While Hong Kong has developed into an important trading hub, it is also a technology marketplace in the region. Unfortunately, such achievement is dwarfed by the misperception that Hong Kong is not a marketplace for technology on mere grounds of a lack of front-end R&D activities. Nonetheless, Hong Kong's industries in reality excel at certain technological areas like innovation, commercialisation, application and industrial engineering, which are backed by a technology cluster composed of local as well as foreign enterprises in the territory. Coupled with robust demand from the Chinese mainland for various kinds of technology, Hong Kong's role as a centre for technological cooperation and integration in the region is set to develop further in the medium term.

Technological Activities - Hong Kong's Edges and the China Factor

Hong Kong is a trading hub not only for consumer goods, but also a wide range of high-tech products, dominated by electronics-related items. Total high-tech exports exceed US$80 billion a year, and the Chinese mainland is both the major source as well as the major destination of such exports. Behind the scenes, such performance is supported by substantial R&D and innovation activities undertaken by the business community.

• According to a survey in 2005, there are about 4,000 Hong Kong companies (mainly firms with production facilities across the border) undertaking R&D activities.
  
  
• Innovation activities are even more popular, with nearly 16,000 companies engaged in such activities.
  
  
• A substantial portion engage in technological cooperation with external partners, particularly with those located in the Pearl River Delta (PRD).

On the whole, Hong Kong still maintains certain edges in the business of technology, thanks to a number of its intrinsic advantages as well as the China factor. All these help the economy survive weaknesses like higher operation costs and lack of front-end R&D activities, and overcome challenges from competitors in the region and around the globe.

Notably, Hong Kong has remained a design centre for electronic parts and components. Although many semiconductor companies, for example, do not have their own fabrication facilities, they ride on a number of Hong Kong advantages to carry out their design business in the form of a "fab-less" setup here. Besides, a number of multinationals from the US, Europe and Japan have set up design engineering teams in the territory. On the whole, most companies here focus on the application aspect, while rendering technical support to their downstream customers on the mainland and Asia.

• The component companies largely focus on application aspects, which are meant to support downstream manufacturers' production activities on the mainland and Asia. Such production is mainly related to consumer electronics and IT equipment, which are the major focus of applications.
  
  
• Hong Kong companies are good at making specifications, specifying technical details and setting out the necessary data for their parts and components. These are important references for downstream manufacturers intending to make use of the components in their products.

CASES
ON Semiconductor
to ride on Hong Kong's proximity to Asian clusters

Solomon Systech Limited
making chips for daily display in the globe

Andigilog Inc.
getting technical as well as financial solutions

Dragonchip Limited
flash storage applications to minimise inventory

Advanced Analogic Technologies Inc.
heading for tech licensing

Industrial players in Hong Kong who are competent in high-tech, high-precision processes have moved to specialise in electronics manufacturing service (EMS) for both finished goods and semi-manufactures. Amid advancement in technology, as well as the resulting increases in sophistication and miniaturisation of electronic products, traditional techniques and mere labour-intensive processes can no longer be employed for manufacturing. Increases in regulatory requirements, such as the EU's WEEE and RoHS Directives that encourage the use of green components or even ban the use of certain hazardous materials, have also affected production processes, which have to be expertly handled in order to ensure compliance with the regulations.

• Hong Kong's EMS service providers are focusing on industrial engineering, which serves to fill the gap between product design and mass production. This is because products designed by front-end technology may not be able to be brought into mass production without consideration from a manufacturing perspective.
  
  
• Amid globalisation, R&D and production of different inputs may be undertaken in different countries. Strong project management is among Hong Kong companies' strengths, i.e. overseeing the workflows from R&D and product design to production and shipment of finished items. With competent personnel possessing relevant technical knowledge, they are the good conductors to orchestrate such projects, which notably require coordination from an international perspective.

CASES
Surface Mount Technology (Holdings) Limited
filling the technology gap

Gold Peak Industries (Holdings) Limited
from consumer to auto electronics

VTech Holding Ltd.
heading for next generation products with a "smile"

Hong Kong is an important information technology (IT) hub in the region, which is well supported by a cluster of IT services providers that render services like software design and development, application support and maintenance, IT consultancy and system integration and implementation. Many companies develop their software and applications on the basis of third parties' proprietary platforms. Various kinds of cooperation through licensing deals, joint ventures or other partnering among local and foreign IT companies are thus part of their daily business. In the process, Hong Kong provides a convenient platform for such business deals, thanks to the presence of IT multinationals from advanced countries, which greatly fosters cooperation among IT companies of different origins.

• On the whole, the major value-added function of Hong Kong enterprises largely lies in their ability to adapt to the local demand in Hong Kong and international markets, tailoring their services to the client's requirements.
  
  
• This is thanks to their capabilities in systems integration by turning blocks from proprietary platforms into application-specific systems, and localisation of software developed all over the world for company-specific applications in local languages, business flows and practices, which are among the important elements of their marketing beyond Hong Kong.

CASES
eBroker Systems Ltd.
merging domain knowledge with IT expertise

Future Solutions Laboratory Ltd.
single technology to support multiple platforms

iASPEC Services Limited
minimising Internet security risk by one-time password token solution

Network Box Corporation Ltd.
computer security in a "box"

KanHan Technologies Ltd.
getting through the hurdles of Chinese language

Titanium Technology Ltd.
login with a face

Hong Kong's environmental protection companies usually put their foci on areas like waste handling, water/energy conservation and air pollution/noise control. While they are mainly small companies, their strength lies in sales and marketing. Hong Kong companies are especially good at identifying niches in different markets, and sourcing appropriate technologies for local applications there. As there is a growing demand for environmentally friendly production amid increasingly stringent regulatory requirements on the mainland, there is much room for technological cooperation between Hong Kong and overseas companies in exploring the mainland market.

• Hong Kong companies are especially good at commercialising different environmental technologies for applications in niche markets. They also excel in tapping different local demands, given their innovation capabilities which enable them to render custom-designed solutions by making use of existing technology in an innovative way.

CASES
Dunwell Industrial (Holdings) Ltd.
from waste water treatment to used oil refinery

CK Life Sciences Int'l (Holdings) Inc.
protecting the environment by good farming

Totaru Plan (H.K.) Ltd.
licensee acting as licensor for water saving

BillionGroup Technologies Limited
simulations for energy conservation solutions

Bridging Mainland and Foreign Technology Companies

As Hong Kong has already accommodated a technology cluster composed of companies of different origins, it is certain that the territory has a role to play amid increasing cross-border technological cooperation worldwide. Particularly, Hong Kong is well poised to bring its technology partners to the Chinese market. On the other way round, as many Hong Kong companies cooperate with mainland (especially PRD) enterprises, they are bringing their mainland partners to the international market. Hence, Hong Kong indeed provides both foreign and mainland enterprises with a marketplace for undertaking various kinds of technology businesses, which are not confined to merely technical work.

• Such a technology marketplace is driven by businesses aiming at higher value-added, rather than merely keeping an eye on low costs.
  
  
• Hong Kong's edge in areas like application and commercialisation, along with the availability of various financial facilities, are among the key considerations when technology companies make their decision to locate their business in the territory.
  
  
• While stringent protection of IPRs is crucial, good industry practice with participants observing and respecting the confidentiality of a company's business information is also essential for technology business.
  
  
• Bilingual management talent in Hong Kong is able to appreciate the market and technological developments worldwide. And, human resources here are not constrained by its boundary limitation, as the territory allows overseas and mainland experts to work locally.
  
  
• This excellence in mobilisation of global resources is made possible by a strength in effective project management, which is backed by international marketing and customer services. All of these are present in most Hong Kong companies.

In sum, Hong Kong is a business platform providing various services and opportunities for technology businesses, rather than merely being an engineering base. Therefore, it is likely that there are an increasing number of companies using Hong Kong to conduct technology businesses, and the chance that Hong Kong will lose out to its competitors due to a lack of front-end R&D is low even in the medium term.

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