Intellectual Property Enforcement, Technology Transfer and Innovation in China's Semiconductor Industry

Abstract

Several commentators have observed that China has enacted laws that give formal protection to intellectual property rights but that, to date, it has struggled to enforce these laws effectively. This is to some degree reflected in the recent decision of the United States Government to institute proceedings against China in the World Trade Organization regarding intellectual property issues. This paper evaluates China's current protection of the intellectual property embedded in semiconductor chips, as well as the intellectual property of semiconductor manufacturing processes. Having reached a view regarding the effectiveness with which China's intellectual property laws, as they relate to its semiconductor industry, are currently being enforced, this paper then assesses the implications of this situation for technological progress by Chinese semiconductor firms. In doing so, the question is raised of the link between the protection of innovations via an intellectual property law regime, and the speed of technological progress. In particular, two issues are examined. The first is whether concerns by multinational firms about intellectual property enforcement might dissuade them from transferring leading edge technology into China. The second is whether enforcement concerns might be exerting a negative effect on the capacity of Chinese semiconductor firms to innovate. Having drawn some conclusions about the impact of intellectual property enforcement on the level of innovation by semiconductor firms, this paper considers other government policies which, in conjunction with better enforcement, should encourage increased firm-level innovation. In particular, the importance of privatization, education and public research and development are examined.