20 March 2017
Technology Industry in Hong Kong
In January 2017, Hong Kong and Shenzhen signed a “Memorandum of Understanding on Jointly Developing the Lok Ma Chau Loop by Hong Kong and Shenzhen”. Under the terms of this, the two cities will jointly develop the Hong Kong/Shenzhen Innovation and Technology Park in order to foster co-operation with regard to innovation and technological research.
Companies in Hong Kong’s technology sector specialise in the commercialisation and application of innovative products and systems, as well as in industrial engineering. A number of clusters, comprising local and overseas technology enterprises, actively undertake R&D and innovation-led activities across the territory.
Technology Companies in Hong Kong
Companies in Hong Kong’s technology sector specialise in the commercialisation and application of innovative products and systems, as well as in industrial engineering, with both local and overseas companies active in this sector. Among the high-profile overseas technology companies active in Hong Kong are Nvidia (US), Texas Instruments (US), IBM (US), Sierra Wireless (Canada), Samsung (South Korea), Hitachi (Japan), Siemens (Germany), Philips (the Netherlands), Huawei (Chinese mainland), and Macronix (Taiwan).
Electronics-related players, including those in the semiconductor sector and those involved with the manufacture of a wide array of parts and components, are among the most prominent technology-related businesses in Hong Kong.
Hong Kong’s status as a major IT and telecommunications hub has also led to the emergence of a number of companies in related hardware and software design and development sectors.
Overall, Hong Kong companies in the technology sector are notably proactive when it comes to undertaking R&D and innovation-led activities. According to the latest figures from the Census and Statistics Department, there were 3,885 Hong Kong companies undertaking R&D activities in 2015. Overall, total R&D expenditure in the business sector amounted to US$1 billion, a 7% rise on the preceding year.
Innovation-led activities were even better supported, with 7,344 companies engaging in such activities in 2015. The total innovation-related expenditure of the business sector amounted to US$2.2 billion for the same period, up 3% year-on-year.
In 2015, 425 Hong Kong companies had in place co-operative arrangements with external partners with regard to R&D, while 1,093 had such an arrangement with regard to innovation-oriented activities. A substantial proportion of these external partners were technology companies or research institutes either in Hong Kong or on the Chinese mainland.
The Hong Kong Science Park is home to more than 600 technology companies and approximately 13,000 technology talents. The park houses five distinct clusters: (1) biomedical technology; (2) electronics; (3) green technology; (4) information and communications technology (ICT); and (5) material and precision engineering. Its current development focus is on three over-arching cross-disciplinary platforms - smart cities, healthy ageing and robotics.
Cyberport, a wholly-owned Hong Kong government facility, is a creative digital workspace with more than 800 community members. With an avowed mission to establish itself as a leading global innovation and technology hub, Cyberport is committed to boosting the local economy by nurturing digital industry start-ups and entrepreneurs, driving collaboration in terms of resources and the creation of business opportunities, while accelerating digital adoption through strategic initiatives and partnerships.
Hong Kong’s technology sector also benefits from the R&D activities of various public bodies. In 2006, under the government’s Hong Kong R&D Centre Programme, five centres were established to drive and co-ordinate applied R&D in selected focus areas, as well as to promote the commercialisation of these R&D results and any subsequent technology transfer. The five R&D centres were:
- The Automotive Parts and Accessory Systems R&D Centre
- Hong Kong Research and Development Centre for Information and Communications Technologies
- The Hong Kong Research Institute of Textiles and Apparel
- The Hong Kong R&D Centre for Logistics and Supply Chain Management Enabling Technologies
- The Nano and Advanced Materials Institute Limited
Hong Kong’s technology sector is also engaged in trading in a wide range of high-tech products. In 2016, Hong Kong’s exports of high-tech products amounted to US$264 billion, accounting for 57% of total merchandise exports for that 12-month period.
Electronic products, especially telecommunications equipment, semiconductors and computer items, are Hong Kong’s primary high-tech exports. This is in line with the fact that the electronics sector is Hong Kong’s largest export earner. The Chinese mainland is both the major source and the major destination of Hong Kong’s trade in high-tech products. In 2016, it accounted for 52% of Hong Kong’s imports and 63% of Hong Kong’s exports of high-tech products. These mainland-bound exports are largely industrial inputs, with the majority destined for Guangdong and the mainland’s other major high-tech production sites.
Hong Kong’s technology players are also active when it comes to undertaking technology transfers through such avenues as technology licensing, contract services and industry collaborations with their local and foreign counterparts. For instance, the total industry income of the abovementioned five R&D centres derived from licensing/royalty, industry sponsorship and contract services amounted to some HK$150 million during the period 2015-2016.
Technological Co-operation with the Chinese Mainland
In order to foster technological co-operation across the border, Hong Kong’s technology sector has long-established connections with its mainland counterpart. This is of particular significance as the mainland government has resolved to use technological advancement and innovation as its key means of fostering economic development.
The mainland’s 13th Five-Year Plan (2016-2020) places considerable emphasis on advancing mass entrepreneurship, encouraging technological innovation and promoting the development of new industries in a bid to inject new vigour into the country’s economy. Under the terms of the plan, there will be a distinct focus on developing high technology and high value-added industries, while strengthening supporting infrastructure, revamping related financial systems, and improving the business environment in order to promote the further growth of related industries. The target industries and development sectors include the following:
- Corporate Innovation
Every effort will be made to encourage R&D, strengthen technology integration capabilities and to import technology from abroad. In particular, advanced technologies will be targetted, including next-generation information communication, new energy, new materials, aviation and space, biomedicine, and smart manufacturing. Action will also be taken to improve the tax concession policies related to corporate R&D expenses, while preferential treatment will be expanded for the accelerated depreciation of fixed assets in order to encourage enterprises to update their equipment and introduce new technology.
- Made in China 2025
Steps will be taken to encourage industries across the mainland to graduate from “Made in China” to “Created in China” and to complete the industrial upgrade process. In order to deliver this, the level of product technology, technical equipment, energy efficiency and environmental protection will all need to be raised. It will also be important to liberalise market access to cutting-edge services as part of any moves to promote the development of a specialised high-value producer service industry and to assist the manufacturing industry in increasing its added value.
As many Chinese companies lack the necessary front-end technologies to achieve such objectives – while continuing to foster domestic R&D activities – the mainland has implemented a number of tax and fiscal measures designed to boost the import of key technologies and related equipment.
With its conducive business environment, robust protection of intellectual property rights and its comprehensive range of professional service providers, Hong Kong is ideally configured to allow its technology sector to undertake technology transfers from the international markets to the mainland.
A case in point is that in January 2017, Hong Kong and Shenzhen signed a “Memorandum of Understanding on Jointly Developing the Lok Ma Chau Loop by Hong Kong and Shenzhen”. Under the terms of this, the two cities will jointly develop the Hong Kong/Shenzhen Innovation and Technology Park within the 87-hectare loop. It is anticipated that the park will attract many of the leading businesses, research institutions and higher education establishments from both Hong Kong and Shenzhen, as well as those of other mainland regions and from abroad. In the long-term, it is seen as emerging as one of the key bases for co-operation in innovation and technology research.
According to 2015 figures from the Ministry of Science and Technology, Hong Kong was the tenth largest source of technology imports for the Chinese mainland in terms of contract value (US$605 million), accounting for 2.1% of the total. In terms of number of contracts, Hong Kong was ranked in fourth place (669 contracts), after Singapore, the US and Germany.