The Stack Archive Feature

Where should the Government of Hong Kong invest to support manufacturing 4.0?

Thu 30 Aug 2018 | Michael Mudd

Hong Kong tech

There is a lot of talk in the media about technology transforming traditional manufacturing processes.

The World Economic Forum described this as the Fourth Industrial Revolution, building on the Third (the digital revolution).

It is characterized by a fusion of technologies that are blurring the lines between the physical, digital, and biological spheres and the use of technology such as artificial intelligence and low-cost massive computing resources available through Cloud.

When applied to the practice of manufacturing, it may be termed ‘Manufacturing 4.0’.

Manufacturing 4.0

In the 1960-70’s, the light industry employed almost a million people in Hong Kong and by 1977, this accounted for around 30% of GDP.

The reemergence of mainland China as a manufacturing powerhouse since the mid-1980s meant that Hong Kong gradually evolved into a service economy.

By 2015 manufacturing contributed to only 1.2% of GDP, according to government reports.

Hong Kong is therefore over-dependent on the services sector, in particular, finance, and a rebalancing may, therefore, be desirable.

The Hong Kong Science and Technology Parks Corporation (HKSTPC) was founded in 2001 as an agency to focus on connecting stakeholders, fostering collaboration, and catalyzing innovation.

The company operates a science park that acts as an innovation and technology base camp for research and development, testing, fund-raising, and commercialization.

The HKSTPC also manages the Hong Kong Science Park in Tai Po, Hong Kong and other facilities for the CEO and the chief executive of Hong Kong, thus it is a direct arm of the government.

More importantly; it has access to funding through the Innovation and Technology Fund.

Re-industrialisation of Hong Kong

Recently announced initiatives of the HKSTPC include developing a 12 storey Data Technology Hub of about 27,000 sq.m and an Advanced Manufacturing Centre comprising two 13 and 9 storey towers of over 108,000 sqm at the Tseng Kwan O industrial area in Hong Kong.

In addition, a new development close to the Lok Ma Chau crossing to Shenzhen is intended to provide support facilities for Shenzhen’s vast technology industrial complexes.

These complement existing manufacturing facilities in Tai Po that are mainly focused on traditional industrial sectors.

These projects will focus on five major areas; (i) medical, healthcare, and hospital devices and apparatus; (ii) biomedical engineering devices, implants and apparatus; (iii) intelligent electronic and optical apparatus; (iv) intelligent sensors and advanced assembly of semiconductors; and (v) robot electronics and intelligent power devices that dovetail with smart city development.

The repurposing of land and building at the Tai Po park, and under guidance from the Hong Kong Applied Science and Technology Research Institute (ASTRI), is to develop intelligent manufacturing, or as outlined above, Manufacturing 4.0 in Hong Kong.

This approach to providing physical facilities within land challenged Hong Kong.

By providing both agility and flexibility in making facilities available through leasing rather than ownership for manufacturers, the plan is intended to foster fast developing sectors.

The government of the Hong Kong SAR recently consulted industry associations and chambers, including the Hong Kong Computer Society, for their views on what they termed the ‘re-industrialisation’ of Hong Kong.

In the last two years, the Government of the HKSAR has committed at least HK$78 billion to promote IT development, including an unprecedented HK$50 billion allocated in the 2018 budget.

The application of funds that will ultimately flow into continued growth and employment sector diversification is to be applauded.

What are the issues?

Some of the challenges entrepreneurs face in technology are not so much as to do with basic research but development in bringing products to market.

Many a good product fails to reach its full potential due to insufficient and ineffective measures in the “last mile” of this value chain.

Similarly, revisions to government procurement policies that may allow smaller companies to bid on supply contacts would further drive local innovation.

As manufacturing has changed dramatically over the past 40 years, there is a need to revisit existing legislation that may have been relevant then but is a hindrance to manufacturing 4.0 now.

Attracting the right talent, both home-grown who may be overseas, as well as from outside Hong Kong, is important.

Restrictive policies that often desire persons with higher qualifications (PhDs) would exclude some of the most successful technology entrepreneurs in history (Steve Jobs and Bill Gates come to mind).

Similarly, the government-funded R&D centre such as ASTRI needs to be held to account as to their KPI objectives and outputs.

The Greater Bay Area (GBA) initiative has a far-reaching impact to Hong Kong, so policies that facilitate easier exchanges are important, in particular given the vast capital of the mainland, both financial and human.

Finally, Hong Kong needs to look at the export markets for the outputs of manufacturing 4.0.

With trade policies of the US, for example, turning against globalization, it may be prudent to look at other markets, in particular, Europe, Africa and Latin America to complement our Asian trading partners.

In conclusion, the governments stated investment pan for manufacturing 4.0 combined with addressing the issues above, will ensure the best chance to rebalance Hong Kong’s economy for continued growth.

Experts featured:

Michael Mudd

Managing Partner APP LLC
Asia Policy Partners LLC


finance Hong Kong technology
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