. Researchers have explored design options to determine optimum membrane structures for forward osmosis (H. Ng et al., 2006).

Solar Desalination. Electric-power costs represent almost 50 percent of the total cost of a reverse osmosis–desalination plant for seawater (SNL, 2003). Accordingly, the ability to incor-porate renewable-energy technologies into desalination processes holds considerable potential for cost savings. There are two categories of technologies for solar desalination. The first cate-gory relies on the greenhouse effect to distill water. This approach has been used for small-scale domestic applications, especially in remote locations (Bahadori, 2005; Khanna, Rathore, and Sharma, 2008). Some researchers have enhanced cost-effectiveness by designing systems that use low pressure and temperature (Lalzad et al., 2006). Researchers have also examined inte-grating photocatalysts into distillation units to enhance efficiency and water quality (S. Patel et al., 2006).

The second category of solar desalination technologies uses photovoltaic (PV) cells to power a reverse-osmosis system. PV-based systems have been demonstrated to be capable of autonomously desalinating brackish water (Schäfer, Broeckmann, and Richards, 2007). Such demonstrations show promise for providing clean water to remote locations. Florida Interna-tional University’s Applied Research Center has conducted joint research with the U.S. mili-tary to develop a mobile solar-PV reverse osmosis–desalination unit to provide clean water for military operations, disaster recovery, and underdeveloped regions (“Solar Powered Purifica-tion Technology Unveiled,” 2007).

Wind Desalination. Wind turbines that can power reverse-osmosis installations have also been considered a renewable energy source to mitigate desalination costs (García-Rodríguez, Romero-Ternero, and Gómez-Camacho, 2001; NREL, 2006). As part of its Ecomagination initiative, General Electric (GE) has partnered with Texas Tech University to explore options for pairing reverse-osmosis systems with wind turbines (“GE Blows the Winds of Change with Renewable Desalination Research,” 2007). Researchers at the University of Massachu-setts Amherst have also sought to demonstrate the economic benefits of coupling wind power and desalination (Johnson, 2005).

2 Thiols are organic materials with an affinity for gold that assemble into structures that can be used as a template for the functional DNA.

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Nuclear Desalination. There are potential energy savings to combining desalination with nuclear-power plants. Joint plants are designed to make use of waste heat from the nuclear plant to assist in desalination processes (Megahed, 2001). Such plants are in use in Japan, Kazakhstan, and India (Misra and Kupitz, 2004).

Vapor-Compression Distillation. Many recent gains in the efficiency of desalination have come as a result of merging desalination technologies. Dais Analytic is currently testing one such new merged technology in Singapore. The process, called NanoClear™, uses a combina-tion of vapor-compression distillation and membrane separation to purify water (“Dais N-Still Product’s New Brand,” 2007).

Capacity Available to TBNA and TEDA

TBNA, TEDA, and Tianjin have substantial capacity in the areas of membranes, filters, and catalysts. TEDA is the home of Tianjin Motian Membrane Engineering and Technology Com-pany, which, for more than 20 years, has been manufacturing and supplying water-filtration membranes for industrial, personal, water-utility, and medical applications—including reverse-osmosis desalination. Motian is, in fact, currently serving the TEDA commercial market. For example, the company has a contract with McDonald’s to provide products for the food and beverage industry. It has sought to expand this relationship to provide services to all McDon-ald’s locations in China and Asia. During the severe acute respiratory syndrome (SARS) out-break in 2003, it provided filters to hospitals to treat wastewater, eliminating the need to use bleach (Tianjin Motian Membrane Engineering and Technology Company, 2007).

Motian uses conventional filters and, to our knowledge, does not have R&D in prog-ress on nanoscale materials or membranes. However, Tianjin University’s (TU’s) School of Chemical Engineering and Technology has a substantial R&D program in desalination led by Shichang Wang. This includes a demonstration project on desalination by flash evapora-tion and ongoing work on the design, fabrication, and testing of nanoscale filters for reverse osmosis (Shichang Wang, 2007). Moreover, the TEDA-based China National Academy of Nanotechnology and Engineering (CNANE) has the scientific and technical capacity to con-duct research on nanoscale filters and catalysts. Nanoscale filters for water purification and nanoscale catalysts for manufacturing are key areas in which the nanotechnology transfer and commercialization organizations based in TEDA (Nanotechnology Industrial Base Com-pany, or NIBC, and Nanotechnology Venture Capital Company, or NVCC) are active (Ce, 2007).

Drivers and Barriers

In Chapter Three, we identified eight factors that we believe encompass the most-significant drivers and barriers for TBNA to develop and implement the seven selected technology appli-cations (TAs). We now discuss how those factors may influence TBNA’s development and implementation of membranes, filters, and catalysts for water purification.

Due to the combination of economic and population growth in a region of water scarcity, China’s need to improve public and individual health and, in particular, the demand for clean water will be a driver for this TA. However, a mitigating factor is that implementing water-

Membranes, Filters, and Catalysts for water purification 107

purification schemes can require a substantial investment, although reverse-osmosis processes typically need considerably less capital investment than alternatives (Meridian Institute, 2006). Additionally, water that has been purified or produced by desalination will be more expensive to the end consumer, especially when compared with water for which the government subsi-dizes the price (Boberg, 2005). For these reasons, R&D opportunities in water purification typically target some aspect that will reduce costs.

China’s national R&D policies will be a driver. Water purification is one of the key national needs for which the central government has established funding for R&D.3 For example, within the Tianjin municipality, TU’s School of Chemical Engineering and Technology is developing nanoscale filters for water purification, as well as a desalination demonstration project (TU, 2003).

Other national policies, especially those aimed at providing clean water for the Chinese people, will be a driver. In particular, China has opened the water market to private compa-nies, including foreign investors, and has succeeded in attracting investment from large global firms, such as Veolia Environment and Suez Environment (S. Taylor and Leung, 2008).

However, intellectual property rights (IPR) protection remains a barrier in China both to indigenous innovation and to the involvement of foreign capital and talent in innovative R&D and ventures (see, e.g., Davies, 2006; OECD, 2008). TBNA enforcement of existing laws would contribute momentum to what has been described as an improving situation (S. Jang, 2007).

Finance and banking laws and regulations remain a barrier in China. The Organisation for Economic Co-Operation and Development (OECD) concluded that, while the situation is improving, much more remains to be done to achieve the robust, transparent, and trusted laws and regulations necessary to draw capital from global sources for cutting-edge R&D and innovation (OECD, 2008). TEDA’s nanotechnology venture fund (Ce, 2007) and the green venture-capital fund of Tsinghua University, Tsing Capital (P. Tam, 2007), are both potential sources of venture capital for TBNA.

Human capital should be a driver for TBNA, although its proximity to the growing metropolis of Beijing will provide strong competition for talent. The current workforce in TBNA, TEDA, and the Tianjin municipality more broadly provides a ready source of skilled labor with manufacturing experience, although the current trend in China for students to attend universities rather than technical and vocational schools (T. Fuller, 2005; Wiseman, 2005; “Chinese Manufacturing Slowed by Skilled Worker Shortage,” 2002; “China in Seri-ous Shortage of Skilled Workers,” 2004) will be a challenge for TBNA as it ramps up pro-duction. China’s central government recognizes the problem and has taken steps to address it (J. Wu, 2006). Access to university graduates in the Tianjin municipality and in Beijing, especially those with science and engineering (S&E) backgrounds, may be able to provide the needed R&D staff. Graduates of TU’s School of Chemical Engineering and Technology will be especially relevant for this TA. TEDA has recognized the importance of attracting such talent locally, from elsewhere in China, and internationally and has established incentive programs.4

3 See, for example, dedicated projects for water-pollution control and demonstration under the National High-Technology Research and Development Program of China (863 Program).4 These include incentives to enterprises and to individuals to bring in Ph.D. graduates and awards for outstanding per-formance. For details, see Chapter Three.

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The development of a culture of R&D and innovation remains a barrier for TBNA, as it is for other organizations in China that seek to develop into state-of-the-art S&E centers (CAS, 2006). For both its existing and new initiatives, TBNA should encourage risk-taking and flexibility to change course as dictated by technical, economic, political, and market developments.

A Possible Path Forward

The suggested long-term goal is for TBNA to become a center for R&D in nanoscale mem-branes, filters, and catalysts and in manufacturing state-of-the-art membranes for water purifi-cation, including those for reverse-osmosis and advanced desalination systems.

We suggest that TBNA and TEDA take the following actions:

Coordinate the ongoing R&D program at CNANE—as well as the technology-transfer •efforts of NIBC and the commercialization efforts of NVCC—with the R&D program at TU and Motian’s current commercial activities. Couple this with market assessments that will provide a driving force and direction for the research programs, especially con-cerning the needed performance levels and conditions for new membranes, filters, and catalysts.Establish and provide necessary funding for a program that provides for researchers from •TU and CNANE to spend time working in each other’s laboratories and at Motian. This cross-fertilization should facilitate each research group’s ability to build on the latest concepts and results wherever they might originate and should provide the industry with innovative ideas and concepts that can lead to new programs and products.Engage in discussions with the leading individuals, institutions, and organizations iden-•tified in this chapter. These discussions should be aimed at identifying opportunities for TBNA or TEDA to become a partner in the development of new membranes, filters, and catalysts, along with desalination programs and projects. Of particular interest might be the research groups at UCLA, PNNL, and the University of Illinois; Woongjin Chemical Company; and NZVI manufacturers SolmeteX and Graver.Develop the capacity to manufacture necessary components in TBNA and TEDA to •serve the growing demand for membranes, filters, and catalysts. The manufacturers and R&D groups must have strong relationships to enable commercialization of novel com-ponents. China currently faces strong competition from international leaders in produc-tion. As technologies improve worldwide, local manufacturing capabilities will need to improve continually to remain competitive.Monitor and address the potential environmental implications of increasing the ability •to desalinate water. Sustaining or improving the ecology will be an important factor in the continued growth of desalination (Lin Zhang et al., 2005). In this context, it may be worthwhile to consider colocating desalination plants with energy-production plants.

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ChApTeR eIGhT

Molecular-Scale Drug Design, Development, and Delivery

Advances in nanotechnology and biotechnology have revolutionized drug design, develop-ment, and delivery (see, e.g., Wagner et al., 2006). The ability to control and design drugs at the nanoscale has enabled scientists to develop new treatments and procedures that can now address previously intractable medical challenges. For instance, the intersection of nanotech-nology and biotechnology allows innovative drug therapies that combine the properties of nanoscale materials (such as increased solubility in the bloodstream and increased bioavailabil-ity) with state-of-the-art approaches to biological transport and function (Caruthers, Wickline, and Lanza, 2007). Bionanotechnology has also enhanced diagnostics. It makes it possible to perform higher-contrast magnetic resonance imaging (MRI) and more precisely locate and evaluate tumors and their vascular networks.

Importance to TBNA and TEDA

The field of nanomedicine is still very young, and its full potential is likely decades away. How-ever, this emerging technology application (TA) can be built on TBNA and TEDA’s existing scientific and technical capacity in nanotechnology and biotechnology, along with the planned life-sciences park. It could provide the impetus for the continued development of pharmaceu-ticals in TBNA and TEDA and could offer new treatment options for patients in TBNA, else-where in China, and around the world.

Current Scientific and Market Status and Future Prospects

Molecular-scale drug design, development, and delivery are focused on improving the ability of drugs to produce a desired effect while minimizing any unwanted consequences from the treatment. To achieve optimum performance, drugs must be delivered efficiently. Much of the research in this field focuses on developing technologies to advance this effort. The fundamen-tal objective of this research is to develop treatments that (1) can deliver the drug to a particu-lar site in the body, (2) minimize the needed dose, (3) achieve a desirable activity profile, and (4) avoid adverse effects.

Research is being actively pursued in four principal areas:

targeted carriers for drug delivery and imaging•controlled release•

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drug administration•solubility.•

Research Area 1: Targeted Carriers for Drug Delivery and Imaging

One of the most-promising areas of drug research is targeting drugs and imaging agents (i.e., materials that improve the quality of medical images, such as MRI contrast agents) to a par-ticular location in the body. It has particular potential to improve cancer treatment. Tradi-tional cancer treatment is inhibited because, in addition to affecting cancerous cells, it also indiscriminately damages noncancerous cells. Researchers have sought to develop drugs that will target a localized area to affect primarily elements that are cancerous. The ability to target treatment this way could greatly improve a drug’s efficacy and mitigate its toxicity. It even holds the potential to rescue drugs that had previously been abandoned because of concerns about toxicity. This is because lower concentrations may be used if the drug is targeted, and accompanying material that may be toxic is not required for the drug to be effective.

There are two broad classes of targeted drugs for cancer treatment: passive and active.Passively Targeted Drugs. Passively targeted drugs capitalize on two unique character-

istics of tumors: (1) permeable vascular structure (Senger et al., 1983) and (2) poor lymphatic drainage. These features allow drugs to enter the tumor structure and remain in place, a char-acteristic known as the enhanced permeability and retention effect. Because their size directly affects their ability to enter the vascular structure, nanocarrier platforms for drug delivery are believed to be most effective when they measure less than 200 nanometers (nm) in diameter (Peer et al., 2007).

Actively Targeted Drugs. Active targeting relies on the drug’s ability to recognize targeted cells (e.g., tumor cells) and selectively bind to them. This is achieved by attaching ligands to the drug that will bind to specific receptors unique to the surface of the target cells.

These nanocarriers can be designed in various ways. Carrier arrangements are composed of up to four key elements:

The • carrier platform carries the arrangement of materials to the targeted area of the body under the guidance of the targeting agent. It can possess properties to prevent the arrange-ment from degrading before it arrives at the targeted site and to control the release of medication once it has arrived.The • targeting agent is responsible for leading the carrier platform to the desired target site in the body (e.g., tumor site). Some commonly used targeting agents are aptamers, pep-tides, and folate. Aptamers are deoxyribonucleic acid (DNA) or ribonucleic acid (RNA) oligonucleotides that preferentially bind to target antigens. They are an attractive target-ing option because they have high targeting affinity and specificity, are highly stable, and do not provoke an immune-system response (Nimjee, Rusconi, and Sullenger, 2005). In 2004, the U.S. Food and Drug Administration (FDA) approved the first aptamer-based drug, pegaptanib (commercially sold as Macugen®), used to treat age-related macu-lar degeneration (Proske et al., 2005). Peptides have gained recent attention as target-ing agents, in part because of combinatorial library screening methods. Cilengitide is an example of a peptide undergoing clinical trials for treatment of lung and pancreatic cancer (Gu et al., 2007). Folate conjugates have been explored as targeting agents because tumors tend to overexpress folate receptors (Müller et al, 2006).

Molecular-Scale Drug Design, Development, and Delivery 111

Therapeutic agents • are the materials (e.g., drugs) that are released at a targeted site for treatment of a condition. They can be trapped inside or conjugated on the surface of the carrier.Imaging agents • provide or enhance a signal from the targeted site. For example, they can be used to locate a tumor.

The key element in targeting a particular site is selecting a targeting agent that is attracted to unique molecules on the target cells (i.e., molecules that are overexpressed), thus causing the carrier arrangement to bind preferentially to the target.

Therapeutic and imaging agents can use the same carriers and can even be used simul-taneously. A recent review describes nanocarriers (i.e., nanoscale carrier platforms) for cancer therapy, with associated commercial and clinical trial applications (Peer et al., 2007). While many nanocarrier designs incorporate hybrid approaches so that the choice of design is not straightforward, the primary design categories include the following:

polymers•liposomes•proteins•micelles•dendrimers•nanoshells•fullerenes•nanohorns•quantum dots.•

Polymers. Drugs and proteins can be delivered via designed polymeric materials. Poly-mers are the most commonly used material in drug design, most likely because many are bio-degradable and most biomolecules form polymeric structures. There are two broad approaches to loading polymers with drugs: conjugation and entrapment.

Polymeric drugs offer many possible design options, many of which involve synthetic versions of other types of carriers (Qiu and Bae, 2006). Because polymeric aspects of phar-maceuticals tend to enhance or synthetically imitate other carriers, we do not call out specific examples at this point. Instead, we discuss specific polymer applications in the appropriate car-rier subsections that follow.

Liposomes. Ordered arrangements of lipid molecules form a spherical structure that can entrap desired drugs. Targeting molecules can be incorporated onto the surface (Jesorka and Orwar, 2008).

Targeted-Delivery Applications. Liposome-based therapeutics are currently sold on the commercial market. Doxil®, produced by Ortho Biotech, is a commercially available polyeth-ylene glycol (PEG)–liposome therapeutic based on a compound called doxorubicin to treat ovarian cancer (Ortho Biotech, undated). Caelyx® and Myocet® are also commercially available doxorubicin compounds used to treat Kaposi’s sarcoma, ovarian cancer, and breast cancer. Onco TCS, produced jointly by Tekmira Pharmaceuticals and Enzon Pharmaceuticals, is a liposome therapeutic used to treat non-Hodgkin’s lymphoma. Daunorubicin is another com-mercially available liposome-based drug, marketed under the name DaunoXome®. DaunoXome is used to treat acquired immunodeficiency syndrome (AIDs)–related Kaposi’s sarcoma.

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DaunoXome has also been explored as a therapeutic for patients who have not responded to first-line treatments for leukemia (Clavio et al., 2004). In addition, liposomal daunorubicin has been attached to PEG (pegylated), resulting in lower toxicity, increased circulation time, and enhanced biodistribution (H. Song et al., 2006).

Imaging Applications. The imaging of liposomes has been explored to characterize their release profiles in vivo. Such research has been aimed at understanding the pharmacokinet-ics of liposomal therapeutics. Improving understanding of how the body processes various liposome-based therapeutics could be pivotal in determining their potential value and risks. Liposomes loaded with an MRI contrast agent have been used to study release profiles (Port et al., 2006). Liposomes have also been labeled with europium to study the biodistribution of liposome-based therapeutics (Mignet et al., 2006).

Proteins. Protein carriers can contain antibody fragments that target cancer cells and an immunotoxin or drug that kills the cancer cells (Kreitman, 2006).

Targeted-Delivery Applications. One immunotoxin, denileukin diftitox (commercially known as Ontak®) fused to a protein, has been approved in the United States for treatment of cutaneous T-cell lymphoma (CTCL), achieving a 30-percent response rate and 10-percent complete remission in the phase III trial (Pastan et al., 2007).

Many other immunotoxins are currently undergoing phase I and II trials. Abraxane® is a nanoparticle formulation of paclitaxel bound to albumin (i.e., water-soluble protein). By employing a formulation enabled to carry a protein, it can be used without solvents that can cause serious, dose-limiting side effects. Abraxane is FDA-approved for treatment of breast cancer and is currently undergoing phase III trials for treatment of lung cancer (Abraxis Bio-science, 2007).

Micelles. Micelles are self-assembled lipid monolayers with a hydrophobic core and a hydrophilic shell and can be loaded with drugs. They present an attractive opportunity for drug delivery because of their stability, biocompatibility, and ability to enhance the solubil-ity of poorly soluble pharmaceuticals (Torchilin, 2007). Polymeric micelles are a particularly promising platform due to the enhanced biodistribution that results from the controlled release and their lower toxicity.

Targeted-Delivery Applications. Currently, no micelle-based drugs are available commer-cially. However, various drugs that use micelles are undergoing clinical and preclinical trials. NK105 is an example of a polymeric micelle that has shown promise in delivering paclitaxel in phase I clinical trials (Hamaguchi et al., 2007). Another polymeric micelle is NK911, which encapsulates doxorubicin (Matsumura et al., 2004).

Micelles have also been explored for their potential to increase the solubility of hydro-phobic drugs. One example is indomethacin, an anti-inflammatory drug (Djordjevic et al., 2005).

Imaging Applications. Micelle-based systems have been explored for use in magnetic reso-nance angiography (MRA) applications (Anelli et al., 2001).

Dendrimers. Dendrimers are synthetic polymers with a branched structure capable of encapsulating therapeutics and targeting molecules (e.g., antibodies). Studies have shown that toxicity issues associated with dendrimer platforms could be addressed by conjugating den-drimers with PEG at the surface, creating a “stealth dendrimer.” However, design decisions must be made carefully to ensure that PEG-dendrimer conjugates have optimized drug-loading capacity (Yang et al., 2008).

Molecular-Scale Drug Design, Development, and Delivery 113

Targeted-Delivery Applications. There are currently no commercially available dendrimer-enabled drugs. Some are undergoing preclinical trials. For example, doxorubicin has been bio-conjugated with pegylated dendrimer. The conjugate exhibited a tumor uptake nine times greater than free doxorubicin and complete tumor regression after eight days in mice with colon carcinomas (Cameron Lee et al., 2006). Another example is methotrexate, an antican-cer agent for treatment of malignant tumors, bioconjugated to a polyamidoamine (PAMAM) dendrimer. The bioconjugate showed significantly lower cytotoxicity (i.e., toxicity to cells) in rats than did free methotrexate (G. Wu et al., 2006).

Imaging Applications. Dendrimers have been explored for use as contrast agents in MRI. Their longer circulation times make them attractive candidates for this use. Increased reten-tion time in the liver is a challenge, although it is thought that this could be overcome through careful design (Svenson and Tomalia, 2005).

Magnevist® is a PAMAM dendrimer developed by Dendritic Nanotechnologies and com-mercially available from Bayer HealthCare Pharmaceuticals. Magnevist and similar materials exhibit a good biocompatibility profile and minimal cytotoxicity (NCL, 2006).

Nanoshells. Nanoshells are nanomaterials composed of an inner core of silica (e.g., 100–200 nm) surrounded by a much thinner outer, metallic layer. This construction produces opti-cal properties that make nanoshells desirable for imaging applications. Nanoshells tend to exhibit preferential accumulation in tumors and do not have to carry a drug to have therapeu-tic value. After accumulation at a tumor site, hyperthermia (local heating) can be induced, using a laser, to eradicate the tumor. This photothermal reaction is a particularly promising treatment when surgery is not possible (Hirsch et al., 2006).

Similarly to nanoshells, nanocages can be used to photothermally induce hyperthermia in tumors. Nanocages are smaller (<50 nm) than nanoshells and can be composed solely of pure metallic nanoparticles.

Targeted-Delivery Applications. There are no currently approved drugs on the market based on nanoshells; however, some preclinical trials are under way. Trials using photothermal eradication in mouse models showed a 55-percent survival rate in treated mice during the trial period (35 days), while none of the control mice survived (James et al., 2007).

Imaging Applications. Nanoshells have been explored for use as imaging agents. Their highly tunable optical resonances enable them to absorb or scatter light at almost any desired point of the spectrum. For imaging applications, nanoshells can be designed to scatter light (Portney and Ozkan, 2006).

Fullerenes. Fullerenes represent a family of molecular structures composed purely of carbon, resulting in various shapes. Here, we discuss two types of fullerenes: carbon nanotubes and buckminsterfullerenes (or bucky balls).

Carbon nanotubes exhibit the potential to be functionalized with a wide variety of target-ing, therapeutic, and imaging agents. Carbon nanotubes could assist in lowering the toxicity of drugs. But there is great deal of uncertainty as to whether they will ever be clinically suc-cessful (Prato, Kostarelos, and Bianco, 2008). Moreover, a recent report highlighted the fact that single-walled carbon nanotubes are not always inherently cytotoxic to cancer cells (Yehia et al., 2007).

Carbon nanotubes must overcome considerable challenges before commercialization can even be anticipated. These challenges include developing improved mechanisms to unload therapeutic agents and characterizing how the carbon nanotubes are metabolized and excreted from the body (Endo, Strano, and Ajayan, 2008).

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Targeted-Delivery Applications. There are currently no commercially available drugs based on carbon nanotubes. There are, however, preclinical trials under way. For example, researchers recently examined the unique properties of carbon nanotubes for treatment of tumors. Tumors were injected in vivo with single-walled carbon nanotubes and subsequently exposed to a radio-frequency (RF) field. Exposure to the RF field induced a thermal reaction in the carbon nanotubes, which heated and killed the surrounding cancer cells (Gannon et al., 2007).

Buckminsterfullerenes are spherical arrangements of 60 carbon atoms (although alternative arrangements can involve more carbon atoms).1 Their unique properties enable the spherical arrangements to be surrounded by compounds on their surfaces, analogous to a pincushion (S. Wilson, 2002). In particular, fullerenes functionalized with polymeric dendrimers hold prom-ise for biomedical applications (C. Wang et al., 2004).

Targeted-Delivery Applications. Unidym has explored a dendritic fullerene, DF1, for its selective cytotoxicity. It has also explored a functional fullerene derivative, C3, for the same purpose (NCL, 2007).

Nanohorns. Carbon nanohorns—essentially, carbon nanotubes with one enlarged and one closed end so that, together, they resemble a horn—are a newly developed material that holds much promise for therapeutic applications. Their improved toxicity profile, as com-pared with that of carbon nanotubes, makes them particularly attractive. The lower toxicity is believed to be a result of manufacturing processes that do not require the toxic metallic cata-lysts often used to stimulate the growth of carbon nanotubes.

Researchers at Oak Ridge National Laboratory and the University of Tennessee have recently studied the potential pulmonary hazard of carbon nanohorns. Their results led them to conclude that carbon nanohorns are a “relatively innocuous nanomaterial” (Lynch et al., 2007).

Researchers at Tianjin University (TU) are at the forefront of this emerging area. They have recently demonstrated that carbon nanohorns can be isolated using steric stabilization by a copolymer. The carbon nanohorns produced in this way displayed excellent biocompatibility and demonstrated the ability to enter cell structures (Xiaobin Fan et al., 2007). These proper-ties make carbon nanohorns a very promising platform for drug-delivery systems.

Quantum Dots. Quantum dots are typically semiconductor nanocrystals with dimensions in the tens of nanometers. They have been explored for tumor-imaging applications because of their highly tunable light emission (Michalet et al., 2005). Although quantum dots represent a promising prospect for imaging technologies, there are considerable challenges regarding their safety—in particular, their clearance routes from the body (Choi et al., 2007; Cai et al., 2007).

Research Area 2: Controlled Release

Drugs with delivery that can be controlled provide enhanced performance by activating at advantageous times and rates. This can assist in lowering doses and mitigating potential unwanted side effects. Polymers are often employed to achieve preferred release profiles (Qiu and Bae, 2006). Polymer blends can sometimes improve release profiles even further (Siep-mann et al., 2008).

1 C60 and its related alternatives are often referred to generically as fullerenes, and we adopt that practice in this subsection.

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Flamel Technologies, a French biotechnology company, specializes in controlled-release drug delivery. Flamel manufactures a drug-delivery platform called Medusa®, which is an amino-acid polymer that can be loaded with peptide or protein. Medusa has been used in various applications. One of these has been to create long-acting insulin for treating diabetes (Flamel Technologies, 2008). In this case, the Medusa platform allowed researchers to create long-acting human insulin, FT-105, which could maintain a stable baseline (basal) for up to 48 hours. FT-105 recently completed a phase I trial (Flamel Technologies, 2007a).

Medusa is also being pursued to enable delivery of interleukin-2 (IL-2) for treatment of renal-cell carcinoma and metastatic melanoma. While IL-2 shows potential to treat additional types of cancer, its toxicity produces severe side effects that have prevented such an application. In a phase I trial, by linking IL-2 to the Medusa platform for delivery, researchers were able to show the potential to reduce the drug’s toxicity and increase its efficiency (Oudard et al., 2006). One further application of Medusa is a formulation of IFN-alpha-2b-XL for treatment of the hepatitis C virus (Flamel Technologies, 2007b).

Flamel’s other flagship platform is called Micropump®, which enables extended and delayed delivery of drugs. Micropump works by extending the amount of time that small mol-ecule drugs spend in the small intestine. The most prominent application of the Micropump to date has been COREG CR®. COREG CR is FDA-approved and licensed to GlaxoSmithKline for treatment of hypertension, heart failure, and heart attack (GSK, 2007).

Research Area 3: Drug Administration

Research on drug administration focuses attention strictly on novel methods to introduce drugs into the body. Often, drugs that can be administered to a particular site allow for lower doses and enhanced effects. In addition, behavioral barriers to administration can be reduced if it becomes possible to make it less painful, or even completely painless, for a patient to have medication administered.

Microneedle Administration. Microneedles are a promising method for drug delivery in the future. Researchers at the University of Kentucky College of Pharmacy and the Geor-gia Institute of Technology recently demonstrated microneedle-enabled delivery of a drug in humans (“Future Injections Point to Microneedles,” 2008). They applied an array of micronee-dles to the surface of the skin and then removed them, leaving a series of holes in the skin’s outer layer. Each microneedle was 620 µm long and 160 µm in base width. Participants in this study were unable to distinguish any sensation of pain between applications of the microneedle arrays and control materials with a smooth surface.

A naltrexone gel, a drug used to treat opiate and alcohol addiction, was applied to the skin surface with a patch before the microneedle array was removed. Naltrexone alone is unable to penetrate the skin’s surface. However, the perforations left by the microneedles allowed it to enter the bloodstream at clinically significant levels for 48 hours (Wermeling et al., 2008). Researchers found that, to produce the desired level in the bloodstream, they needed only one-fifth of the amount of naltrexone that would normally be necessary.

In addition, the researchers measured a reduction in unwanted by-products as naltrexone was metabolized. And the microneedle-assisted delivery eliminated an undesired initial peak in the drug that typically occurs when it is taken orally.

This study demonstrated for the first time that microneedles can be used to enhance drug administration. It opens the door to the possibility of using them to administer a wide range of other drugs as well, including insulin, lidocaine, and vaccines.

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Pulmonary and Nasal Administration. Research is ongoing on means of administering novel therapeutic materials via pulmonary and nasal routes. These approaches are often pur-sued because they offer simple administration of drugs previously restricted to intravenous delivery. There are many design options to optimize novel inhaled therapeutics (Chow et al., 2007). Research has also been done on ways of delivering insulin and growth hormones nasally (Türker, Onur, and Ózer, 2004). For example, emulsion-based production of nanocrystals dispersed in liquid (nanosuspensions), show promise for both pulmonary and nasal delivery of poorly soluble drugs (Gao et al., 2008). Recently, a formulation of inhaled cetuximab was developed for treatment of lung cancer. Pulmonary administration provided localized delivery of the drug, thus avoiding metabolic degradation (Maillet et al., 2008).

At the same time, there are considerable challenges to commercializing inhaled thera-peutics. Inhaled insulin, for example, has been an active area of research in pulmonary ther-apeutics for quite a while. But the utility of such formulations has recently been called into question. In October 2007, Pfizer discontinued production of Exubera, an inhaled formula-tion of insulin. While Exubera was similarly effective to injected insulin, the administration was still cumbersome (Mathieu and Gale, 2008). Patients were required to receive regular lung examinations to monitor potential long-term effects, and their doses had to be much larger than injected dosages to produce the same effect (Black et al., 2007).

In January 2008, Novo Nordisk followed suit, discontinuing phase III trials of its inhaled insulin formulation, named AERx iDMS (Opar, 2008). Marketability is a real challenge for these inhaled insulin formulations because the benefits they offer are not sufficiently greater than traditional treatment regimens (i.e., multiple daily injections) to outweigh their addi-tional costs. In addition, the long-term safety issue has not been addressed.

However, novel formulations of insulin might improve the prospects for nasal or pul-monary delivery. Gold nanoparticles loaded with insulin have shown improved absorption characteristics in preclinical tests via nasal and oral routes. Traditional formulations of insulin made oral administration unfeasible because they were susceptible to hydrolysis and digestion (Bhumkar et al., 2007).

Research Area 4: Solubility

An estimated 40 percent of new chemical entities identified in drug research display poor water solubility (Heimbach, Fleisher, and Kaddoumi, 2007). But drug materials must be adequately soluble to function effectively. One existing approach to address this problem is to use a solvent. Taxol, a commercial formulation of paclitaxel, uses the Cremophor® EL solvent to enhance solubility in the blood (Yeh et al., 2005). Another approach is grinding the drugs as part of preparation (J. Kim et al., 2008). Other manufacturers have approached this problem by mill-ing poorly soluble drugs together with a highly soluble substance (Fukami et al., 2006).

A new approach to enhancing solubility in poorly soluble drugs is to create drug nanocrys-tals, which provide greater surface area of pure drug material (Gao, Zhang, and Chen, 2008). Various methods exist to create nanocrystals. The first FDA-approved nanocrystal formulation was sirolimus (sometimes also called rapamycin) in 1999. Commercially produced by Wyeth as Rapamune®, it is an immunosuppressant drug to prevent rejection in organ transplant. It can also be used to treat cancer. Recently, potential improvements to sirolimus formulations using polymeric micelles were reported to decrease neurotoxicity and improve biodistribution (Yáñez et al. 2008).

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Relevant Capacity Available to TBNA and TEDA

TEDA already has a substantial presence of leading pharmaceutical developers, such as Glaxo-SmithKline, Novo Nordisk, and Novozymes (See TEDA Investment Promotion Center, 2004, 2006, 2008). Its China National Academy of Nanotechnology and Engineering (CNANE) offers further capacity to pursue molecular-scale drug design, development, and delivery. In fact, CNANE has already manufactured products for a local pharmaceutical company (Wei, 2006). Biopharma in general and, in particular, bionanomaterials for drug delivery, are thrust areas for CNANE, as well as for its technology-transfer partner, Nanotechnology Industrial Base Company (NIBC), and its commercialization partner, Nanotechnology Venture Capital Company (NVCC) (Ce, 2007).

Zhang Fengbao at TU, along with colleagues at Nankai University, has recently made an important research development in this area—namely, isolation of carbon nanohorns and a demonstration in the lab that they can be used for drug delivery (Xiaobin Fan et al., 2007). Finally, TEDA also has a small company, Tianjin SinoBiotech (TSB), founded by Zailin Yu, that is developing a long-acting interferon with albumin linkage, as well as an adenovirus gene-therapy injection for cancer tumors. Both of these developments are at the preclinical stage (Tianjin SinoBiotech, 2007).

Drivers and Barriers

In Chapter Three, we identified eight factors that we believe encompass the most-significant drivers and barriers for TBNA to develop and implement the seven selected TAs. We now dis-cuss how those factors may influence TBNA’s development and implementation of molecular-scale drug design, development, and delivery.

China’s need to improve public and individual health will be a driver because this TA is aimed at providing improved treatments for cancer and other diseases. Future trends appear to be threefold: (1) continued improvements in the effectiveness of nanoparticle formulations of existing drugs, (2) development of new drugs designed at the molecular scale, and (3) com-bination of diagnosis, therapy, and monitoring through the use of targeted and functionalized bionanomaterials. However, the barriers to clinical testing and marketing of new drugs are substantial. These barriers are detailed in a report in the January 2008 issue of Nature Bio-technology on the industry and market in China for biotechnology-derived pharmaceuticals.2 Biotechnology-dominated drugs represent only a small fraction of the Chinese pharmaceutical market, for example. Moreover, the market is strongly dominated by generic drugs, which con-stitute more than 90 percent of market share. Yet despite the barriers, the authors conclude that this market in China is “beginning to take off” (Frew et al., 2008). They recommend improve-ments in exit mechanisms for investors, training for entrepreneurs and business managers, financial reporting, regulation, intellectual property rights (IPR) protection, health-system infrastructure, and drug-distribution mechanisms.

2 Frew et al. (2008). Detailed data for this report were derived from interviews of 22 “homegrown” Chinese health-biotechnology firms, including TSB. The authors note that this constitutes only a small fraction of the “thousands of companies in this sector.”

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China’s national R&D policies will be a driver. The five-year plan for 2006–2010 names biomedicine as a major S&T initiative, with the following thrusts: building a number of dem-onstration projects for commercial production of vaccines for major diseases and gene-modified medicines; improving the modern traditional Chinese medicine system; and enhancing the capability for new medicine invention and production. This TA contributes to all of these thrusts.

Other national policies, specifically regulation of new drugs, will be a barrier. While regu-latory frameworks protect people from treatments that might have harmful effects, they raise the cost of development. They can also make it very difficult for new drugs to be approved. For example, it remains a challenge to get new drugs approved in the United States: One recent study reported that the number of new candidates more than doubled between 1990 and 2006, while the approval rate remained at 8 percent (Reichert and Wenger, 2008). It will be challenging for regulatory frameworks in China to maintain pace with the rapidly emerging field of nanobiomaterials (Dobrovolskaia and McNeil, 2007).

IPR protection remains a barrier in China both to indigenous innovation and to the involvement of foreign capital and talent in innovative R&D and ventures (see, e.g., Davies, 2006; OECD, 2008). TBNA enforcement of existing laws would contribute momentum to what has been described as an improving situation (S. Jang, 2007). The aforementioned Nature Biotechnology article emphasized the importance of improved IPR protection for the develop-ment of this TA (Frew et al., 2008).

Finance and banking laws and regulations remain a barrier in China. The Organisation for Economic Co-Operation and Development (OECD) concluded that, while the situation is improving, much more remains to be done to achieve the robust, transparent, and trusted laws and regulations necessary to draw capital from global sources for cutting-edge R&D and innovation (OECD, 2008). The Nature Biotechnology article emphasized the importance of financial reporting and regulations (Frew et al., 2008).

Human capital should be a driver for TBNA, although its proximity to the growing metropolis of Beijing will provide strong competition for talent. The current workforce in TBNA, TEDA, and the Tianjin municipality more broadly provides a ready source of skilled labor with manufacturing experience, although the current trend in China for students to attend universities rather than technical and vocational schools (T. Fuller, 2005; Wiseman, 2005; “Chinese Manufacturing Slowed by Skilled Worker Shortage,” 2002; and “China in Serious Shortage of Skilled Workers,” 2004) will be a challenge for TBNA as it ramps up pro-duction. China’s central government recognizes the problem and has taken steps to address it (J. Wu, 2006). Access to university graduates in the Tianjin municipality and in Beijing, especially those with science and engineering (S&E) backgrounds may be able to provide the needed R&D staff. For example, Zailin Yu, the founder of TSB, who returned to China from the United States, has an established research group of former students and current students at Beijing University (Z. Yu, 2007; TSB, undated). TEDA has recognized the importance of attracting such talent locally, from elsewhere in China, and internationally and has established incentive programs.3

The development of a culture of R&D and innovation remains a barrier for TBNA as for other organizations in China that seek to develop into state-of-the-art science and engineer-

3 These include incentives to enterprises and to individuals to bring in Ph.D. graduates and awards for outstanding per-formance. For details, see Chapter Three.

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ing centers (CAS, 2006). For both its existing and new initiatives, TBNA should encourage risk-taking and flexibility to change course as dictated by technical, economic, political, and market developments.

A Possible Path Forward

The suggested long-term goal is for TBNA to become a center for R&D and manufactur-ing of drugs developed through bionanotechnology. We are less certain about drugs devel-oped through biotechnology alone: There is extensive competition in China in the latter field. TEDA appears to have just one small company at this time, whereas other areas, such as Shen-zhen and Shanghai, are much more advanced, with companies already going public in the United States.

For TBNA and TEDA to establish themselves as innovators in this type of biomedical application, it will not be enough to focus solely on attracting foreign enterprises. Rather, they should aggressively build their own R&D capacity so that they can generate homegrown treat-ments and techniques (i.e., based on developments made at CNANE and TU). In pursuing this goal, TBNA and TEDA will have to achieve a delicate balance between obtaining invest-ment from foreign enterprises seeking near-term gains and striving to become leaders in the field themselves. Consequently, their R&D activities should be aimed at eventually commer-cializing novel medical treatments.

We suggest that TBNA and TEDA take the following actions:

Perform a detailed review of current research under way at CNANE on nanobiotechnology-•enabled drug development, as well as the current technology-transfer efforts under way at NIBC and commercialization efforts under way at NVCC. Ascertain the stage of matu-rity of these efforts, the targeted products and markets, and the breadth and depth of the supporting research.On the basis of this review, develop a business plan for TBNA and TEDA to grow their •R&D efforts into a state-of-the-art program consistent with the developing trends in car-rier platforms, targeted and controlled drug delivery, drug administration, and solubility described in this chapter. This plan should include development of the necessary associ-ated manufacturing base.Work with the groups at TU and Nankai University described in this chapter to •make a detailed review of both the cost and the potential benefits of establishing a drug-development program based on their carbon-nanohorn research. The program could involve collaboration among TBNA, TEDA, the universities, CNANE, other government and private-sector partners, and financing organizations—locally, region-ally, China-wide, and globally. Putting such a program in place could provide TBNA and TEDA with a head start in international competition because of the Tianjin-based research groups’ leading position internationally in carbon-nanohorn research.Make molecular drug design, development, and delivery a thrust area in TEDA Watson •Biotech Park. To this end, initiate discussions with the pharmaceutical companies already in TEDA (e.g., GlaxoSmithKline, Novo Nordisk), as well as some of the smaller compa-nies currently developing nanoformulated drugs (e.g., Abraxis Bioscience, Ortho Biotech, Tekmira, Dendritic Nanotechnologies, Unidym, and Flamel). In tandem with this effort,

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make molecular-scale drug delivery part of the continued development of TBNA and TEDA’s industrial base in biopharmaceuticals.Support the development of a responsive regulatory framework based on the latest •global technology developments. Work within the evolving regulatory framework in China and internationally to develop manufacturing processes for products emerging from the R&D pursued under items 1, 2, and 3 that will allow TBNA and TEDA to market the pharmaceuticals that they develop and manufacture locally to both Chinese and foreign markets.Implement and sustain a public-communication strategy to inform Chinese citizens of •new developments in medical treatments and their associated benefits and risks. This could involve frequent newsletters and press releases, postings on TBNA and TEDA’s Web sites, and incentives and awards for research advances—especially for successful new products manufactured in TBNA and TEDA.

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ChApTeR nIne

Electric and Hybrid Vehicles

Hybrid vehicles, “automobiles available to the mass market with power systems that combine internal combustion and other power sources, while recovering energy during braking” (GTR 2020 In-Depth Analyses, pp. 27–28), have emerged as one of the leading new automotive markets worldwide. Initially, the public’s increasing interest in reducing emissions from inter-nal combustion (IC) engines and, more recently, rising oil prices drove their growing market strength. Electric vehicles have been, to date, a niche market, but the distinction between the two is being blurred by the development of plug-in hybrids, in which the electric motor can be charged independently of the IC engine.

Importance to TBNA and TEDA

Manufacturing hybrid and electric vehicles and their components can become an important part of TBNA and TEDA’s drive to develop state-of-the-art science and technology (S&T) capacity. This technology application (TA) addresses an area of critical importance to solving China’s urban pollution problem while providing TBNA and TEDA an opportunity to build on an existing pillar industry in TEDA.

Current Scientific and Market Status and Future Prospects

Technology Overview

Currently, the main issue with hybrid vehicles is whether they can form a bridge from IC engines to widespread use of less polluting alternatives, such as electric or fuel-cell vehicles. Considerable research is under way on production automobiles based on hydrogen and fuel cells, as well as several demonstration programs. But widespread availability is very likely in a time frame that stretches beyond 2020. Still, most of the leading automakers are currently producing, or planning to produce, some type of hybrid vehicle, including larger models, such as sport-utility vehicles (SUVs) and pickup trucks (see EERE, undated).

At present, only about 15 percent of the energy from gasoline is transmitted to the tires; in other words, 85 percent is burned up without contributing to transportation (Valdes-Dapena, 2008). For that reason, it is not surprising that significant innovations are under way to improve the fuel efficiency of and lower greenhouse-gas emissions from passenger vehicles and trucks. While some of these efforts are incremental, others are novel.

Four categories of vehicles are in various stages of development:

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Traditional hybrid-electric vehicles (HEVs). • This type of vehicle is commercially available today as passenger cars.Pure electric vehicles (EVs). • This type of vehicle is also commercially available today as pas-senger cars.Plug-in hybrid-electric vehicles (PHEVs).• This is the next generation. It should be com-mercially available by 2010. PHEVs will allow the driver to charge an onboard battery by plugging it into the electric-power grid. The battery will then supply most of the energy needed to drive the vehicle, typically up to a certain mileage—say, 40 miles for a PHEV-40.Serial hybrid vehicles. • These vehicles are also referred to as series hybrids, range-extended electrics, or extended-range electrics. After PHEVs, this is the next technology in the development stream. Vehicles of this type would function similarly to an EV but have an onboard power source to charge the batteries (Bullis, 2007a).

Heavy-duty vehicles, such as trucks and buses, also form an important market segment, because, while they make up less than 10 percent of vehicles, they represent about 50 per-cent of fuel consumption. In 1999, General Motors (GM) patented a two-mode hybrid bus transmission that is now commercially available. General Electric (GE) is currently pursuing a fuel-cell/hybrid bus strategy that uses two types of batteries to reduce the size of the fuel-cell power source (Fairley, 2006). For short bursts of power, GE is evaluating batteries from A123Systems. For longer-lasting energy storage, it is examining sodium metal–chloride bat-teries (Bullis, 2006k).

Buses in particular have received attention due to federal subsidies in the United States. Other heavy-duty vehicles have received less attention, although hydraulic hybrid systems have been proposed as ideal for some heavy-duty vehicles (Bullis, 2006h).

Automotive Components. All of these innovations are increasing the need for new, high-technology components. Not only must these components be highly efficient and reliable, they must also be successfully integrated into an overall vehicle system that meets customers’ needs for performance, convenience, reliability, price, and other features. As a result, many areas need advances in research and development (R&D) and manufacturing, both in terms of special-ized components and new subsystems and at the system level. TBNA and TEDA may be able to target many of these areas.

The following technology reviews focus on those areas in which we believe TBNA and TEDA are well positioned to lead the market. These areas include the following:

batteries•power electronics and electrical machines•power trains•IC engines and emission controls•vehicle-system analysis•fuel cells and hydrogen storage.•

Additional areas that are important but in which TBNA and TEDA do not appear to have a competitive advantage include fuels, lubricants, and lightweight, high-performance materials.

Batteries (Electrochemical Storage). Electrochemical storage, or battery, technologies are crucial for storing energy in EVs, HEVs, PHEVs, and serial hybrids. However, each type of

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vehicle has different needs in terms of energy density, power density, weight, charging time, quality, and other important factors. For example, according to MIT’s Technology Review,

The plug-in hybrid application will also be much more demanding on batteries than ordi-nary hybrids are. In a car such as the Toyota Prius, the battery stays at about a 50 percent state of charge, and this varies only a few [percentage points] as it absorbs power from regenerative braking and delivers it in short bursts to augment the gas engine. With plug-ins, batteries will be charged up to at least 95 percent and then deeply discharged during the first 20 miles of driving before settling into an ordinary hybrid mode. Such deep dis-charging typically decreases battery life. Automakers want batteries that can last 10 years or so even under these conditions so that consumers won’t need to buy new battery packs a few years into owning a vehicle. (Bullis, 2006l)

Because of the broad range in demand, research is focused on improving each individual tech-nology and matching it to the appropriate vehicle or even using multiple batteries to meet dif-ferent needs.

While lead-acid batteries continue to be used in traditional vehicles, EVs and HEVs are increasingly using batteries based on different materials, including nickel metal–hydride (NiMH) and lithium-ion (Li-ion) batteries.1 Li-ion batteries are a particular focus of R&D because they are lighter weight and have the higher energy densities deemed crucial for suc-cessful performance. But recent commercial Li-ion technologies have also generated significant heat, leading to safety concerns. As a result, Li-ion applications for automobiles have addressed cooling systems and overcharging protections. At the same time, researchers have focused on developing improved anodes and cathodes that operate at lower temperatures.

Current battery technologies are also limited by the fact that their storage properties degrade over time. Advances in nanotechnology have shown researchers how to design new technologies that increase energy density and power density and significantly decrease the deg-radation of storage capacity over time. While many of these results have been demonstrated only in the laboratory or at pilot production scales, opportunities are abundant to continue R&D and scale up manufacturing processes to commercial levels of production.

Particularly important to the success of electric and hybrid vehicles will be the safety of vehicle batteries. Given the potential for current Li-ion batteries to overheat and catch fire, especially when physically damaged, the quality of manufacturing must be outstanding for a firm to be selected to produce for the automotive sector (Bullis, 2006i). For this reason, innova-tions focused on improving manufacturing quality will be of great importance.

Firms and organizations active in these areas include the following:

A123Systems (Watertown, Mass.)• has met with great success in developing innovative and powerful Li-ion batteries. A123 was recently awarded a contract to codevelop proprietary doped-nanophosphate Li-ion batteries for GM (“A123Systems Receives $30M to Scale Up Nano-Enabled Batteries,” 2007; Bullis, 2007b, 2008b).Altair Nanotechnologies (Reno, Nev.)• is developing a lithium-titanate battery that uses nan-otitanate particles to replace the graphite that contributes to overheating in traditional

1 At least one firm, Firefly Energy, is looking at improving traditional lead-acid batteries (Bullis, 2006a). Other tech-nologies are also being pursued in special cases. These include a high-temperature sodium metal–chloride battery that GE believes would be a good match for hybrid-electric buses (Bullis, 2006k).

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Li-ion batteries (“Car Makers Seek Battery That Keeps Going,” 2008). Altair is also work-ing on advanced batteries for the U.S. Navy that would help enable a new generation of all electric–drive ships (“Senate Approves Altair Nanotechnologies’ Battery Systems for Use in the Navy,” 2007).BYD Auto (Shenzhen, Guangdong)• has produced two plug-in hybrid automobile models that use a Li-ion-phosphate battery pack based on BYD’s own production cells (iron, or Fe, cells). Using iron phosphate as one of the main electrode materials is supposed to keep the battery from reaching such high temperatures, averting the risk of explosion (Mil-likin, 2008). The company has plans to mass market an all-electric vehicle in two years that uses this battery (Shirouzu, 2008).Nissan Motor (Tokyo)• is developing a stable, manganese-based material that is thinner and allows better cooling than conventional battery materials. Nissan has launched a joint venture with NEC to mass-produce batteries based on this material and use them in future vehicles (“Car Makers Seek Battery That Keeps Going,” 2008).A Stanford University research team led by material-science and engineering professor Yi Cui• has developed a nanowire-based silicon anode for Li-ion batteries whose unique shape is capable of holding 10 times the charge of traditional Li-ion batteries while reducing deg-radation (Stober, 2007). If the additional challenges of developing a corresponding cath-ode and lower-temperature manufacturing processes can be overcome, this technology has the potential to lead to batteries with three times the storage capacity of today’s Li-ion batteries, as well as improved safety and longevity characteristics (Fairley, 2008).Argonne National Laboratory• has licensed to Japan’s Toda Kogyo a patented, composite cathode material for Li-ion batteries. The composite cathode, made of lithium and man-ganese mixed metal oxides, offers improved stability, higher voltages, and higher storage capacities (ANL, 2008).Electric-car company ZAP (Santa Rosa, Calif.)• and China-based Advanced Battery Tech-nologies (Harbin) have opened a joint development office in Beijing to expand research, manufacturing, and marketing of electric vehicles based on nanotech batteries (“Zap Opened a Joint Development Office in Beijing to Expand Research in Nanotechnology,” 2007).Valence Technology (Austin, Tex.)• makes Li-ion batteries.Compact Power (Troy, Mich.)• was selected by GM to test its batteries for potential use with the Chevrolet Volt (Bullis, 2007b). Compact Power is a subsidiary of the Korean com-pany LG and was selected by GM to manufacture the batteries for the first generation of the Volt (Bullis, 2008c).Continental Automotive Systems (Frankfurt, Germany)• was also selected by GM to test batteries—using battery cells manufactured by A123Systems—for potential use with the Chevy Volt (Bullis, 2007b).Cobasys (Orion, Mich.)• , half owned by Chevron, is developing automotive NiMH batter-ies (Gold, 2008).Miles Electric Vehicles (Santa Monica, Calif.)• is manufacturing all-electric vehicles using nickel-based batteries instead of Li-ion batteries. These cars are manufactured in Tianjin and are already available for sale in the United States (Dosh, 2008).

Power Electronics and Electrical Machines. The growing sophistication and electrification of vehicles have considerably heightened the need for motors, inverters, sensors, and control

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systems. Efficient variable-speed electric motors are increasingly needed, for example, to help drive vehicles while in electric mode. Highly efficient constant-speed motors and generators will be especially important to the future of the serial hybrid. To meet these needs, research is under way on induction motors, permanent-magnet motors, and switched-reluctance motors (although each has its limitations) (EERE, 2008). One specific area needing improvement is high-performance permanent magnets capable of operating at high temperatures (up to 200 degrees Celsius). This has led to R&D on new materials (“Better Electric Cars Need Better Magnets,” 2008).

Complex Electronics for Battery Management. The increasingly important role of bat-teries has generated a need for complex electronics to charge and discharge these batteries properly and ensure safety. Just how complex these systems are may be best illustrated by the fact that the electric vehicle being developed by Tesla Motors has roughly 7,000 discrete Li-ion cells in its battery pack. This requires an advanced control system to maximize efficiency and ensure safety (Bullis, 2006i). Firms active in the development of advanced battery-management techniques—including those for PHEVs (Bullis, 2006f)—include the following:

Tesla Motors (San Carlos, Calif.)•Electro Energy (Danbury, Conn.)•Energy Control Systems Engineering (EnergyCS) (Monrovia, Calif.)•A123 Systems Hymotion (Watertown, Mass.)•

Ultracapacitors. A still-emerging technology expected to be of great value to future hybrids is the ultracapacitor. Like regular capacitors able to hold a charge for a short period, ultracapacitors can charge and discharge power very quickly. But they can also handle large amounts of power. This makes them ideal for storing energy from regenerative braking and powering electric motors during acceleration.

Although this technology has been pioneered in niche applications, it is currently expen-sive, so improvements in cost and performance are needed to bring the technology to the auto-motive market. That said, ultracapacitors may allow designers to reduce the size of fuel cells or other power sources by 75 percent, lowering the cost of advanced vehicles (Bullis, 2006c).

Firms currently active in this area include the following:

AFS Trinity Power (Medina, Wash.)• demonstrated its technology at the most recent Detroit auto show, suggesting that it would enable an upgraded Saturn Vue to achieve 80 miles per hour (mph) and 150 miles per gallon (mpg).2 The upgrade price was nearly $9,000 (“Ne Plus Ultra,” 2008).EEStor (Cedar Park, Tex.)• has developed a barium-titanate electrical energy–storage unit that it will supply to Lockheed Martin for military and security equipment. It also envi-sions large-scale applications for storing off-peak power for later use. Zenn Motor Com-pany (Toronto) has already worked with EEStor to replace the lead-acid batteries used in the small, low-speed EVs that it sells for urban use (“Ne Plus Ultra,” 2008).ISE Corporation (Poway, Calif.)• develops battery- and ultracapacitor-based hybrid bus systems (Bullis, 2006h).

2 The 2008 Saturn Vue Hybrid has U.S. Environmental Protection Agency (EPA) mileage ratings of 25 mpg city and 32 mpg highway (see EPA and DOE, 2008, p. 15).

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Maxwell Technologies• is a U.S.-based developer and manufacturer of ultracapacitors.

Smart-Charging Power Electronics. Another area needing innovation and manufacturing expertise would be the smart-charging power electronics needed to manage the charging of EVs and PHEVs. A leading firm in this area is the U.S.-based GridPoint. GridPoint is working on the technology with Ford Motor Company, Southern California Edison, and the Electric Power Research Institute (GridPoint, 2008; EPRI, 2008).

Thermoelectric and thermophotovoltaic materials. Novel technologies, such as thermo-electric and thermophotovoltaic materials, are also being discussed as potentially applicable to vehicles (Bullis, 2005). These materials have the ability to recover waste heat and efficiently generate electric power, thereby increasing energy efficiency and potentially replacing the alter-nator. The promise of these technologies has prompted Toyota Motor Sales to fund R&D at the Massachusetts Institute of Technology (MIT) on thermophotovoltaics (Bullis, 2006g).

While neither technology is currently commercially available, with additional R&D and the ability to scale up production, they each have the potential to play a significant role in future vehicles.

Power Trains. As traditional IC engines are combined with electric motors, vehicle power trains are becoming increasingly complex. A power train is the combination of an engine and transmission that together provide power to the wheels. Toyota’s Prius hybrid includes an innovative power train crucial to its success (Fairley, 2006). Recently, Chrysler Motors, GM, Mercedes-Benz, and BMW announced the development of an alternative power train to which they refer as a two-mode hybrid and that achieves a 50-percent improvement in fuel economy during city driving. According to the U.S. Department of Energy (DOE), the system incorporates “two small electric motors into its transmission, yielding an electronic continuously variable transmission that operates in two modes: one mode for low speeds and light loads, and another mode for highway speeds” (EERE, 2007). Under the two-mode system, the electric motors play a key role in providing torque at low speed. But at higher speeds, when the electric motors would represent a drag on the power train, the two-mode hybrid transmission removes those motors from the power train, thereby reducing drag on the engine. This enables the electric motors to provide efficiency gains at low speeds without imposing a performance penalty at higher speeds. Furthermore, because the electric motors are removed from the power train at higher speeds, smaller motors can be used. As a result, according to Tim Grewe, GM’s chief engineer for the technology, the “hybrid transmission is no bigger than a conventional transmission” (Fairley, 2006).

Vehicle-System Analysis. With the large number of technologies now being combined into a single vehicle, the role of vehicle-system analysis is becoming increasingly important. Through such analyses, designers can optimize the balance between batteries, ultracapacitors, engines, electric motors, and even fuel cells. Given that each of these components includes expensive materials and performance characteristics that may change significantly over time, such optimizations are key to meeting customer requirements for such features as range, accel-eration, and price. System-analysis tools can also be used to inform public-policy discussions about potential fuel (or greenhouse-gas) savings from particular improvements to passenger vehicles, heavy trucks, buses, utility vehicles, and other types of vehicles.

The Argonne National Laboratory has been a leader in developing such system-analysis tools. For example, it invented a technology called the Powertrain Systems Analysis Toolkit (PSAT). The Tianjin-based China Automotive Technology and Research Center (CATARC)

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and TEDA-based Tianjin Qingyuan Electric Vehicle have already been trained in PSAT, so this is an area in which TEDA already has available expertise. Argonne has also developed the Greenhouse Gases, Regulated Emissions, and Energy Use in Transportation (GREET) model. This technology holds the potential to inform assessments of the ability of different technolo-gies to reduce greenhouse gases and other emissions.

Fuel Cells and Hydrogen Storage. Fuel cells produce energy through a chemical reac-tion. Accordingly, they have the potential to further increase efficiency and potentially replace IC engines in HEVs, PHEVs, and serial hybrids. However, today’s fuel cells are not cost-competitive with alternatives, so much of the research under way has focused on making them less expensive.

One area of innovation receiving particular attention involves improving the membranes in proton exchange–membrane fuel cells. Enhancing existing membranes or developing new ones could allow for an increase in power density and help shrink the size of the fuel-cell system, lowering its cost (Bullis, 2006d).

The automotive fuel cells under development are fueled by hydrogen. A transition to hydrogen as a fuel will require not just lowering the cost of fuel cells, but also determining an affordable and practical way to produce and distribute hydrogen and store it on a vehicle.3 As John Heywood, director of MIT’s Sloan Automotive Laboratory, observed, “A feeling is growing, that, really, hydrogen isn’t a particularly convenient way of doing all of this” (Talbot, 2006).

However, GM is very upbeat about its own fuel-cell technology. In 2007, G. Richard Wagoner Jr., GM’s chair and chief executive, announced that “GM was far enough along in designing fuel cells that it could spend the next three or four years doing engineering work on a production process for them.” He went on to say that China “may very well be the first coun-try to develop a broad-based fuel cell infrastructure.” Notably, the production process for steel produces a significant amount of hydrogen gas as a by-product. Traditionally, steel mills have vented this hydrogen gas to the atmosphere. But it could be stored and used for cars. China is currently the world’s leading steel producer (Bradsher, 2007a).

Alternative approaches to producing, transporting, and storing hydrogen that are getting less attention include using methanol as an energy carrier and conducting onboard reforming to generate hydrogen. Research on this second topic is ongoing even though the DOE has con-cluded that onboard reforming is unlikely to be economical (Bullis, 2006b; Shekhar, 2006).

Internal-Combustion Engines and Emission Controls. IC engines can run on gasoline, diesel, hydrogen, and a growing number of blends of ethanol and other biofuels. To improve combustion efficiency and control the resulting emissions, engineers must understand the com-bustion chemistry and use catalysts and other measures to precisely control both combustion and postcombustion cleanup. Improving the quality and composition of fuels can also help.4

3 Policymakers will also need to determine how hydrogen should be produced (i.e., from what sources). Since the lower-cost methods of hydrogen production currently use fossil fuels, using hydrogen as an energy carrier may not be environmen-tally desirable at present.4 Improving fuel quality, especially for diesel fuel, could be very important to improving automotive technology and air quality in China. This is because low-quality fuels can foul fuel-injection systems and spoil catalysts. This increases the cost of repairs and limits improvements in air quality. According to an article in Beijing Review, low-quality diesel fuel is reduc-ing interest in diesel-powered cars despite their other advantages (Yunyun Liu, 2007).

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While the efficiency and control over emissions of IC technologies have improved dramat-ically in the past 30 years, further advances are possible. For example, homogeneous charge–compression ignition (HCCI) holds the potential to improve the efficiency of gasoline engines by 15 percent. HCCI functions by making the gasoline engine, once it is running, function more like a diesel engine by combusting the fuel through compression and the engine’s heat alone (Valdes-Dapena, 2008).5

Increasing the use of diesel engines also holds great promise. Since diesel engines are inherently more efficient than current gasoline engines, a hybrid diesel holds promise of even greater efficiency gains.6

Innovative Business Models. A business-model innovation worth highlighting has been developed by a start-up known as Better Place, led by former SAP executive Shai Agassi. Better Place has launched a new electric-vehicle company that leases electric vehicles (to be manufac-tured by Renault) and assumes responsibility for maintaining and charging them. The busi-ness model is based on setting up a network of battery “filling” stations where a vehicle that has exhausted its batteries can have its battery pack switched for a fully charged set at no cost beyond the owner’s regular service contract.

This business model enables electric vehicles to be practical over a wider geographic range without individual drivers having to assume the risk of purchasing a vehicle on their own or being constrained by the mileage limitations of batteries. The new firm will demonstrate its approach in Israel and Denmark, where high gasoline prices and tax policies favor electric vehicles (Bullis, 2008a).

Market Overview

China is now ranked third in the world in the production of motor vehicles, after Japan and the United States.7 China produced 8.88 million motor vehicles in 2007, a 22-percent increase from the previous year.8 Sales of vehicles in China also increased almost 22 percent in 2007 to 8.79 million units. Forty percent of the passenger vehicles sold and 95 percent of commercial vehicles sold were manufactured in the country. That makes China the second-largest vehicle market, after the United States. Almost 83 percent of the cars sold in China were smaller cars with 1–2 liter engines (Du, 2008). China is also a center for export of automobiles. For example, Chery Automobile, a Chinese company, saw its sales rise 25 percent in 2007 but a 132-percent increase in exports (H. Wang, 2008).

In the first quarter of 2008, auto sales in China surged. Ford Motor (including the Ford, Volvo, Mazda, Jaguar, and Land Rover brands) reported a 47-percent increase in sales. Volk-

5 Commercially available diesel engines are roughly 45-percent efficient, compared to 30 percent for gasoline vehicles. But further technological advances in diesel engines are possible that could increase their efficiency to 55–63 percent. Unfor-tunately, diesel engines inherently produce relatively high levels of reactive nitrogen (NOx) and particulate matter (PM) (EERE, 2003).6 Yet another diesel-related technical advance is in the area of coal-to-liquids. Specifically, new catalysts developed by Alan Goldman of Rutgers, the State University of New Jersey, and Maurice Brookhart of the University of North Carolina at Chapel Hill have the potential to lower the cost of converting coal into diesel fuel through Fischer-Tropsch (F-T) processes. Furthermore, their approach produces a cleaner-burning form of diesel that does not include aromatics that generate PM (Bullis, 2006e).7 This is according to the International Organization of Motor Vehicle Manufacturers (Organisation Internationale des Constructeurs d’Automobiles, or OICA) (see OICA, 2008).8 U.S. production declined 4.5 percent from 2006, and Japan’s increase was just 1 percent from 2006.

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swagen AG, Europe’s largest automaker, had a 32-percent increase. Audi, Volkswagen’s high-end line, increased 25 percent. BMW AG, which includes BMW and Mini, jumped 43 per-cent in the first quarter. Mercedes-Benz also increased sales by 40 percent (Hongjiang, 2008). Overall car sales in China rose 16 percent in the first quarter (Bradsher, 2008b). The trend is for Chinese buyers of cars to shift toward larger vehicles, SUVs, and full-size, luxury cars. In the first two months of 2008, sales of SUVs increased 38 percent, and sales of luxury cars were up 30 percent from the previous year.

One of China’s biggest challenges today is balancing the benefits of an industrializing economy (as represented by an increasing number of Chinese car owners) with the need to support that economy (by fueling cars and industry) and protect its citizens and the environ-ment (by reducing emissions). World oil prices soared in the first part of 2008, but that has not lessened China’s consumption of oil products. China’s consumption of gasoline and diesel rose about 16 percent in the first three months of 2008; its consumption of crude oil rose 8 percent. Chinese industry and citizens can tap into below-cost fuel because the central government maintains a ceiling on domestic oil prices. Many speculate that this access to below-cost fuel has contributed to the surge in oil consumption (Yao, 2008). It is predicted that, by 2010, cars will consume 43 percent of China’s total oil demand and 57 percent of China’s total demand by 2020 (“China to Levy Tax on Cars with Higher Exhaust Emission,” 2005).

Given recent increases in oil prices and the prospect that they will rise still higher, the Chinese government is pushing automakers to reduce fuel consumption, either through elec-tric or hybrid cars. The government is also concerned about the forecasted growth in car sales, which will push up the demand for oil as well as emission levels. There are 800 million vehicles in use in China today. By 2020, this number is estimated to increase by 300 million, to more than 1 billion cars. As Anthony L. Posawatz, GM vehicle-line director for the Chevy Volt plug-in electric hybrid, observes, “They can’t all be petroleum-based. . . . [W]e believe in electricity. It’s everywhere, and you can make it from a variety of fuels” (Smith, 2008).

With the success of the Toyota Prius hybrid well established in the United States, the world’s automakers have been making advances in hybrid and electric cars across the full range of vehicle types. In late 2007, GM and Chrysler introduced their 2008 models, including hybrid versions of popular SUVs, pickups, and a sedan (EERE, 2007). The Detroit Free Press recently announced that, “within four years, at least two Japanese automakers plan to have all-electric cars on American roads. Several other automakers from around the world, including Ford Motor Co., are mulling similar vehicles” (Hyde, 2008).

Mitsubishi Motors is planning to start selling its iMiEV in Japan in 2009 and test it in the United States beginning in 2010 (Hyde, 2008). Likewise, Nissan has announced that it will introduce electric vehicles to the United States and Japan in 2010 in anticipation of a mass market that it believes will emerge by 2012 (E. Taylor, 2008). Some reports indicate that Nissan will first target fleet customers in the United States and Japan in 2010; it expects to expand sales to residential customers globally by 2012 (E. Taylor, 2008; Hyde, 2008).

GM is currently the biggest overseas automaker in China. In 2007, GM’s sales in China grew 19 percent while its sales in the United States fell 11 percent. However, the growth of GM’s sales in China slowed to about 7 percent in the first quarter of 2008, as buyers shunned the company’s aging line-up. Consequently, GM plans to spend $1 billion per year in China revamping models and expanding its operations (Ying, 2008). It introduced its first hybrid vehicle, the Buick LaCrosse, this year. This new, hybrid version of this model brought the mile-age up to 28 mpg from the nonhybrid’s 24 mpg (“Hybrids for China,” 2008). In 2009, GM

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plans to introduce the two-mode hybrid Cadillac Escalade. And in 2010, it will introduce its first plug-in electric vehicle, the Chevy Volt (Ying, 2008).

In fall 2007, GM announced that it would open an advanced research center in Shanghai, specifically to develop hybrids and other advanced designs. Other automakers, such as Honda Motor Company, Ford, and Volkswagen, have also recently announced their own research centers in China (Bradsher, 2007b). These announcements came on the heels of the Chinese government’s disclosure that the National Development and Reform Commission was draft-ing strict rules requiring that major components of alternative-fuel vehicles be made in China to qualify for anticipated subsidies (Bradsher, 2007b).

GM’s new center complements its China Automotive Energy Research Center, also in Shanghai, which employs 1,400 engineers and designers and planned to add 250 engineers and designers in 2008 (Ying, 2008). The center is a joint venture with Shanghai Automotive Industry Corp. Group, while the new research center will be wholly owned by GM (Bradsher, 2007b).

A less-known company, Miles Electric Vehicles based in California, is manufacturing all-electric vehicles using nickel-based batteries instead of Li-ion batteries. Manufactured in Tianjin by Tianjin Xiali, which is owned by First Automobile Works, these cars are already on sale in the United States (Dosh, 2008).

Chinese firms have also entered the growing market for electric vehicles:Tianjin-Qingyuan Electric Vehicle, based in TEDA, manufactures a range of electric vehi-

cles, including cars, buses, and vans. It has sold them in the United States and other coun-tries, primarily for depot-based fleets. The U.S. National Aeronautics and Space Administra-tion (NASA), for example, has purchased Qingyuan’s products for use indoors. Moreover, Qingyuan has several international R&D relationships and is working on a U.S. joint venture (Rong, 2007a).

Qingyuan’s ZX40 model, available in 2006, had a top speed of 25 mph and a range of 40 miles per charge. Its planned XS200 would reach 80 mph and have a range of 200 miles per charge (Millikin, 2006). Certain models in its line-up use traditional lead-acid batteries, while others use the much more expensive and higher-capacity Li-ion batteries.

BYD Auto has developed two plug-in hybrid models, the first of which was planned to be available in China in 2008. BYD also plans to mass market an all-electric vehicle in China by 2010, with hopes of eventually exporting it to North America and Europe (Shirouzu, 2008).

Youngman Automotive Group, China’s dominant manufacturer of luxury motor coaches and commercial trucks, has recently entered into a joint venture with ZAP, a U.S. company. The joint venture will manufacture, market, and distribute hybrid and electric vehicles in the North American market (ZAP, 2007).

Jinan Flybo Motor is currently selling a range of low-speed and high-speed electric cars in the United States. On the low end, its cars reach 45 mph and have a range of 70 miles. The company claims that its high-end model, the Comet, can reach a top speed of more than 90 mph, with a range of 200 miles before needing to be recharged (“Chinese Flybo Electric Car Coming to America,” 2007).

Changan Automobile in Chongqing has developed a hybrid minivan that it planned to start manufacturing in 2008 for sale in China (Bradsher, 2007a).

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Relevant Capacity Available to TBNA and TEDA

To our knowledge, hybrid vehicles were not being manufactured in TBNA or TEDA at the time of this writing. We did come across reports that a Tianjin company, Irizar, is producing energy-saving buses that run on compressed natural gas. These buses are used for public trans-port. Irizar expects to manufacture similar buses for Beijing, Shanghai, Chongqing, Guang-zhou, and Shenzhen (“Environment-Friendly Vehicles Used to Cut Pollution,” 2004).

TBNA and TEDA do have extensive capacity to conduct R&D on and manufacture electric vehicles. The TEDA-based Tianjin-Qingyuan Electric Vehicle Company is a case in point.

Qingyuan does not perform battery research at its own facilities in TEDA but rather at one of its sponsor organizations, EV Battery. Research on nanoscale batteries would be within the capabilities of the TEDA-based nanotechnology center, China National Academy of Nan-otechnology and Engineering (CNANE).

CATARC’s ability to conduct standards and certification testing (e.g., safety, energy effi-ciency, emissions, electric vehicles) should be a valuable asset, because companies based in TBNA and TEDA may want to meet the stricter standards of markets in the West. Eighty automobile-part enterprises are currently located in TEDA. Fifty of these are already direct suppliers of Toyota. All of these companies should be able to market themselves to other lead-ing automakers with standards similar to Toyota’s. Also relevant is that the Chinese Ministry of Commerce and National Development Reform Commission consider TEDA a national-level auto and auto-part export base.

Drivers and Barriers

In Chapter Three, we identified eight factors that we believe encompass the most-significant drivers and barriers for TBNA to develop and implement the seven selected TAs. We now dis-cuss how those factors may influence TBNA’s development and implementation of electric and hybrid vehicles.

China’s need to raise energy efficiency and reduce impact on the environment should be a driver. For example, in 2006, the Chinese central government issued a notice to encourage the use of environmentally friendly, low-emission vehicles. This notice proposed numerous incen-tives that government departments could use to promote fuel-efficient vehicles (“Green Light Given to Eco-Friendly Vehicles,” 2006):

Lift restrictions on small cars. Approximately 80 Chinese cities had banned or curbed the •purchase and use of small cars.Use tax breaks and preferential oil-pricing policies to encourage consumer purchase of •fuel-efficient cars.Lower parking charges for small vehicles.•Take the lead in using fuel-efficient vehicles. In 2004, 45 percent of vehicles in China •(including trucks) were government owned (Gallagher, 2006).

Now, China is considering the possibility of tax incentives for buyers of hybrids (Bradsher, 2007a). However, the price of hybrids currently available in China is significantly higher than

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that of conventional automobiles with IC engines. For example, Toyota’s Prius sells in China for about RMB 288,000—a very high price9 that derives in part from the 10–28-percent tariff on imported parts and components (Gallagher, 2006). The plug-in hybrid vehicle that the Chinese company BYD planned to launch in China in 2008 will cost about RMB 150,000 (Shirouzu, 2008). Unless strong subsidies are provided to Chinese consumers, this high cost will be a barrier to the widespread use of electric and hybrid vehicles in China.

China’s national policies designed to promote both the manufacturing and purchasing of fuel-efficient vehicles will be a driver. For example, consider the following:

In March 2007, a panel of the Chinese Academy of Sciences (CAS) recommended adop-•tion of new automobile power trains that are more fuel-efficient and use diverse energy sources (“Hybrids from China and What They Could Mean,” 2007).A new auto consumption–tax scheme was introduced in 2006. Consumption taxes on •vehicles with 1.0-liter engines or less were lowered from 3 percent to 1 percent. But taxes on vehicles with engines larger than 3.0 liters were raised from 8 percent to 15–20 percent (“Green Light Given to Eco-Friendly Vehicles,” 2006).In 2005, the National Development and Reform Commission issued its first fuel-economy •standards. The standards are based on weight and will be implemented in two phases. Phase I, which took place in 2005, required standards similar to those in Europe and Japan. The second phase will ratchet up those standards even more. It was planned to go into effect in 2008. At that time, the lightest vehicles will go to 43 mpg, from 38 mpg in 2005. The heaviest vehicles will go to 21 mpg, from 19 mpg in 2005 (Wellington and Sauer, 2004).

However, other laws and policies will be a barrier for electric and hybrid vehicles. For example, consider the following:

Tariffs on motor vehicles or auto parts coming into China are considered high and increase •the costs of hybrids (Gallagher, 2006).Toyota and Honda hold many of the relevant patents for key hybrid components (Gal-•lagher, 2006).Low fuel prices due to government controls on domestic oil supplies fail to create incen-•tives for fuel efficiency (Gallagher, 2006).Some big cities place restrictions on electric vehicles. Some permit electric vehicles only in •bicycle lanes, for example, because the local department of motor vehicles will not issue them license plates (Ash, 2007).

Moreover, China’s auto industry is still lagging behind the West when it comes to meeting industry standards, such as for safety and the environment. This may be another barrier keep-ing Chinese companies from entering the North American and European markets (“Hybrids from China and What They Could Mean,” 2007).

IPR protection remains a barrier in China both to indigenous innovation and to the involvement of foreign capital and talent in innovative R&D and ventures (see, e.g., Davies,

9 Low-end cars can be bought in China for about RMB 30,000 (see Xinzhen Lan, 2007).

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2006; OECD, 2008). TBNA enforcement of existing laws would contribute momentum to what has been described as an improving situation (S. Jang, 2007).

Finance and banking laws and regulations remain a barrier in China. The Organisation for Economic Co-Operation and Development (OECD) concluded that, while the situation is improving, much more remains to be done to achieve the robust, transparent, and trusted laws and regulations necessary to draw capital from global sources for cutting-edge R&D and innovation (OECD, 2008).

Human capital should be a driver for TBNA, although its proximity to the growing metropolis of Beijing will provide strong competition for talent. The current workforce in TBNA, TEDA, and the Tianjin municipality more broadly provides a ready source of skilled labor with manufacturing experience, although the current trend in China for students to attend universities rather than technical and vocational schools (T. Fuller, 2005; Wiseman, 2005; “Chinese Manufacturing Slowed by Skilled Worker Shortage,” 2002; “China in Serious Shortage of Skilled Workers,” 2004) will be a challenge for TBNA as it ramps up production. China’s central government recognizes the problem and has taken steps to address it (J. Wu, 2006). Access to university graduates in the Tianjin municipality and in Beijing, especially those with science and engineering (S&E) backgrounds may be able to provide the needed R&D staff. TEDA has recognized the importance of attracting such talent locally, from else-where in China, and internationally, and has established incentive programs.10

The development of a culture of R&D and innovation remains a barrier for TBNA, as it is for other organizations in China that seek to develop into state-of-the-art S&E centers (CAS, 2006). For both its existing and new initiatives, TBNA should encourage risk-tak-ing and flexibility to change course as dictated by technical, economic, political, and market developments.

In addition, in China, the current performance gap between hybrid and electric vehicles and conventional automobiles (e.g., size and styling, acceleration, range of electric vehicles) will be a barrier, because many Chinese consumers value performance more than they value fuel efficiency. A round-table discussion organized by Harvard University and CATARC held in Beijing in 2006 identified not only this but many other barriers to the sale of hybrids in China—for example, that the Chinese public has a poor understanding of hybrids and does not value future savings from fuel efficiency (Gallagher, 2006).

The lack of infrastructure in China for the production of hybrid vehicles will also be a barrier. At present, key components for these vehicles must be imported because few Chinese companies have the technical capabilities needed to develop and produce them or the ability to integrate these subsystems into a complete vehicle (Gallagher, 2006). However, TBNA and TEDA’s capacity to design and manufacture electric vehicles and their components should mitigate this problem, perhaps even becoming a driver, especially for EVs and possibly also PHEVs.

10 These include incentives to enterprises and to individuals to bring in Ph.D. graduates and awards for outstanding per-formance. For details, see Chapter Three.

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A Possible Path Forward

The suggested long-term goal is for TBNA to become a center for state-of-the-art R&D and manufacturing of electric and hybrid vehicles and their components. The specific actions we propose fall into three categories:

enhancing existing and building new R&D capacity•enhancing existing and developing a new industrial base•positioning TBNA and TEDA to produce electric and hybrid vehicles for the global •marketplace.

Building R&D Capacity

Have Qingyuan Electric Vehicles expand its existing collaboration with Argonne National •Laboratory (Rong, 2007b) in research on batteries and power trains.Look for other opportunities for collaborative R&D with companies and research insti-•tutes working in batteries, power electronics, and other component technologies. For example, contact the following organizations about the possibility of collaborating with TBNA and TEDA-based partners in their areas of expertise (Embassy of the United States Beijing China, 1998):

CAS Institute of Electrical Engneering – , which does R&D on electric motors and motor-control systemsAutomotive Engineering Department of Tsinghua University – , which does R&D on onboard charging and battery managementTianjin Institute of Power Sources (affiliated with the China Industrial Association of –Power Sources), which works on advanced battery and fuel-cell research, including NiMH, Li-ion, and direct-methanol fuel cells.

Developing an Industrial Base

Nissan and Mitsubishi have ties to the Japanese firms that control 70 percent of the pro-•duction of Li-ion batteries (Hyde, 2008). We suggest that TBNA and TEDA build on any existing relationships with these companies or their partners to build production capacity in this area.Open a dialogue between power-electronics manufacturers in TBNA and TEDA, •Qingyuan Electric Vehicles, and TBNA and TEDA’s electric utilities to discuss the pos-sibilities of (1) deploying EVs or PHEVs in TBNA and TEDA and (2) manufacturing affordable, residential smart-charging power electronics and smart meters needed to charge EVs and PHEVs from the electric-power grid.Numerous firms have announced plans to produce hybrid or electric vehicles—for exam-•ple, GM and its partner Shanghai Automotive, Geely International, Volkswagen (also teamed with Shanghai Automotive), and Chery Automobile. Toyota also teamed with China’s First Automotive Works to produce the 2.0-liter Prius hybrid in Jilin province (Qiao, 2005). TBNA and TEDA should contact these firms to ascertain whether any of their existing firms or their partners can help meet these manufacturers’ needs for com-

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ponents, subsystems, or vehicle analyses—or whether any of their current suppliers would like to locate or expand within TBNA or TEDA.CATARC reported that it had conducted R&D on hybrid vehicles and had produced a •vehicle comparable in theory to a Prius (Jiangyong and Sheng, 2007). We suggest that TBNA and TEDA identify which CATARC company did the R&D and built the vehicle and work with it to identify opportunities for collaboration.Approach Better Place, Nissan/Renault, and NEC about the possibility of (1) manufac-•turing their batteries in TBNA or TEDA and (2) using TBNA or TEDA as a third pilot location for this new business model. Also propose working with these firms on battery recycling.CATARC Auto High-Tech Company (CAH) and Tianjin Huanke Auto-Catalytic Puri-•fication Hi-Tech focus on catalytic converters. Their work on Euro II and Euro III cata-lysts suggests that they have the skills needed to manufacture and conduct R&D on the most-advanced catalysts available. Because the need for pollution control will only grow as car ownership increases in China and around the world, this is an important domestic capability. We suggest TBNA and TEDA use it to attract new investors.

Positioning TBNA and TEDA for the Global Marketplace

As Michael Dunne of Automotive Resources Asia told • China Daily in 2005,

If hybrids are to really take off (in China), they would need a shot in the arm from the gov-ernment in two ways: Either the central and local governments purchase fleets of hybrids to serve as taxis, or they offer tax breaks to people who buy hybrids or both. (Qiao, 2005)

We suggest that TBNA and TEDA work to advance these goals, either through fleet pur-chases or tax breaks to consumers.Based on an August 2007 notice by the Beijing State Council calling for compulsory •“green procurement” by local governments, including for vehicles (Yunyun Liu, 2007), TBNA, TEDA, and CATARC (which appears to be responsible for developing these standards) could work together to accelerate development and implementation of these rules.China’s auto industry is still behind the West when it comes to meeting industry stan-•dards, such as those for safety and the environment. CATARC has a leading role in set-ting standards for electric vehicles and has standardization and certification capabilities that TBNA and TEDA firms could use.Work with CATARC to make experts trained in the use of the PSAT available to work •with the appropriate staff of existing and potential TBNA and TEDA partners to ensure that designs are sound and performance goals are met.The Automotive Technology Information Research Institute, a CATARC subsidiary with •capabilities in scrapping and recycling electric vehicles, could be beneficial to Qingyuan and other firms operating in TBNA and TEDA. We suggest that TBNA and TEDA work with this institute to identify vehicle-recycling services that would be valuable to existing and potential TBNA and TEDA tenants.With respect to the use of EVs, HEVs, or PHEVs in TBNA and TEDA, discuss with the •local electric utility the possibility of instituting a special electricity rate for nighttime

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charging of EVs and hybrids. In addition, contact GridPoint (described in the power elec-tronics section of this chapter) as a potential investor or tenant.Review incentives used to attract new manufacturing companies to TBNA and TEDA •(e.g., tax benefits, funding for postdoctoral associates), determine which have proven most appealing, and consider adding new incentives suggested by existing and prospective TBNA and TEDA-based companies.

137

ChApTeR Ten

Green Manufacturing

The development and use of manufacturing processes that minimize or eliminate waste streams and the use of toxic materials is commonly referred to as green manufacturing. As public con-cerns have grown about degradation of the environment and ever-scarcer resources, govern-ments and multinational corporations alike have embraced the trend toward applying green manufacturing techniques.1

As defined by the sponsors of the Green Manufacturing Expo held in New York City on June 3–5, 2008, sustainable manufacturing is the “creation of manufactured products that use processes that are non-polluting, conserve energy and natural resources, are economically sound, and safe for employees, communities and consumers” (see Canon Communications, undated). This definition is consistent with our understanding of green manufacturing.

Importance to TBNA and TEDA

Pursuing green manufacturing is consistent with TBNA’s mission to promote a recycling or “circular” economy, where each entity uses the products or waste streams of the other so that there is no net waste.2 At the same time, it would position TBNA and TEDA at the forefront of an important emerging area of science and technology (S&T) and of sustainable economic development. It would enable TBNA’s leadership to establish a group of more-profitable and environmentally responsible firms able to export to Japan, the United States, the European Union (EU), and other regions with strict regulations and standards for environmental and product safety.

Green manufacturing methods could also increase the competitive advantage of compa-nies in TEDA and TBNA more broadly by doing the following:

reducing near-term costs while outmoded technology is being replaced•reducing longer-term costs when environmental regulations are being enforced, waste dis-•posal and energy costs are rising, and past environmental damage is being repairedreducing investment required for infrastructure, such as toxic-gas handling, waste treat-•ment, and disposal of hazardous materialproviding the basis for proprietary manufacturing processes•

1 See, for example, Holliday, Schmidheiny, and Watts (2002). The authors are corporate CEOs. The foreword is written by the president of the Business Council for Sustainable Development.2 For more detail, see Salonen (2007), who reports on the Third International Conference on the Circular Economy, held in Tianjin on October 22–23, 2006.

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improving working conditions and the health and safety of workers•enhancing product quality by eliminating harmful impurities or ingredients•facilitating ISO 14001 certification (described in more detail next).•

The numbers recommending green manufacturing are indeed compelling. At a 2007 confer-ence on green chemistry,3 a representative from Pfizer projected that a green approach could save the pharmaceutical industry $10 billion annually and $700 million over the lifetime of a typical product.

Moreover, with the healthier, more pleasant, and safer environment that green manufac-turing will bring, TBNA and TEDA will be able to more easily attract research and develop-ment (R&D) facilities, new universities, companies, and skilled personnel. Some firms located near Tianjin, in TBNA, and in TEDA are already reaping the benefits of green manufacturing as it gains more attention and becomes a requirement in some Chinese industries.4

Current Scientific and Market Status and Future Prospects

Technology Overview

Green manufacturing is about companies choosing manufacturing methods that do no harm to individuals or the environment. Such methods involve a variety of advanced technology and techniques:

green chemistry•green engineering•inherently safe process design•good manufacturing practices.•

Green Chemistry. Green chemistry focuses on the design of chemical processes and prod-ucts that are environmentally benign. Seven techniques can be used in developing such pro-cesses. In turn, 12 principles guide the use of these techniques (see, e.g., EPA, 2008b; “Green Chemistry,” 2008). Green chemistry has been used to develop robust green processes in the chemical, pharmaceutical, pulp and paper, semiconductor, and manufacturing sectors.

Green Engineering. Green engineering is the design, commercialization, and use of pro-cesses and products that are feasible and economical and that, at the same time, minimize (1) generation of pollution at the source and (2) risks to human health and the environment. Green engineering embraces the concept that decisions to protect human health and the envi-ronment can have the greatest impact and cost-effectiveness when applied early, during the design and development phases of a process or product (see EPA, 2007b).

3 The Green Chemistry Business Summit, hosted by the Northern Essex (Mass.) Community College in the United States on October 31, 2007. The meeting was aimed at developing economic and workforce opportunities for clean manufacturing through green chemistry.4 For example, the Surface Mount Technology Association (SMTA) cosponsored with TEDA the Third International Conference and Exhibition on Green Manufacturing in Tianjin, on May 13–14, 2006. The purpose of this conference was to promote green electronic manufacturing and to provide information on the recycling of waste electronic products (see “SMTA Co-Sponsors Conference on Green Manufacturing in China,” 2006).

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Inherently Safe Process Design. Inherently safer chemical processes involve the use of smaller quantities of hazardous materials, fewer hazardous materials, and alternative reaction routes or process conditions (see RSC, 2007). The goals are to reduce the risk of runaway exo-thermic reactions, fires, explosions, and the generation or release of toxic material. In the past, such events have caused multiple fatalities, severe property damage, environmental damage, and business losses.5

Good Manufacturing Practices. Good manufacturing practices refers to the methods, facil-ities, and controls used in manufacturing and aimed at high-quality, reproducible products meeting the appropriate regulations and standards. For example, the U.S. Food and Drug Administration (FDA) has established requirements for GMPs for medical devices (see Medi-cal Devices, 1996).

The goods and services produced using these four techniques may or may not necessarily be deemed green or safe. But they have a better chance of being so when produced in one of these green manners.6

A 2003 RAND Corporation report7 concluded that green manufacturing can “in some cases eliminate the use and generation of hazardous substances at little or no additional cost” (Lempert et al. (2003, p. 13). In fact, almost half of the manufacturing processes based on green manufacturing that the researchers studied led to a cost savings. Such processes included the following:

use of supercritical carbon dioxide (CO• 2) as a polymerization solvent (DuPont™ Teflon®)a three-step process based on the atom economy principle for making ibuprofen (Celanese •and BASF)many examples of biobased processes•several methods of purifying water without using chlorine•inert anodes for aluminum production (Alcoa)•a redesigned process for manufacturing antivirals (Roche Pharmaceuticals Cytovene®)•elimination of chlorofluorocarbons in printed wire board and electronic assembly and •testing (IBM)a zero-waste process for production of glyphosate (Monsanto Roundup®).•

Two examples offer further insight into the current state of the art:Cleaner Production in Printed-Circuit Manufacture. A case study done by China’s

National Development and Reform Commission on this topic described the following steps in a green manufacturing process:

Electroplate lead (Pb)–tin (Sn) by using ammonium-sulphonate solution instead of flu-1. oborate solution.

5 It should be noted that, in some cases, changes made to improve the environment have resulted in inherently less safe designs. For example, the collection of vent-discharge gases for incineration or for absorption onto carbon beds has resulted in explosions when the composition of the gases in the vent system has entered the flammable range.6 Conversely, products that are called green may be produced in a plant that does not thoroughly employ green chemistry or green engineering.7 RAND researchers analyzed 25 examples of manufacturing processes based on the seven areas of green chemistry and principles of green engineering.

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Recycle the spent solution.2. Use counterflow and spraying-rinse technology.3. Remove resin residue by using potassium-permanganate solution instead of chromate 4. and sulphuric acid.Use electroless copper solution without any chelates.5.

Manufacture of Chromium Compounds. Chromium compounds are important, basic chemicals essential to many industries. In the traditional process for manufacturing these compounds, the utilization efficiency of resources and energy is quite low. Large amounts of chromium-containing, toxic, solid wastes and exhaust gas are discharged, resulting in serious pollution problems.

The Chinese Academy of Sciences (CAS) Institute of Process Engineering developed a green manufacturing process for chromium compounds that achieves higher efficiency of resource utilization and zero emissions of chromium-containing waste residue. The process involves altering the process chemistry, modifying the reactor and its operation, regenerating and recycling reaction media, and comprehensive use of resources. A demonstration plant with an annual production capability of 10,000 tons using this green process operates in Henan province.

Regulatory Overview

ISO is a multinational organization of representatives from national standards groups. The vol-untary international ISO 14000 standard spells out environmental-management standards. It can lead to third-party ISO 14000 certification, which can be an important asset in competi-tion to serve international markets (see Praxiom Research Group Limited, 2008). ISO 14001 2004 is an international, voluntary standard for environmental management. It specifies a set of requirements for environmental-management systems. The purpose of this standard is to help all types of organizations protect the environment, prevent pollution, and improve their environmental performance.

Since 2006, the EU has adopted two important regulatory requirements governing the merchandise-export trade—in particular, the consumer-electronics sector:

Directive 2002/96/EC on waste electrical and electronic equipment (WEEE): The EU •made this standard effective in August 2007. It is aimed at reducing the amount of waste produced by general electrical and electronic equipment. Its regulations also serve to edu-cate consumers about reducing waste by reusing, recycling, and recovering electronics that they use on a daily basis.Directive 2002/95/EC creating a restriction on hazardous substances (RoHS): This EU •standard became effective in July 2006. It focuses primarily on the use of potentially harmful substances, such as mercury and lead, that are typically found in electrical appli-ances and medical devices.

China has recently followed suit by launching its own regulations, motivated by the need of packaging-equipment suppliers in the southern China to integrate their manufacturing methods into the customers’ manufacturing process. In 2007, China’s National Development and Reform Commission published clean production–evaluation standards for six industries. These standards are aimed at reducing air and water pollution. They include energy consump-

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tion, resource consumption, and pollutant-discharge indexes for the following sectors: cement, fermentation, soda ash, machinery, sulphuric acid, and leather. Their focuses are on saving raw material and energy, avoiding the use of harmful or poisonous material, and decreasing the discharge of industrial waste (see China Internet Information Center, 2007).

China’s environmental regulators have also joined forces with the nation’s banking regu-lators to promote pollution control and sound environmental practices. For example, China’s central bank will now take into account a company’s environmental records when it performs loan reviews (Zhiming, 2007). This suggests that the Chinese central government is losing patience with industries that consistently ignore environmental regulations. In addition, the China Banking Regulatory Commission (CBRC) has called for lenders to reduce or retrieve loans made to firms with obsolete production facilities. And instructions were passed down to banks to sharpen their scrutiny of loans already granted to firms with high levels of energy consumption. All of these measures are consistent with China’s pledge in its 11th five-year plan (2006–2010) to place environmental protection at the forefront of its economic policies.

According to Chan Kei-biu (2005), chair and managing director of Surface Mount Tech-nology and honorary chair of the Hong Kong Green Manufacturing Alliance,8 much green manufacturing in China’s electronics sector is in direct response to these recent EU, and now Chinese and Korean, RoHS regulations. Other industry sectors are following suit. China’s Ministry of Science and Technology recently provided the China Machinery Industry Federa-tion with funding to host a symposium to develop the China Green Manufacturing Technol-ogy Industry Innovation Alliance. This alliance is aimed at enhancing the core competitiveness of China’s manufacturing industries.

Market Overview

Today, major multinational corporations are embracing green manufacturing. General Electric (GE), with its Ecomagination initiative, is a prominent example. Others include Dow Chemi-cal, General Motors (GM), BASF, and the former DaimlerChrysler.9 Since 1996, the U.S. Environmental Protection Agency (EPA) has presented Presidential Green Chemistry Chal-lenge Awards to winners that include Hercules, Merck, Dow, Bristol-Myers Squibb, DuPont, Pfizer, PPG Industries, and Novozymes.10 Several of these companies have developed a Process Greenness Scorecard to measure the greenness of their processes.11

Many such prominent U.S. and European custom chemical companies are diversifying their operations to leverage lower-cost production. They are searching for suppliers and part-ners in Asia—particularly in India and China, which now manufacture a significant portion of the world’s active pharmaceutical ingredients and intermediates at much lower cost than their

8 This organization was established in February 2005 to advise companies in Hong Kong about how to adopt green prac-tices and comply with stricter standards.9 These companies are all discussed in Holliday, Schmidheiny, and Watts (2002). 10 See EPA (2008). Similar awards have been established in Australia, Canada, Italy, Japan, and the UK, as described in Appendix C, which also lists recent winners of the EPA Presidential Green Chemistry Challenge Awards.11 Bristol-Myers Squibb’s Process Greenness Scorecard uses a weighted scale to rate 16 parameters that affect production, including solvent-recovery percentage, amount of liquid and solid process waste, number of listed reagents, and potential to emit. The scorecard facilitates taking a holistic approach to reviewing the company’s impact on the environment (see EPA, 2007c).

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Western competitors (Chemical and Engineering News, 2008). These Western firms look for not only a supply of talented chemists and engineers but also, often, the use of GMPs.

By some accounts, India is currently in a favorable position compared with China in terms of GMP production and product development (Chemical and Engineering News, 2008). However, that situation may be changing as China passes new GMP regulations and Western firms build GMP plants in China. According to the San Francisco Business Times, “China’s an open field for green technology and everyone wants to farm it.” Venture capitalists and clean-tech executives worldwide are establishing offices, building industrial parks, and seeding clean technology startups in the country (L. Wilson, 2007). Kleiner Perkins Caufield and Byers, Khosla Ventures, Applied Materials, Miasolé, and Element Partners are several examples.

Element Partners is Draper Fisher Jurvetson’s clean-technology group. Its managing director, John Rockwell, has spoken enthusiastically of the prospects in China: “It’s a fantastic opportunity. Both as a user and as a potential place to develop technology, China is a crucial place to be now.” Rockwell’s group is one of a half-dozen venture-capital firms supporting a clean-technology industrial park in the heart of Jiangsu province. This joint venture between the Jiangsu officials and Michigan-based Cleantech Group plans ultimately to host 20 clean-technology companies specializing in such areas as water purification, energy efficiency, and next-generation fuels (L. Wilson, 2007).

Other examples of companies—both Chinese and foreign—are plentiful:China Wind Systems. In early 2008, China Wind Systems completed construction of a

highly automated, state-of-the-art green manufacturing facility in Wuxi City. Its strategy for the facility has three phases:

In the initial phase, China Wind Systems will produce rolled rings up to 6 meters in •diameter, as well as other windmill components, such as yaw bearings, shafts, and rotor blades.In phase two, the company intends to machine rolled rings into yaw bearings.•In phase three, the company will manufacture other windmill components, such as tur-•bine leaves. By this time, it will be able to produce forged rolled rings up to 8 meters in diameter weighing up to 150 tons, as well as shafts of 8-meter diameter weighing up to 500 tons. These components will suit different applications and processes in the wind-energy industry (see “China Wind Systems Begins First Phase of Expansion Plan,” 2008).

China Wind Systems has already purchased some of the equipment to manufacture the components planned for the first phase, including a 6-meter ring-rolling mill and a 4,500-ton oil press. It will purchase additional equipment during phases two and three.

Beijing Pony Labs. At the 2005 Motorola China Technology Symposium, director Song Wei of Beijing Pony Labs announced,

Through our cooperation with Motorola, we have set up a state-of-the-art lab for the material testing for electronic components and products. It is a great honor to be in the IEC [International Engineering Consortium] standard group, which [is] championed by Motorola technical experts to develop global standards on RoHS (Restriction of Hazard-ous Substances) restricted material test. We are also pleased that with Motorola’s education

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and support we have conducted training on the latest progress of [Europe’s] rules on the WEEE/RoHS to many companies in China. (Motorola, 2005)

At the same symposium, Xia Zhidong of the College of Materials Science and Engineering of the Beijing University of Technology described the launch of a project with Motorola Labs in China on handling the waste produced by manufacturing of electrical and electronic equip-ment: “All the technologies developed will follow the green design concept to achieve low-cost, low-energy consumption and no pollution, high efficiency, and high profit” (Motorola, 2005).

World Wide Stationery Holding. In 2007, World Wide Stationery Holding won the Chi-nese Office Products Awards Corporate Social Responsibility Award. The world’s largest man-ufacturer of metal bindery parts, World Wide had built a green manufacturing environment by taking the following steps:

developing an environmental-protection system and beginning the process of getting the •ISO 14001 certificationestablishing treatment of used water•reducing plant-noise level to meet the level III standards of GB12348-1990 (China’s Stan-•dards for Noise at Boundary of Industrial Enterprise) in the plant areaestablishing treatment of scrapped materials•establishing treatment of polluted air•establishing control of resource utilization and energy conservation•embarking on content analysis of raw materials, e.g., analyzing the chemical contents of •raw materials to avoid doing harm to the environmentestablishing efficient use of raw materials.•

In recognition of these efforts, the Dongguan local government in 2002 had also granted World Wide the award of Poison-Free Enterprise. The company’s stated intention is to “con-tinue to invest in the enhancement of hardware and software to comply with international environmental protection standards (e.g. ISO 14001) and other standards set by the local gov-ernment” (see World Wide Stationary Holding Co., Ltd., 2007).

Otis Elevator Company. In TEDA, Otis Elevator, a unit of United Technologies, operates the world’s first green elevator-manufacturing facility, producing environmentally friendly ele-vator systems. With sales of more than 100,000 units since released in 2000, the Gen2 elevator system has received widespread acclaim for its environmental benefits. In 2005, it made Otis the first elevator company to receive the Green Product Award from the China Environmental Protection Foundation. In 2006, the Gen2 system was named one of Spain’s 100 best ideas by the country’s leading business magazine, Actualidad Económica. The Chinese government also recognized it as one of China’s “Top 10 Architectural Science and Technology Achievements” (see Otis Elevator Company, 2007).

A green manufacturing program in the United States may provide an instructive model for TEDA. The American Institute of Chemical Engineers (AIChE) and the EPA share a mutual interest in advancing programs aimed at improving ecoefficiency, protecting the envi-ronment, developing more-sustainable green manufacturing processes, and helping integrate ecoefficiency and pollution prevention into industrial management systems across a range of industries and companies in those industries. The two have partnered to establish a pro-

144 The Global Technology Revolution China, In-Depth Analyses

gram focused on helping industry to maintain its competitiveness in the global economy and become more sustainable, with the goal of radically changing how process and product design are undertaken.

This program has three main thrusts:

Develop a framework for evaluating new green engineering and green chemistry •approaches to determine their potential commercial feasibility and value to industry.Develop tools and methods for industrial practitioners that support the design of sustain-•able manufacturing processes and products, including concepts from such areas as indus-trial ecology, life-cycle assessment, and design for the environment.Promote these concepts and their life-cycle commercial benefits to different stakeholders •(e.g., academia, senior industrial management, developers of manufacturing sites, practic-ing engineers, managers of process-design functions, technicians).

Relevant Capacity Available to TBNA and TEDA

TBNA and TEDA have already embraced certain green manufacturing principles in their industrial recycling efforts in the automotive, electronics, chemicals, and biopharma sectors. Examples include the following:

Tianjin Toyota’s practice of reusing waste steel•Taiding Environmental Technology’s practice of recycling IBM’s electronic waste•Tianjin Toho Lead Recycling Company•Novozymes’ reuse of wastewater for irrigation and use of residues as fertilizer.•

Several companies located in TEDA (e.g., Otis Elevator, Motorola) already have programs in green chemistry and experience with green manufacturing. In addition, several winners of the EPA Presidential Green Chemistry Challenge Awards, such as PPG Industries and Novozymes, are already present in TEDA.

Drivers and Barriers

In Chapter Three, we identified eight factors that we believe encompass the most-significant drivers and barriers for TBNA to develop and implement the seven selected technology appli-cations (TAs). We now discuss how those factors may influence TBNA’s implementation of green manufacturing.

China’s need to raise energy efficiency and reduce impact on the environment will be a driver. This is part of the worldwide trend toward green energy, green processes, and sustain-able development, as reflected in China’s laws and policies and the growing number of compa-nies adopting these approaches. However, cost can become a barrier, especially when an exist-ing plant needs to be renovated or replaced. In fact, cost can sometimes make it prohibitive to implement green manufacturing practices. For example, in cases in which a process would need to be introduced into an existing plant environment, it may be easier and more eco-nomical to go with old technology for which recycle streams, energy flows, and waste-disposal

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needs are readily known or can be calculated. A new, untried process introduces risks and new training tasks. However, green manufacturing can provide a competitive advantage in many specific cases, as demonstrated in Lempert et al. (2003) referenced earlier in this chapter. The justification for financing green manufacturing initiatives—be they introduced in new plants or retrofitted in existing facilities—must be based on such advantages.

China’s national policies that promote the conservation of resources and reduction of pol-lution and, in some cases, green manufacturing will be a driver. For example, in 2007, Chi-na’s National Development and Reform Commission published clean production–evaluation standards for six industries. These standards are aimed at reducing air and water pollution. They include energy consumption, resource consumption, and pollutant-discharge indexes for the following sectors: cement, fermentation, soda ash, machinery, sulphuric acid, and leather. Their focuses are on saving raw material and energy, avoiding the use of harmful or poisonous material, and decreasing the discharge of industrial waste (China Internet Information Center, 2007).

Intellectual property rights (IPR) protection remains a barrier in China both to indige-nous innovation and to the involvement of foreign capital and talent in innovative R&D and ventures (see, e.g., Davies, 2006; OECD, 2008). TBNA enforcement of existing laws would contribute momentum to what has been described as an improving situation (S. Jang, 2007). However, many green manufacturing initiatives involve the adoption of best practices and do not necessarily involve intellectual property.

Finance and banking laws and regulations remain a barrier in China. The Organisation for Economic Co-Operation and Development (OECD) concluded that, while the situation is improving, much more remains to be done to achieve the robust, transparent, and trusted laws and regulations necessary to draw capital from global sources for cutting-edge R&D and innovation (OECD, 2008). Green manufacturing may have some benefits in this area, since China’s environmental regulators have recently joined forces with the nation’s banking regu-lators to promote pollution control and sound environmental practices. For example, China’s central bank will now take into account a company’s environmental records when perform-ing a loan review (Zhiming, 2007). In addition, the CBRC has called for lenders to reduce or retrieve loans made to firms with obsolete production facilities and instructed banks to sharpen their scrutiny of loans already granted to firms with high levels of energy consumption, which may also provide an impetus for green manufacturing.

Human capital should be a driver for TBNA, although its proximity to the growing metropolis of Beijing will provide strong competition for talent. The current workforce in TBNA, TEDA, and the Tianjin municipality more broadly provides a ready source of skilled labor with manufacturing experience, although the current trend in China for students to attend universities rather than technical and vocational schools (T. Fuller, 2005; Wiseman, 2005; “Chinese Manufacturing Slowed by Skilled Worker Shortage,” 2002; “China in Serious Shortage of Skilled Workers,” 2004) will be a challenge for TBNA as it ramps up production. China’s central government recognizes the problem and has taken steps to address it (J. Wu, 2006). Access to university graduates in the Tianjin municipality and in Beijing, especially those with science and engineering (S&E) backgrounds, may be able to provide the needed

146 The Global Technology Revolution China, In-Depth Analyses

R&D staff. TEDA has recognized the importance of attracting such talent locally, from else-where in China, and internationally, and has established incentive programs.12

The development of a culture of R&D and innovation remains a barrier for TBNA as for other organizations in China that seek to develop into state-of-the-art S&E centers (CAS, 2006). For both its existing and new initiatives, TBNA should encourage risk-taking and flexibility to change course as dictated by technical, economic, political, and market developments.

A Possible Path Forward

The suggested long-term goal is for TBNA to become a center for green manufacturing, first through attracting companies at the leading edge of green chemistry and engineering, and eventually through development and demonstration in TBNA and TEDA of new green man-ufacturing processes. Given the drivers and barriers, we recommend that TBNA and TEDA emphasize new plants in their green manufacturing initiatives and focus on processes that offer a cost savings as well as on companies that have already embraced green chemistry.

We suggest that TBNA and TEDA take the following actions:

Communicate TBNA and TEDA’s commitment to green manufacturing in their promo-•tional materials, as well as in discussions with companies planning to locate new manu-facturing plants in TBNA and TEDA. This commitment could be described as an expan-sion of TBNA and TEDA’s existing emphases on recycling and a circular economy. This will be especially appealing to companies that have already embraced the principles of green chemistry. It can also contribute to TBNA and TEDA’s effectiveness in promoting themselves as offering a clean and healthy environment.Possibly form a green-manufacturing alliance similar to that in Hong Kong• 13 and other regions to work together to overcome the barriers to green manufacturing. A 2005 pre-sentation (Chan Kei-biu, 2005) by its honorary chair suggests the following approach:

Review the environmental impact of all parts of the manufacturing processes. –Implement such measures as lead-free soldering, elimination of heavy metals, and use –of halogen-free materials.Comply with standards required or recommended by the EU. –Obtain ISO 14001 certification. –Provide continuous training for staff about the importance of environmental –awareness.

Establish incentives for companies already located in TBNA and TEDA to adopt the prin-•ciples of green chemistry and engineering in green manufacturing. These could include annual awards, tax rebates based on TBNA and TEDA’s utilities’ savings from reduced waste and cleanup of toxic materials, and recognition for contributions to improving the environment in TBNA and TEDA. For example, consider using the approach developed

12 These include incentives to enterprises and to individuals to bring in Ph.D. graduates and awards for outstanding per-formance. For details, see Chapter Three.13 Hong Kong’s Green Manufacturing Alliance was established in February 2005 to advise companies there about how to adopt green practices and comply with stricter standards.

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by Bristol-Myers Squibb, the Process Greenness Scorecard, and providing rewards to those companies that achieve ISO 14001 certification.Consider making bioprocesses for green manufacturing a thrust area in the TEDA •Watson Biotech Park.Use local expertise (e.g., Tianjin University’s School of Chemical Engineering and Tech-•nology) to develop a state-of-the-art R&D program in green chemistry and engineering that could be modeled after the joint program in the United States between the AIChE and the EPA.Make use of noted chemists and engineers with expertise in green manufacturing as •consultants in developing this R&D program. The individuals and conferences listed in Appendix D provide a good starting point. Another source is the speakers and par-ticipants in the Eighth International Symposium on Green Chemistry in China, held at Beijing University of Technology on May 21–24, 2007.

149

pART ThRee

Building for TBNA’s Future

151

ChApTeR eLeVen

Toward Making TEDA a State-of-the-Art Science and Engineering Center

TBNA is pursuing an ambitious strategic vision for TEDA. Today, TEDA is a successful industrial-park complex with a traditional manufacturing base. Tomorrow, it will be a state-of-the-art science and engineering (S&E) center for high-impact, emerging technologies. By capitalizing on opportunities presented by the top cutting-edge technology trends taking shape today, TBNA aims to have established itself—within the next 20 years—as a global S&E leader. In this capacity, it will become an engine for innovation-driven economic development in Tianjin municipality, the Bohai Rim region, and northeastern China as a whole. TEDA will play a vital role in this aspiration.

The strategic vision is the important first step. Now, TBNA is laying the foundation for the critical next task of producing a comprehensive strategic plan for achieving that vision. We believe that the seven technology applications (TAs) we have identified should form a pivotal part of that plan. All are in line with the most-promising global trends. All can be expected to have led to products and to have secured a significant worldwide market by 2020, with consid-erable influence on multiple sectors of society. At the same time, these seven are particularly well suited to TBNA’s current capacities, can help it meet its unique economic-development needs, and support China’s priorities. In short, the TAs we recommend present TBNA with a wealth of opportunities that we believe will position it for the future development it envisions.

We do not expect that TBNA’s future development and economic growth over time will hinge solely on pursuing these seven TAs in TEDA and elsewhere within its borders. In tandem, it should continue to expand its current manufacturing areas and, as other emerging technolo-gies present opportunities, capitalize on them. But as TBNA develops a strategic plan that it intends to put into action in the near term, these seven TAs can form the core of its efforts.

TEDA’s extensive manufacturing base provides a solid platform on which to build as TBNA develops these recommended TAs. The seven fit holistically into an overarching plan, because they all emerge from one or more of TEDA’s current pillar industries. This will make for a fluid transition in which new advances stem from and extend existing capacities, such as TEDA’s automotive and semiconductor manufacturing base; the nanotechnology research, development, and commercialization efforts in TEDA and the Tianjin region; and emerging developments in biotechnology and life sciences in China, the Tianjin region, TBNA, and TEDA (Frew et al., 2008).1

1 Detailed data for that report were derived from interviews of 22 homegrown Chinese health-biotechnology firms, including Tianjin SinoBiotech. The authors note that this constitutes only a small fraction of the “thousands of companies in this sector.”

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In Part Two, we recommended specific action plans for each TA. These seven plans can be integrated into TBNA’s overall strategic plan through three overarching activities:

building state-of-the-art R&D programs in emerging, interdisciplinary technology areas •specifically related to these seven TAsupdating and expanding TBNA and TEDA’s manufacturing and industrial bases in areas •linked to these TAsadopting institutions and implementing local market initiatives that will allow the devel-•opment of products based on these TAs and can position TBNA advantageously to be highly competitive in the global marketplace.

These three overarching activities support and synergize with each other. State-of-the-art R&D can provide the foundation for an updated manufacturing base that, in turn, enables the devel-opment of globally competitive products. An updated and expanded manufacturing base will provide opportunities to prototype innovative products stemming from R&D advances. Regu-lations and standards that meet international norms, as well as laws and policies that create or expand local markets, can both enable new products to be competitive internationally and provide a testing ground to improve performance to global standards.

As the TBNA administrative zone spearheading this effort, TEDA should maintain close connections between its research and manufacturing branches throughout TBNA’s transition from industrial-park complex to S&E center. Staff involved in these two domains should inter-act frequently, for example, through periodic visits to each other’s facilities and the regular exchange of staff. Plans, goals, objectives, and current status evaluations for both should be integrated at the planning and management levels. Only in this way will the R&D being pur-sued be consistent with the needs of the developing manufacturing base.

Because of its location in a region of scarce water resources, as well as the priority in China for economic growth with reduced environmental impact, TBNA’s strategic plan for TEDA and other entities in TBNA should emphasize the efficient use of energy, water, and other resources. A number of the TAs we recommend could be viable parts of this aspect of the plan: Green technologies, such as cheap solar energy and electric and hybrid vehicles, are one example. The use of advanced filters and catalysts to produce and purify water is another. The use of bioassays to identify pathogens that threaten the environment could also play a role. And finally, resource-management approaches, including promotion of green manufacturing, would be vital to this effort.

Positioning TBNA and TEDA for the Future by Building on the Present

Every one of the seven TAs that we recommend can be built on present capacity in TBNA, TEDA, and the Tianjin region.

TEDA currently has strong manufacturing capabilities in the automotive sector, pro-ducing both conventional internal combustion–engine vehicles and electric vehicles and their components. Developing electric and hybrid vehicles and their components would be a natural extension and combination of those capabilities. In broadening the scope of its auto-part man-ufacturing to produce parts for electric and hybrid vehicles as well, TEDA could also build on another existing strength: its research capabilities in batteries and in nanoscale materials.

Toward Making TeDA a State-of-the-Art Science and engineering Center 153

Cheap solar energy and advanced mobile-communication and radio-frequency identifica-tion (RFID) applications can both stem from TEDA’s extensive experience and capabilities in manufacturing semiconductors and electronic products. Each of them can encompass a full spectrum of activities, from the expansion of current manufacturing facilities to new product lines to the development of entirely new capabilities based on R&D advances made in local laboratories.

Filters and catalysts for water purification build directly on TEDA’s current manufactur-ing capabilities in materials and chemicals, especially as integrated into membranes. They also build on local research, development, and demonstration activities, as well as industrial desali-nation projects in the Tianjin region.

Rapid bioassays and molecular-scale drug design, development, and delivery combine TEDA’s experience and capabilities in chemicals, materials, and pharmaceuticals with cutting-edge R&D in biotechnology and nanotechnology. These areas can also form important thrusts in TEDA Watson Biotech Park, ensuring a close connection between TEDA’s research and manufacturing branches.

Green manufacturing encompasses all of TEDA’s current manufacturing base. Many companies both in TEDA and elsewhere in China are already embracing the principles of green chemistry, in this way reducing their environmental footprint while increasing their competitiveness in global markets.

Integrating Specific Action Plans into an Overarching Strategic Plan

The specific action plans described in Part Two can be integrated into an overarching strategic plan that rests on three legs: building a state-of-the-art R&D program; updating and expand-ing TBNA and TEDA’s manufacturing base; and positioning TBNA and TEDA for the global marketplace. Possible approaches that TBNA might adopt in each of these areas are described next.

Building State-of-the-Art Research and Development Programs

In building the R&D programs necessary to implement the seven TAs, TBNA must both make effective use of current R&D capacity and build new and expanded programs that increase the outreach of the current programs and fill currently unmet needs of the selected TAs. The focus and emphases will depend on the quality and quantity of local capacity in the specific R&D areas relevant to each TA. However, TBNA will need to follow this approach regardless of which TAs it decides to pursue.

Make Effective Use of Local R&D Capabilities. TEDA has both its own nanotechnology center (China National Academy of Nanotechnology and Engineering, or CNANE) and exist-ing R&D programs at local (Tianjin) universities that can directly support its development of emerging TAs. For example, CNANE can provide the personnel, expertise, and facilities for the necessary R&D on third-generation solar collectors; advanced membranes, filters, and catalysts for water purification; and molecular-scale drug design, development, and delivery. The technology-foresight sections of Part Two describe in detail the emerging developments in these areas, almost all of which involve understanding the behavior of materials at the nano-scale and developing the ability to fabricate, manipulate, and modify such materials to achieve properties and levels of performance needed for commercial applications. TBNA and TEDA

154 The Global Technology Revolution China, In-Depth Analyses

also have the good fortune to be located in direct proximity to university research groups that are at the leading edge in areas directly related to the TAs of interest. Most notable is the group at Tianjin University (TU) working on carbon nanohorns, which has already demonstrated the potential applicability of these materials as platforms for targeted drug delivery. Other examples include the work on nanoscale filters and desalination demonstration systems at TU and the Nankai University group working on second-generation solar collectors with the Bei-jing Solar Energy Institute.

Expand the Outreach of Existing R&D Programs or Begin Entirely New Ones. TEDA has a number of existing collaborations on which it can build. It can also seek new collabora-tions with world-class research institutions or emerging technology corporations. One example would be to increase the magnitude and breadth of the excellent existing collaboration between Qingyuan Electric Vehicle Company and the U.S. Argonne National Laboratory. Another would be to develop partnerships with companies developing second- and third-generation solar collectors, nanoscale filters and membranes, and nanoscale-formulated drugs identified in Part Two and connect these companies with the appropriate research institutions in TBNA, TEDA, and the Tianjin region.

Updating and Expanding TBNA’s Manufacturing Base

To update and expand its manufacturing base, TBNA must both build on the substantial existing base and bring in new companies and facilities that can provide both state-of-the-art equipment and processing and new manufacturing capabilities necessary for the selected TAs. As with building R&D, the focus and emphases of the effort will depend on the quantity and quality of existing manufacturing capacity relevant to each TA. However, TBNA will need to follow this approach regardless of which TAs it decides to pursue.

Work with Companies That Already Have Facilities in TEDA to Ensure That These Facili-ties Are Issuing the Latest Product Lines and Using Updated Manufacturing Processes. Part of this effort could include discussions with the large automotive manufacturers to encourage them to produce electric and hybrid vehicles in their TEDA plants. Another part could include technology-transfer efforts aimed at incorporating R&D advances made in TBNA, TEDA, or Tianjin laboratories or elsewhere, into products to be manufactured in TBNA—for example, nanostructured batteries or membranes for water purification or desalination.

Bring in New Companies with State-of-the-Art Manufacturing Capabilities in Emerg-ing Technology Areas. One example might be to establish new relationships between Tianjin Biochip Corporation and the leading rapid-bioassay companies worldwide that are described in Part Two. Another example might be to establish manufacturing plants for second- and third-generation solar collectors; nanoscale membranes, filters, and catalysts; or targeted and con-trolled drug delivery, based on new relationships with some of the leading companies in these areas identified in Part Two. Finally, for both new and existing companies, TBNA can promote and reward green chemistry approaches and green manufacturing, which will ensure the use of the most-current and efficient manufacturing processes throughout its facilities. Such rewards might involve, for example, supplements to existing tax incentives, R&D support, subsidies for needed equipment, or awards like those described in Chapter Ten and in Appendix C.

Positioning TBNA and TEDA for the Global Marketplace

The initiatives described here can form the centerpiece for the implementation of TBNA’s stra-tegic plan in a manner that would ensure that its companies that are already serving global

Toward Making TeDA a State-of-the-Art Science and engineering Center 155

markets (e.g., mobile phones) continue to produce products that remain competitive and that its expansions and new initiatives also result in products that will be competitive in global markets.

Encourage or Reward Manufacturers in TBNA That Focus on Health and Environmen-tal Protection. One of the leading global trends today is a focus on health and environmental protection,2 so that anything TBNA can do to encourage or reward manufacturers with that focus will enhance its position and positive profile in global markets. One example might be adopting or developing standards and supporting or requiring certifications, such as ISO 14001. Another might be providing its workers with training in the manufacturing skills needed to produce electric and hybrid vehicles or to establish and sustain firms that can service compo-nents for these vehicles.

Make use of TBNA’s local market as a testing ground for products that could be even-tually marketed elsewhere in China and worldwide. To accomplish this goal, TBNA should define its local market such that products tested and accepted are on a par with accepted prac-tices and standards in global markets. One example might be purchases of electric- and hybrid-vehicle fleets for local use that meet the most-restrictive emissions and mileage performance standards adopted in the United States or the EU. Another might be the use of bioassays devel-oped in TBNA to monitor food and water at demonstrated levels of pathogen detection that would meet U.S. and EU standards. By providing a local market for demonstration and test-ing, TBNA can thus allow its companies to prototype products and learn from consumer expe-rience, thus both continuing to improve their products and establishing their efficacy under real-world conditions. The existence of such test markets, together with TBNA’s emphasis on a green environment with efficient use of energy, water, and other resources and the presence of research institutions and a trained workforce, should complement the existing business incen-tives to help develop a business environment to attract the companies described in Part Two.

2 For a corporate viewpoint, see Holliday, Schmidheiny, and Watts (2002).

157

AppenDIx A

RAND Workshop on TBNA Science and Technology Vision, August 8–9, 2007

RAND Workshop on TBNA Science and Technology Vision, Tianjin, China, August 8–9, 2007

Objectives of the Workshop

Confirm major drivers and barriers to technology development and innovation in TBNA •and TEDA.Explore how easy or difficult it would be to address these major drivers and barriers and •which might be most urgent or fundamental (critical).Investigate how TBNA and TEDA might address them—that is, options for strengthen-•ing drivers and mitigating barriers—and whom TBNA and TEDA might have to work with (e.g., university, industry, international organizations, and other Chinese govern-ment bodies) to strengthen drivers and mitigate barriers.

Wednesday, August 8, 2007Day One, Session I: Introductions and the Big Picture

This session opens the workshop with an articulation of the economic development vision for TBNA and TEDA and the role for technology and innovation, as well as an exploration of how development in TBNA and TEDA is linked to China and northeast Asia.

8:30 a.m.–9:00 a.m. Introduction by Mr. wAnG Kai of TeDA (30 min)Vision for economic development and role of technology and innovation

9:00 a.m.–9:15 a.m. RAnD introduces study, its objectives, and current status

9:15 a.m.–10:00 a.m. Keynote address by Dr. LIU xuelin of the Graduate School of the Chinese Academy of Science

“China’s S&T/Innovation for economic Development and Application to the Bohai Rim”

10:00 a.m.–10:30 a.m. Q&A

10:30 a.m.–10:45 a.m. Break

10:45 a.m.–11:15 a.m. “Regional Cooperation—ne China and ne Asia—and the Future of Bohai Rim economic Development” by Mr. SeGUChI Kiyoyuki, head representative to China for the Bank of Japan

11:15 a.m.–11:45 a.m. Q&A

158 The Global Technology Revolution China, In-Depth Analyses

11:45 a.m.–12:15 p.m. Summary of RAnD May–June interview results and preliminary analysis on relevant technology applications by Dr. Anny wOnG and Dr. Richard SILBeRGLITT (10–15 minutes each)

12:15 p.m.–12:30 p.m. Q&A

12:30 p.m.–2:30 p.m. Lunch at the TeDA cafeteriaLunch talk: “we Can Keep Tianjin Sky Blue—Advanced Clean Fuel Technology Technologies for Clean energy and environmental protection” (30 min) by Dr. ZhOU Li, professor and director of the high pressure Absorption Laboratory, School of Chemical engineering and Technology, Tianjin University

Day One, Session II: Building Human and Technical Capacity

This session explores issues or factors critical to building human and technical capac-ity for innovation in TBNA and TEDA. Further, this session will investigate where actions are most urgently needed or fundamental and options for them. Moderator: Dr. Richard SILBERGLITT, RAND

3:00 p.m.–3:15 p.m. RAnD observations on critical human and technical capacity issues and options for change (Dr. Anny wOnG, RAnD)

3:15 p.m.–3:30 p.m. panelist 1: Mr. Jimmy hUAnG, manager, Tianjin highland energy Technology Development Co., Ltd.

on the importance of both technical and management personnel/expertise to building a successful small technology firm

3:30 p.m.–3:45 p.m. panelist 2: Mr. LI xin, director-in-chief, Tianjin TeDA International Business Incubator, productivity promotion Center

on criteria for evaluating small technology firms (leadership, team, business plan/connection of technology to market)

3:45 p.m.–4:15 p.m. Break

4:15 p.m.–4:30 p.m. Moderator recaps key points, observes major issues raised, provides open forum for discussion

4:30 p.m.–5:15 p.m. Q&A

5:30 p.m.–7:30 p.m. Reception

Thursday, August 9, 2007Day Two, Session III: Building Physical and Institutional Capacity

This session explores issues or factors critical to building physical and institutional capac-ity for innovation in TBNA and TEDA. Further, this session will investigate where actions are most urgently needed or fundamental and options for them. Moderator: Dr. Richard SILBERGLITT, RAND

9:00 a.m.–9:15 a.m. RAnD observations on critical physical and institutional capacity issues and options for change (Dr. Anny wOnG, RAnD)

9:15 a.m.–9:30 a.m. panelist 1: Mr. ChenG Kuiyu, general manager, Tianjin huanke Vehicle Technical Research and Development Co., Ltd.

on R&D/technology innovation + market interface

9:30 a.m.–9:45 a.m. panelist 2: Mr. Ce Meng, vice director/general manager, nanotechnology Industrialization Base of China, nanotechnology Venture Capital Co., Ltd.

on R&D/technology innovation + finance interface

RAnD workshop on TBnA Science and Technology Vision, August 8–9, 2007 159

9:45 a.m.–10:00 a.m. panelist 3: Ms. ZhenG xiangjun, manager, Beijing Sunbio Biotech Co., Ltd.on R&D/technology innovation + bureaucracy interface

10:00 a.m.–10:15 a.m. panelist 4: Dr. DUAn wenbin, professor of economics, nankai Universityon R&D/technology innovation + industry interface

10:15 a.m.–10:45 a.m. Break

10:45 a.m.–11:00 a.m. Moderator recaps key points, observes major issues raised, open forum for discussion

11:00 a.m.–12:00 p.m. Q&A

12:00 p.m.–1:30 p.m. Lunch at the TeDA cafeteria

Day Two, Session IV: Summary, Conclusions, Next Steps

A look at lessons learned and strategies for financing technological innovation for economic growth, in addition to summaries and conclusions of discussions in this two-day workshop. Moderator: Dr. Richard SILBERGLITT, RAND

2:00 p.m.–2:45 p.m. “Financing Innovation for economic Growth” by Ms. Anne STeVenSOn-YAnG, director, Jp McGregor and Co., and former managing director of the U.S. Information Technology Office in Beijing

2:45 p.m.–3:15 p.m. Q&A

3:15 p.m.–3:45 p.m. Break

3:45 p.m.–4:30 p.m. “Investing in Green Technologies” by Dr. patrick TAM, general partner, China environment Fund, Tsing Capital

4:30 p.m.–5:00 p.m. Q&A

5:00 p.m.–5:15 p.m. RAnD summary, conclusions, next steps (Dr. Richard SILBeRGLITT and Dr. Anny wOnG, RAnD)

End of workshop

161

AppenDIx B

TEDA Meeting Agenda, December 5, 2007, and List of Participants

TEDA-TBNA Meeting, December 5, 2007: Agenda

9:00 a.m.–9:30 a.m. Registration and breakfast

9:30 a.m.–9:45 a.m. Meeting objectives and context

9:45 a.m.–10:45 a.m. John Servo, vice president, Dawnbreaker“Suggestions for the Development and Acceleration of Advanced Technology”Group discussion to follow.

10:45 a.m.–11:00 a.m. Break

11:00 a.m.–12:00 p.m. RAnD research for TeDA/TBnA

12:00 p.m.–12:30 p.m. Lunch, with the showing of a film on RAnD’s history and evolution

12:30 p.m.–2:00 p.m. Technology applications and sustainable development

2:00 p.m.–2:30 p.m. Break

2:30 p.m.–4:30 p.m. Metrics of innovation

4:30 p.m. end

Table B.1TEDA-TBNA Meeting Participants

Name Position Organization Biography

Shoshana Avertick

Foreign affairs officer

U.S. Department of State, Bureau of Verification, Compliance, and Implementation, Office of Biological weapons Affairs

Jocelyn Chan Associate director

U.S. Chamber of Commerce, Greater China

At the U.S. Chamber’s China division, Chan is responsible for financial-services reform and some industrial-policy work. prior to working at the chamber, she was at the hong Kong Monetary Authority, where she worked on banking regulations and policy development.

patrick Chen policy Research Department, TeDA

Keith Crane Senior economist

RAnD Corporation In 2003, Crane served as an economic policy analyst to the Coalition provisional Authority in Baghdad, Iraq. Recent RAnD publications include The Beginner’s Guide to Nation-Building and Encouraging Trade and Foreign Direct Investment in Ukraine.

162 The Global Technology Revolution China, In-Depth Analyses

Name Position Organization Biography

Andreas Goldthau

Transatlantic postdoctoral fellow in international relations and security

RAnD Corporation Goldthau has a ph.D. in political science from the Free University of Berlin. his current research interest lies in energy security with a special focus on Russia, the Commonwealth of Independent States, and China and on governance issues related to energy markets.

John Grayzel Baha’i Chair for world peace

University of Maryland, Center for International Development and Conflict Management

Grayzel retired from the U.S. Agency for International Development after 27 years of work in a variety of areas, including policy reform, technology innovation, and improvement to both basic and higher education in developing countries. he was the U.S. technical representative to the United nations educational, Scientific, and Cultural Organization for the global initiative education for All and for poverty reduction to the Organisation for economic Co-Operation and Development.

walter howes Managing partner

Verdigris Capital howes served in the U.S. Department of energy, where he was principal adviser to the Office of the Secretary of energy in the formulation, guidance, and implementation of the department’s privatization and acquisition reform initiatives. he has more than 20 years of experience in banking and venture capital.

Kent hughes Director woodrow wilson International Center for Scholars, program on Science, Technology, America, and the Global economy

hughes served as associate deputy secretary of commerce, president of the Council on Competitiveness, and chief economist to Senate Majority Leader Robert C. Byrd. he currently directs a science and technology program at the woodrow wilson International Center for Scholars.

evan Michelson Research associate

woodrow wilson International Center for Scholars, project on emerging nanotechnologies

Michelson has worked on a wide variety of issues in science and technology policy, including the impact of S&T on international development, public understanding of emerging technologies, S&T foresight, and the intersection between science and popular culture.

parry norling Corporate technology adviser (ret.)

Dupont norling worked for 33 years at Dupont, where he held a number of research and development and production-management positions, including corporate director of health and safety. he has also served as an American Association for the Advancement of Science Fellow at the RAnD Corporation and corporate technology adviser to Dupont’s chief technology officer.

erich w. Schlenke

postdoctoral research fellow

pennsylvania State University, Rock ethics Institute

Schlenke conducts research on the production of ecological knowledge in contemporary China. he seeks to develop new insights into how decisionmaking capacity can be improved as it pertains to the intersections of society and ecology.

John Servo Vice president

Dawnbreaker Servo assists private clients with gathering market research, strategic planning, and contract negotiations. Dawnbreaker provides commercialization assistance to advanced-technology firms. Servo has more than 20 years of experience in sales and management.

Lance Sherry executive director

George Mason University, Center for Air Transportation Systems Research

Sherry has worked in a wide variety of areas, including development of flight simulators, human-computer interaction processes, and analysis of emerging technologies.

Table B.1—Continued

TeDA Meeting Agenda, December 5, 2007, and List of participants 163

Name Position Organization Biography

paul Tseng president Advanced Building performance

Tseng is a consultant in energy optimization and building performance using the commissioning process and integrated design for building owners, including commercial developers and institutional owners. he has more than 30 years in high-performance building design, energy management, and sustainable design. Currently, he is engaged in green-building consulting and deployment of advanced renewable and energy technologies in the building sector. he works closely with national organizations, including the U.S. Green Building Council; American Society of heating, Refrigerating, and Air-Conditioning engineers; national Institute of Building Sciences; and Alliance to Save energy.

wang Kai Director policy Research Department, TeDA

Table B.1—Continued

165

AppenDIx C

Green Chemistry Awards of National Governments

The Presidential Green Chemistry Challenge Awards are sponsored by the U.S. Environmental Protection Agency (EPA) as an effort to recognize individuals and businesses for innovations in green chemistry in the United States. Typically, five awards are given each year, one in each of five categories: academic, small business, greener synthetic pathways, greener reaction con-ditions, and designing greener chemicals. Nominations are accepted the prior year and evalu-ated by an independent panel of chemists convened by the American Chemical Society. EPA (2008a) reports that, collectively, the award-winning technologies from 1996 to 2008 have eliminated more than 1.1 billion pounds of hazardous chemicals and solvents, saved more than 21 billion gallons of water, and eliminated nearly 400 million pounds of carbon dioxide releases to air.

The Royal Australian Chemical Institute (RACI) presents Australia’s Green Chemistry Challenge Awards. This award program is similar to that at the EPA, although RACI has included a category for green-chemistry education as well as small business and academic or government.

The Canadian Green Chemistry Medal is an annual award given to an individual or group for promotion and development of green chemistry in Canada and internationally. The winner is presented with a sculpture and a citation recognizing the achievements.

Green chemistry activities in Italy center on an interuniversity consortium known as INCA. Beginning in 1999, INCA has given three awards annually to industry for applications of green chemistry. The winners receive a plaque at the annual INCA meeting.

In Japan, the Green and Sustainable Chemistry Network (GSCN), formed in 1999, is an organization consisting of representatives from chemical manufacturers and researchers. In 2001, the organization began an award program. GSCN awards are to be granted to individu-als, groups, or companies who greatly contributed to green chemistry through their R&D and industrialization. The achievements are awarded by ministers of related government agencies (INCA, 2008).

In the United Kingdom, the Crystal Faraday Partnership, a nonprofit group founded in 2001, awards businesses annually for incorporation of green chemistry. Crystal Faraday has given the Green Chemical Technology Awards since 2004; before that, the awards were pre-sented by the Royal Society of Chemistry.

The Royal Swedish Academy of Sciences recognized the importance of green chemistry in 2005 by awarding Yves Chauvin, Robert H. Grubbs, and Richard R. Schrock the Nobel Prize in Chemistry for “the development of the metathesis method in organic synthesis.” The academy stated, “this represents a great step forward for ‘green chemistry,’ reducing potentially

166 The Global Technology Revolution China, In-Depth Analyses

hazardous waste through smarter production. Metathesis is an example of how important basic science has been applied for the benefit of man, society and the environment” (KVA, 2005).

U.S. EPA Presidential Green Chemistry Challenge Award Winners (EPA, 2008d)

Kaichang Li, professor, Oregon State University; Columbia Forest Products; and Hercules Incorporated

Development and Commercial Application of Environmentally Friendly Adhesives for Wood Composites. Innovation and Benefits. Adhesives used in manufacturing plywood and other wood composites often contain formaldehyde, which is toxic. Li developed an alternate adhesive made from soy flour. The environmentally friendly adhesive is stronger than and cost-competitive with conventional adhesives. During 2006, Columbia used the new, soy-based adhesive to replace more than 47 million pounds of conventional, formaldehyde-based adhesives.

Headwaters Technology Innovation Group

Direct Synthesis of Hydrogen Peroxide by Selective Nanocatalyst Technology. Innova-tion and Benefits: Hydrogen peroxide is an environmentally friendly alternative to chlorine and chlorine-containing bleaches and oxidants. It is expensive, however, and its current manu-facturing process involves the use of hazardous chemicals. Headwaters Technology Innovation Group (HTIG) developed an advanced metal catalyst that makes hydrogen peroxide directly from hydrogen and oxygen, eliminates the use of hazardous chemicals, and produces water as the only by-product. HTIG has demonstrated its new technology and is partnering with Evonik Industries (formerly, Degussa) to build plants to produce hydrogen peroxide.

Cargill

BiOH™ Polyols. Innovation and Benefits: Foam cushioning used in furniture and bed-ding is made from polyurethane, a synthetic material. One of the two chemical building blocks used to make polyurethane is a polyol. Polyols are conventionally manufactured from petro-leum products. Cargill’s BiOH polyols are manufactured from renewable, biological sources, such as vegetable oils. Foams made with BiOH polyols are comparable to foams made from conventional polyols. As a result, each million pounds of BiOH polyols saves nearly 700,000 pounds of crude oil. In addition, Cargill’s process reduces total energy use by 23 percent and carbon dioxide (CO2) emissions by 36 percent.

NovaSterilis

Environmentally Benign Medical Sterilization Using Supercritical Carbon Dioxide. Inno-vation and Benefits: Sterilizing biological tissue for transplant is critical to safety and success in medical treatment. Common, existing sterilization techniques use ethylene oxide or gamma radiation, which are toxic or have safety problems. NovaSterilis invented a technology that uses CO2 and a form of peroxide to sterilize a wide variety of delicate biological materials, such as graft tissue, vaccines, and biopolymers. Its Nova 2200™ sterilizer requires neither hazardous ethylene oxide nor gamma radiation.

Green Chemistry Awards of national Governments 167

Arkon Consultants and NuPro Technologies

Environmentally Safe Solvents and Reclamation in the Flexographic Printing Industry. Innovation and Benefits: Flexographic printing is used in a wide array of print jobs, such as food wrappers and boxes, but the process uses millions of gallons of solvents each year. Arkon and NuPro developed a safer chemical-processing system that reduces the amounts of solvents needed for printing. The new system eliminates hazardous solvents, reduces explosion potential and emissions during solvent recycling, and increases worker safety in the flexographic print-ing industry.

Galen J. Suppes, professor, University of Missouri–Columbia

Biobased Propylene Glycol and Monomers from Natural Glycerin. Innovation and Ben-efits: Suppes developed an inexpensive method to convert waste glycerin, a by-product of biodiesel-fuel production, into propylene glycol, which can replace ethylene glycol in automo-tive antifreeze. This high-value use of the glycerin by-product can keep production costs down and help biodiesel become a cost-effective, viable alternative fuel, thereby reducing emissions and conserving fossil fuels.

BASF SE

An Ultraviolet-Curable, One-Component, Low–Volatile Organic Compound Refinish Primer: Driving Eco-Efficiency Improvements. Innovation and Benefits: BASF developed a new automobile-paint primer that contains less than half the amount of volatile organic com-pounds (VOCs) used in conventional primers. The new primer is also free of diisocyanates, a major source of occupational asthma. Use in repair facilities has shown that only one-third as much of this primer is needed than conventional primer and that waste is reduced from 20 percent to nearly zero.

Archer Daniels Midland Company

Archer RC™: A Nonvolatile, Reactive Coalescent for the Reduction of VOCs in Latex Paints. Innovation and Benefits: Latex paints require coalescents to help the paint particles flow together and cover surfaces well. Archer Daniels Midland developed Archer RC™, a new, biobased coalescent to replace traditional coalescents that contain VOCs. This new coalescent has other performance advantages as well, such as lower odor, increased scrub resistance, and better opacity.

Robin D. Rogers, professor, University of Alabama

A Platform Strategy Using Ionic Liquids to Dissolve and Process Cellulose for Advanced New Materials. Innovation and Benefits: Rogers developed methods that allow cellulose from wood, cloth, or even paper to be chemically modified to make new biorenewable or biocom-patible materials. His methods also allow cellulose to be mixed with other substances, such as dyes, or simply to be processed directly from solution into a formed shape. Together, these methods may save resources, time, and energy.

Engelhard Corporation (acquired by BASF in June 2006)

Engelhard Rightfit™ Organic Pigments: Environmental Impact, Performance, and Value. Innovation and Benefits: Rightfit azo pigments contain calcium, strontium, or barium; they replace conventional, heavy metal–based pigments containing lead, hexavalent chromium, or

168 The Global Technology Revolution China, In-Depth Analyses

cadmium. Because of their low potential toxicity and very low migration, most of the Rightfit azo pigments have received U.S. Food and Drug Administration (FDA) and Canadian Health Protection Branch (HPB) (now Health Canada) approval for indirect food-contact applica-tions. By 2004, Engelhard expected to have replaced all 6.5 million pounds of its heavy metal–based pigments with Rightfit pigments.

Charles A. Eckert and Charles L. Liotta, professors, Georgia Institute of Technology

Benign Tunable Solvents Coupling Reaction and Separation Processes. Innovation and Benefits: Eckert and Liotta found ways to replace conventional, organic solvents with benign solvents, such as supercritical CO2 or water “tuned” by carefully selecting both temperature and pressure. These methods combine reactions and separations, improving efficiency and reducing waste in a variety of industrial applications.

Süd-Chemie

A Wastewater-Free Process for Synthesis of Solid Oxide Catalysts. Innovation and Ben-efits: Süd-Chemie’s new process to synthesize solid oxide catalysts used in producing hydro-gen and clean fuel has virtually zero wastewater discharge, zero nitrate discharge, and no or little NOx emissions. Each 10 million pounds of oxide catalyst produced by the new pathway eliminates approximately 760 million pounds of wastewater discharges, 29 million pounds of nitrate discharges, and 7.6 million pounds of NOx emissions. The process also saves water and energy.

SC Fluids

SCORR—Supercritical CO2 Resist Remover. Innovation and Benefits: Supercritical-CO2 resist remover (SCORR) technology cleans residues from semiconductor wafers during their manufacture. SCORR improves on conventional techniques: It minimizes hazardous solvents and waste, is safer for workers, costs less, and uses less water and energy. SCORR also elimi-nates rinsing with ultrapure water and subsequent drying.

Eric J. Beckman, professor, University of Pittsburgh

Design of Non-Fluorous, Highly CO2-Soluble Materials. Innovation and Benefits: CO2 is a nontoxic chemical that can be used as a solvent in many industrial processes. Beckman devel-oped new detergents that allow a broad range of substances to dissolve in CO2. Any process that can now use CO2 may reduce or eliminate the use of hazardous solvents.

Chi-Huey Wong, professor, Scripps Research Institute

Enzymes in Large-Scale Organic Synthesis. Innovation and Benefits: Wong developed methods to replace traditional reactions requiring toxic metals and hazardous solvents. His methods use enzymes, environmentally acceptable solvents, and mild reaction conditions. His methods also enable novel reactions that were otherwise impossible or impractical on an industrial scale. Wong’s methods hold promise for applications in a wide variety of chemical industries.

Karen M. Draths and John W. Frost, professor, Michigan State University

Use of Microbes as Environmentally Benign Synthetic Catalysts. Innovation and Ben-efits: Adipic acid, a building block for nylon, and catechol, a building block for pharmaceuti-

Green Chemistry Awards of national Governments 169

cals and pesticides, are two chemicals of major industrial importance. Using environmentally benign, genetically engineered microbes, Draths and Frost synthesized adipic acid and catechol from sugars. These two chemicals are traditionally made from benzene, a petroleum product; they can now be made with less risk to human health and the environment.

Legacy Systems

ColdStrip™, A Revolutionary Organic Removal and Wet Cleaning Technology. Inno-vation and Benefits: During manufacture, silicon-based semiconductors and flat-panel dis-plays require cleaning to remove manufacturing residues, usually with corrosive acid solutions. Legacy Systems developed the ColdStrip process, which uses only water and oxygen to clean silicon semiconductors. ColdStrip has the potential to cut the use of corrosive solutions by hundreds of thousands of gallons and save millions of gallons of water each year.

Joseph M. DeSimone, professor, University of North Carolina at Chapel Hill and North Carolina State University

Design and Application of Surfactants for Carbon Dioxide. Innovation and Benefits: DeSimone developed new detergents that allow CO2, a nontoxic gas, to be used as a solvent in many industrial applications. Using CO2 as a solvent allows manufacturers to replace tradi-tional, often hazardous chemical solvents and processes, conserve energy, and reduce worker exposure to hazardous substances.

171

AppenDIx D

Some Recent Conferences and Academic Research on Green Manufacturing in China

GreenTech Expo 2008: International Exhibition on Green Manufacturing, Energy Conserva-tion, Pollution and Emission Control, and Green Energy, Shenzhen Convention and Exhibi-tion Center, Shenzhen, Guangdong Province, September 17–19, 2008. This conference was designed to take advantage of Guangdong’s robust manufacturing sector and mass-market demand for sophisticated environmental technology (Environmental Expert, undated).

The Eighth International Symposium on Green Chemistry in China (8th ISGCC’ 2007), Beijing University of Technology, Beijing, May 21–14, 2007. International Symposium on Green Chemistry in China (ISGCC) events are sponsored by the University of Science and Technology of China (USTC), with an international coordination committee on green chem-istry. The ISGCC, together with the Annual Green Chemistry and Engineering Conferences in the United States and the Gordon Research Conferences on Green Chemistry in Europe, are major international conferences on green chemistry (8th ISGCC’ 2007, undated).

Frontiers of Mechanical Engineering in China: Selected Publications from Chinese Uni-versities seeks to provide a forum for a broad blend of peer-reviewed academic papers in order to promote rapid communication and exchanges between scientists in China and abroad. Green manufacturing is one of the many subject areas featured (Frontiers, various dates).

Recent Progress in Bioorganic and Green Chemistry Studies: Qingxiang Guo et al., School of Chemistry and Materials Science, USTC. This describes research in the Bioorganic Chemistry Laboratory led by Qingxiang Guo, which focuses on molecular recognition, elec-tron-transfer reactions in supramolecular systems, and green chemistry. Most relevant to green manufacturing is research aimed at increasing the efficiency and selectivity and reducing the generation of waste in organic synthetic reactions (Guo et al., 2005).

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References

“21-5 Number of New Students Enrollment by Level and Type of School,” Allcountries.org: China Statistics 2005, revised April 26, 2006. As of October 30, 2008: http://www.allcountries.org/china_statistics/21_5_number_of_new_students_enrollment.html

8th ISGCC’ 2007—see Eighth International Symposium on Green Chemistry in China 2007 Organization Committee, Institute of Green Chemistry and Fine Chemicals.

“A123Systems Receives $30M to Scale Up Nano-Enabled Batteries,” Small Times, October 24, 2007. As of November 18, 2008: http://www.smalltimes.com/display_article/309957/109/ARTCL/none/Energ/1/ A123Systems-receives-$30M-to-scale-up-nano-enabled-batteries/

AAPA—see American Association of Port Authorities.

Abraxis Bioscience, “Abraxis Bioscience Reaches Agreement with the FDA Following Special Protocol Assessment for Phase III Trial of ABRAXANE in Non-Small Cell Lung Cancer,” press release, Los Angeles, Calif., October 15, 2007. As of November 17, 2008: http://phx.corporate-ir.net/phoenix.zhtml?c=217234&p=irol-newsArticle&ID=1125619&highlight=

ACCI—see Australian Chamber of Commerce and Industry.

ACS—see American Chemical Society.

Adis International, “‘Easy’ Diagnosis of Early Disease: Blood-Based Gene-Expression Tests for Breast Cancer and Alzheimer Disease,” Pharmaceutical and Diagnostic Innovation, Vol. 3, No. 10, 2005, pp. 7–10.

AE Polysilicon Corporation, “About Us,” undated Web page. As of October 30, 2008: http://www.aepolysilicon.com/about/about.htm

Affymetrix, filing with the U.S. Securities and Exchange Commission, Form 10-K, March 1, 2007a.

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“Affymetrix,” Value Line Investment Survey, February 29, 2008, p. 175.

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174 The Global Technology Revolution China, In-Depth Analyses

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Angel, Robert, “Putting an Innovation Culture into Practice,” Ivey Business Journal, January–February 2006. As of October 29, 2008: http://www.iveybusinessjournal.com/view_article.asp?intArticle_ID=605

ANL—see Argonne National Laboratory.

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Argonide, “NanoCeram-PAC™ Series,” undated Web page. As of March 2008: http://www.argonide.com/nanoceram-PAC.htm

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ATP—see National Institute of Standards and Technology Advanced Technology Program.

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176 The Global Technology Revolution China, In-Depth Analyses

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178 The Global Technology Revolution China, In-Depth Analyses

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182 The Global Technology Revolution China, In-Depth Analyses

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EERE—see U.S. Department of Energy Energy Efficiency and Renewable Energy.

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EPA—see U.S. Environmental Protection Agency.

EPA and DOE—see U.S. Environmental Protection Agency and U.S. Department of Energy.

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184 The Global Technology Revolution China, In-Depth Analyses

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GTR 2020 In-Depth Analyses—see Silberglitt, Antón, Howell, Wong, Gassman, et al. (2006).

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Huang, Jimmy, manager, Tianjin Highland Energy Technology Development Company, private communication, June 2007.

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Sandia National Laboratories, Environmental Resources Team, Water Treatment Engineering and Research Group, Desalination and Water Purification Research and Development Program, Desalination and Water Purification Technology Roadmap: A Report of the Executive Committee, Discussion, Denver, Colo.: Bureau of Reclamation, Denver Federal Center, Water Treatment Engineering and Research Group, report 95, January 2003. As of November 17, 2008: http://www.usbr.gov/pmts/water/publications/reportpdfs/report095.pdf

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202 The Global Technology Revolution China, In-Depth Analyses

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204 The Global Technology Revolution China, In-Depth Analyses

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