2016 Global Innovation 1000 Study

Chinese companies lead the global R&D spending growth, and Alibaba (#61) and ZTE (#70) overtake PetroChina (#73) as the top R&D spenders in China

By 2020, companies will have shifted the majority of their R&D spending away from physical product-based offerings to digital offerings—software and service, according to the 2016 Global Innovation 1000 Study from Strategy&, PwC’s strategy consulting business. The need to stay competitive is the top reason why companies cited a shift in their R&D budgets towards software and services, and for good reason – according to the study, companies who reported faster revenue growth relative to key competitors allocated 25 percent more of their R&D budgets to software offerings than companies who reported slower revenue growth.

Regionally, companies in North America are making the strongest shift to digital offerings—from 15 percent of total R&D spending in 2010 to 24 percent in 2020. While Asia remains the most product-centric region, with 44 percent of R&D allocated to product offerings in 2010, only falling to 40 percent in 2020. The automotive and industrial sectors are making the most aggressive push towards developing new software offerings.

Among companies that made an acquisition during the past five years, the vast majority – 71 percent – were made to enhance capabilities in software (33%) or services (38%).

R&D spending growth by Chinese companies leads the global market, with Alibaba as the top spender while Huawei—as a non-public company—among one of the Top 10 spenders

In 2016, there are 130 Chinese companies among Global Innovation 1000 (from 123 in 2015), who spent US$46.8 billion on R&D, up 18.6% from US$39.4 billion in last year. As a result, the R&D spending contributed by Chinese companies is also on the rise, up from 5.8% in 2015 to 6.9% in 2016.

For the first time since 2015, PetroChina loses its No.1 place among top R&D spenders in China, surpassed by both Alibaba and ZTE, while PowerChina and JD.com make their debut on Top 20 R&D spenders in China, as No.16 and N0.20, respectively.

As in previous years, we compare Huawei against other Chinese peers on R&D spending, although we have excluded it out of the top spenders list due to its status as a non-public company. According to its FY 2016 annual report, Huawei spent RMB59.6 billion (US$9.48 billion) on R&D in 2015, making it the highest spender in China and the 9th largest spender—behind Novartis but ahead of Johnson & Johnson—among the Global Innovation 1000 (vs. No.16 in 2015).

As the R&D spending by European and Japanese companies declines, Chinese companies are in the leading position as their R&D spending growth increased at 18.6%, higher than the 8% growth of North America. In light of the innovation-driven development strategy at a national level, Chinese companies have been increasing their investment of R&D year by year, which indicates that they are shifting their advantage from competitive cost to innovation to build up technology capabilities to win in the global market.

Top 10 R&D spenders in China (inc. Hong Kong)*

2016 Rank in China 2016 Rank in the Global Innovation 1000 Company Industry R&D Spending R&D Intensity
1 61 Alibaba Group Holding Ltd Software and Internet 2.2 13.6%
2 70 ZTE Corp Computing and Electronics 1.9 12.2%
3 73 PetroChina Co Ltd Chemicals and Energy 1.9 0.7%
4 86 China Railway Group Ltd Industrials 1.6 1.7%
5 88 Baidu Inc Software and Internet 1.6 15.3%
6 92 CRRC Corp Ltd Industrials 1.6 4.2%
7 100 Lenovo Group Ltd Computing and Electronics 1.5 3.3%
8 102 Tencent Holdings Ltd Software and Internet 1.4 8.8%
9 107 China Railway Construction Corp Ltd Industrials 1.4 1.5%
10 112 SAIC Motor Corp Ltd Auto 1.3 1.3%

*Listed companies

Contact us

Adam Xu

Partner, PwC Hong Kong

Tel: +[86] (21) 2323 5600

Follow us