BANGALORE: The Philips R&D centre started in 1996 in a small building at the heart of Bangalore. Its aims then were patently modest: provide implementation support to product teams in the Netherlands. The city did not have many multinational centres in those days.
Philips R&D grew rapidly as its engineers started owning components of products and recently whole products. In the last few years, it has been going through another major phase in its evolution: it has become a prolific generator of patents.
Philips has filed 210 patent applications for work from its Innovation Campus, as the R&D centre is now called, most of it in the last few years, a large number for an institution based in India. And this research campus is not a one-off example.
More patents of key products for global and local markets are coming out of India research centresMNC
technology firms as they reduce time-to-market, launch solutions for emerging economies and not the least, keep a lid on cost in a difficult economic environment.
While patent filings in the US have steadily grown in numbers, especially between 2006 and 2010, these R&D centres have seen a clear shift over the last few years towards business-critical global patent filings and innovations aimed at local markets.
"Foreign R&D centres have increased their dependence on all-Indians teams -- a trend reflected in the number of Indian inventors in patent applications filed by foreign companies in India and abroad in recent years," says Sunil Mani of the Centre for Development Studies, co-author of a study on 120 MNC R&D centres along with Professor Rakesh Besant of Indian Institute of Management, Ahmedabad.
The share of foreign companies in US patenting by Indian inventors has gone up from a modest 16% between 1995 and 1999 to 67% between 2006 and 2010. This is not surprising.
In a recent survey of R&D centres by McKinsey, two-thirds of executives say their companies are spending part of their 2011 R&D budgets in emerging economies with most focusing on the support of either product platforms sold in global markets, or innovation for products made and sold in local, emerging-economy markets.
The global call
Adobe's local research base has seen US patents filed out of India rising from zero in 2006 to 7% in 2010 and boasts of the locally-crafted Pagemaker 7 becoming a global standard.
"We have filed a couple of hundred patents from here and do full products like Adobe Illustrator. We have also done a lot of PDF work here for readers and multiple devices," said Adobe CEO Shantanu Narayen in an earlier interaction.
Patents for tools that made Juniper's single operating system JUNOS - its bread & butter product used by 100-plus customers - more efficient were filed out of the Bangalore engineering centre.
"Most mature R&D centres carry out research at a technology level that is consumed by future products. Research areas and product ownership of India R&D centres are increasing rapidly and most have a focus on innovation," says Sidhant Rastogi, director of consultancy Zinnov, which tracks R&D efforts at local MNC technology centres.
Though the research includes pharma, the most active segment in patents is information, communication and technology. Utility patents filed out of India R&D centres of MNCs have risen from 481 in 2006 to a whopping 1098 in 2010.
Across MNC tech firms, most patents are being granted for innovations that solve a tough customer problem. Example: a part of Freescale India's patents are in embedded solutions in automotive - a key element in today's high-end electronics-rich cars and in which Freescale is a global leader.
The local push
For others, work on global products help in local market push driving up India patent filings. 3G and 4G gear supplier Huawei's local research centre - again a delivery base initially -- works on high-end telecom software platforms and applications for next-generation networks, a large part of which will be part of the first 4G-enabled handset in India, developed jointly with Bharti and Qualcomm.
Qualcomm, for one, had filed 230 patents for 2009-10, the last updated data year at the India Patent Office. GE - with 400 global patents in 2011 that had Indian contributions -- will roll out 30 new India-developed India-focused products over the next three years, mostly in energy and healthcare. While GE does not give country-specific details, the push for patents is on at a fast clip as it bets on markets like India to drive future growth.
"India is a growing, and unique, market, which needs local solution to problems and local talent too", explains Zinnov's Rastogi. Companies, the McKinsey survey said, appear to be aligning their goals, whether it's seeking lower development costs or gaining better access to customer insights, with their specific R&D focus in emerging economies.
While lower development cost is a known driver, accelerating the trend of greater R&D innovation is the need to reach markets faster and launch them for emerging markets too.
Says Besant and Mani: "There are pressures to shorten international penetration of new products and there's need to launch products in different markets simultaneously."
With rising technology intensity, companies find internal capabilities either inadequate or expensive. Decentralisation of R&D is seen as a natural response. Improved communication and collaboration technologies fuel interaction across geographies and such technologies lead to different modules being developed in different locations.
With local demand for top-of-the-line and unique tech products/solutions rising, India patent filings from these centres are growing. "We are not only driving global projects but are contributing towards bringing solutions specifically for the Indian market. The India centre is involved in developing new chips that incorporate vehicle safety, infotainment, and telematics," says Kulbushan Misri of Freescale India adding that firm's engineers make special efforts to understand the dynamics of the market.
A growing telecom and devices market, digitisation of broadcasting services and a need to create health and education infrastructure in rural areas are creating the needs for India-centric technology products. Philips' patents in India over the last few years have come mostly in healthcare.
"Especially for electronics and telecom companies, the desire to supply to large emerging markets (read: India) that requires adaptation of products to local needs results in setting up R&D centres in physical proximity to the manufacturing bases," says Besant and Mani.
Zinnov's Rastogi says transnational tech firms are making significant investments to increase the capability of their India R&D centres. "For the first time, we are witnessing an increase in the amount of core research on technology, future products being done out of these centres in India," he adds.
One reason pulling such investment over the last couple of years is a drop in average operating costs for MNC R&D centres in dollar terms - especially a 6% fall in FY12 on rupee appreciation. "The-...centres in India contributed to a net savings of over billion for the parent in the last five years," says a Zinnov 2012 study on operational cost at such centres.