- Three trends observed from the ripple effect of the recent change in China’s innovation environment
The recent changes in China’s innovation environment have made ASEAN’s IP environment become essential in the global innovation ecosystem. This article shares the observation of three trends: global supply chain relocation, the rush of “IP Going to the Sea”, and blockchain-derived innovations.
Global Supply Chain Relocation
Why is the global supply chain moving from China into ASEAN countries? The US-China trade war is an obvious reason. At the same time, China itself is taking initiatives to upgrade its industry. Also, we see the shortage of labor and electricity are speeding up the relocation process.
A survey by Deloitte in 2020 indicated that 1/3 of manufacturing enterprises are planning to leave China, including so-called “Big-Five” electronic manufacturing services enterprises from Taiwan. They used to be among the top 10 enterprises which make the most contribution to China’s annual foreign exchange reserve.
This trend has important IP implications. EMS enterprises are making innovations in R&D prototyping and improvement of yield rate for mass production. They also have a lot of trade secrets in production lines. Accordingly, whether they could continue to play effective roles in the global supply chain will need support from IP systems in their new host countries in ASEAN.
The Rush of “IP Going to the Sea”
The second trend that highlights the importance of ASEAN’s IP environment is the so-called “IP Going to the Sea” by Chinese enterprises. That means more and more Chinese enterprises are developing their IP in China but commercializing the IP in global markets.
These enterprises adopt this strategy because they are facing regulatory challenges within China, so they need to find new growth opportunities overseas. In addition, some business models may utilize sensitive information, so they need to implement the underlying IP from entities outside China.
Gaming, education, or clouds services are good examples. As we can see companies like Ali, Tencent, and many others are now headquartered in Singapore, using it as a gateway to the global market.
Furthermore, this trend is expanding to more business lines that demand IP protection such as franchise models for “intangible cultural heritages.”
However, IP protection is territorial. Namely, different sovereignty has its own IP legal framework. As such, these companies who operate their IP globally need to reconcile the difference. In ASEAN, they must attend to host countries’ IP regulatory regimes to ensure their success in the global market.
Business models emerging from blockchain-derived innovation
In the third trend, we observe that block-chain applications such as Metaverse, NFT, and Defi are gaining traction in the coming years. However, legal risks faced by such innovations are asymmetrical in different jurisdictions.
For example, authorities are taking different positions toward cryptocurrency. China has illegalized the business. Taiwan seems to be neutral. And Singapore is relatively friendly.
This provides a great opportunity for cross-border collaboration to handle IP, finance, and risk management in the exploration of new business models, such as the international platform for music securitization as shown here.
Recent changes in China’s innovation environment have a ripple effect. From a perspective of the global innovation ecosystem, ASEAN’s IP environment is getting more important now because of EMS enterprises’ supply chain relocation, global IP operation by Chinese enterprises, and blockchain-derived business innovations.
We see great opportunities to commercialize more IP’s value through multilateral collaborations. But to get the benefit from such collaborations, businesses need to gain more understandings of relevant IP regulatory regimes.
This is a fantastic area with great potential. Welcome to explore more interesting topics together with us at the links.