By analyzing statistics, I found that although Lenovo’s acquisition of the PC operations of IBM Corp. and other economic activities made its assets surge, its return on assets has been declining year by year from 19 percent in 2001 to 12 percent in 2003, due to the lack of a detailed development blueprint. Lenovo’s Internet operation lost over HK$200 million after failure in a one-year cooperation with Yestock Information Technology. Moreover, its joint venture with America Online closed with a loss after two years due to respective internal problems.

Lenovo’s shortsightedness mainly lies in its IT service business. Despite a loss in this business, the operation actually increased rapidly, faster than the expansion of the market. For instance, in 2003, the national IT service sector grew by 31.5 percent, while Lenovo’s growth in this sector was 198 percent. In 2003, Lenovo strove to be the third in the IT consulting market with a 3.5-percent market share, following IBM’s 11 percent and Hewlett-Packard Co.’s 8 percent, occupying a position of prestige in this field. But strangely enough, Lenovo suddenly stopped moving ahead in this sector while selling its IT service to AsiaInfo Holdings in July 2004 for 300 million yuan, acquiring a 15-percent equity stake in the latter firm. The reason for Lenovo’s withdrawal was its inability to reach its preset goals. I believe Lenovo just didn’t give enough time to the IT service to accomplish its objective. That’s why I say Lenovo is shortsighted.

Lenovo took research and development lightly. It believed marketing was the priority and underestimated the importance of technology. This mentality didn’t change until 2004, when it put 200 million yuan into R&D, but that still accounted for less than 1.2 percent of the total turnover that year. Compared with Huawei Technologies and Haier Group, Lenovo’s R&D assets fell far behind. Huawei pours no less than 10 percent of its total turnover each year into R&D, while Haier spends no less than 5 percent. All the data I used for the case study are statistics provided by those companies. Based on the available data, Huawei is doing well and is on the right track.

It is not enough for a big country like China to have only a few real hitech companies. According to the 2003 World Competitiveness Yearbook issued by the International Institute for Management Development in Switzerland, China ranked 42nd and 24th, respectively, in technological and scientific infrastructure, which were very low. The overall competitiveness of China (including economic performance, government efficiency, business efficiency and infrastructure) declined to 31st place in 2002 from 21st in 1998.

Even though that number is frustrating, we have to admit that economic performance helped us a lot. China has maintained a high rate of economic growth in recent years, but other indexes like government efficiency, business efficiency and infrastructure ranked between 30th and 40th. Normally, it is difficult to maintain high economic growth, and China’s ranking will be much lower when the economic growth rate decreases.

Additionally, the low R&D efficiency is a well-known fact: The number of research staff is the second largest in the world, while our output is among the lowest.

Fang Jiaping (freelance writer): “Good medicine for health tastes bitter,” and the unpleasant advice is good medicine. As for the criticism raised by Lang, Chinese enterprises can rebut and defend themselves, but they shouldn’t turn a deaf ear. Even though he is a bit overly critical, there is still something we can learn from and reflect on.

It is certain that Lang’s criticism will cause discontent among those renowned domestic companies, which will strive to display all the patents and statistics to prove they are true hitech companies. If they do so, they will have totally misunderstood Lang’s intention. I believe Lang meant to spark and inspire the Chinese enterprises. The right reaction to Lang’s criticism is for the companies to reflect and find their shortcomings so as to better promote the development of science and technology.

Lang’s words are not groundless. The Xinhua News Agency once reported that three out of 10,000 companies have core technology of independent intellectual property rights. Nevertheless, 99 percent of all enterprises do not apply for a patent. The report also said that there were 130,000 applications for patents for inventions in 2004, about half of them from transnational companies. Only 18 percent of all domestic patent applications are for such “utility” patents, while the percentage for foreign enterprises here is 86 percent. The figure just proves the correctness of Lang’s words. How many types of internationally advanced technology with independent intellectual property rights can Chinese hitech companies such as Lenovo bring forth? Have you ever thought about how many companies are being dragged behind due to the rigid technology problems?

Larry Lang’s words hit hard at the shortcomings of China’s hitech industry. Even though Lang has never been on a fact-finding trip to hitech parks such as the Chinese Silicon Valley, we should still meditate on his warning. I have visited some of the hitech industry zones, finding that many of the so-called hitech companies are merely doing assembly work for foreign companies and have no technology content at all. But those companies claim they are hitech companies and thus enjoy the government’s favorable policies toward hitech companies. What can you call this phenomenon?

People like to hear praise, and so does a company. If we indulge in the fantasy that the hitech industry is developing soundly, while not listening to different opinions, this will exert a bad influence on the future development of the national hitech industry as well as hitech companies.

Currently, when independent