Innovation and Technology Industry in Hong Kong

Overview

• Hong Kong’s innovation and technology sector together with that of Shenzhen and Guangzhou – the Shenzhen-Hong Kong-Guangzhou technology cluster – ranks as the world’s second largest according to the Global Innovation Index 2020.
  
  
• Hong Kong’s start-up ecosystem is thriving. In 2020, the number of start-ups in Hong Kong grew by 6% to 3,360, employing over 10,000 people.
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• Biotechnology, artificial intelligence, smart city and financial technologies were identified as the four key areas for Hong Kong’s innovation and technology industry. The city’s expenditure on research and development as a percentage of the gross domestic product is expected to be doubled in five years from 2017.

Industry Data

Industry Development

Amid a growing local research cluster, Hong Kong is a strategic business platform and technology marketplace in Asia. Its innovation and technology (I&T) sector together with that of Shenzhen and Guangzhou — the Shenzhen-Hong Kong-Guangzhou technology cluster — is ranked the world’s second largest based on the Global Innovation Index 2020.

With opportunities brought by the Guangdong-Hong Kong-Macao Greater Bay Area development, Hong Kong is set to further capitalise on its advantages in R&D capabilities, technological infrastructure, legal system and intellectual property. The region intends to spearhead the I&T industry, and act as a business platform for companies looking to access the Asia market (and China in particular), or for innovative mainland companies seeking to go international.

Hong Kong’s start-up ecosystem has gained traction in recent years on the back of increased funding and investment in the necessary infrastructure. In 2020, Hong Kong continued to see a steady upward trend in the number of start-ups (+6% from the previous year), employing over 10,000 people, according to the survey by InvestHK.

Major research focuses of Hong Kong start-ups include information and communication technologies (ICT), software as a service (SaaS), the Internet of Things (IoT), data analytics, biotech, artificial intelligence (AI), robotics, virtual reality (VR) and augmented reality (AR), as well as new materials. In terms of applications, fintech (financial technology), smart city and smart home, healthcare and big data applications are among the most popular sectors.

Corporate engagement in incubation and accelerator programmes is rising. New initiatives to promote start-ups are springing from universities, Cyberport and the Hong Kong Science Park. There has been a string of notable funding rounds for start-ups, particularly those with “unicorn” status. It is hoped that Hong Kong’s technology sector will soon reach a tipping point and begin a period of accelerated growth.

R&D Capabilities

Human capital is crucial in I&T. Universities in Hong Kong occupy respectable positions in the QS University Ranking and the Times Higher Education Ranking, particularly in science and engineering subjects, and they have played an important role in Hong Kong’s I&T capacity building. In terms of research, universities have seen a rising trend in in-house R&D expenditure and the number of R&D personnel. An increasing proportion of this research has been successfully converted into commercialised products, industry research collaborations or other forms of contribution to the society and economy.

Hong Kong’s openness to foreign talents has also contributed to the growth of R&D activities. According to the 2020 start-up survey by InvestHK, around 26% of start-ups were founded by non-locals. In addition, many multinational companies targeting the Mainland market tend to have their R&D employees working in Hong Kong where they find it easier to adapt to life and work.

Technological Infrastructure

Hong Kong ranked eleventh in infrastructure out of the 131 surveyed economies in the Global Innovation Index 2020. Following the blueprint for I&T development unveiled in 1998, the Government has invested in essential infrastructure including setting up the Innovation and Technology Fund (ITF) with an initial HK$5 billion capital injection, founding the publicly-funded Hong Kong Applied Science and Technology Research Institute (ASTRI), and establishing the Hong Kong Science Park, Cyberport and five Research and Development Centres.

The Hong Kong Science Park is home to more than 890 technology companies and approximately 9,000 R&D practitioners. 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. It is currently focused on three overarching 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 1,500 start-ups and technology enterprises. With an avowed mission to establish itself as a leading global I&T hub, Cyberport is committed to boosting the local economy by nurturing digital industry start-ups and entrepreneurs, driving collaboration in resources and the creation of business opportunities, and accelerating digital adoption through strategic initiatives and partnerships. 

Under the Government’s Hong Kong R&D Centre Programme, five centres were established to drive and co-ordinate applied R&D in specific areas, as well as to promote the commercialisation of this R&D and any subsequent technology transfer. The centres are:

• The Automotive Parts and Accessory Systems R&D Centre (under the Hong Kong Productivity Council)
  
  
• The Hong Kong Research and Development Centre for Information and Communications Technologies (under ASTRI)
  
  
• The Hong Kong Research Institute of Textiles and Apparel (hosted by the Hong Kong Polytechnic University)
  
  
• The Hong Kong R&D Centre for Logistics and Supply Chain Management Enabling Technologies (hosted by the University of Hong Kong, the Chinese University of Hong Kong, and the Hong Kong University of Science and Technology)
  
  
• The Nano and Advanced Materials Institute Limited

The Hong Kong Productivity Council (HKPC) is a multi-disciplinary organisation set up to enhance the productivity and international competitiveness of Hong Kong enterprises through the provision of market-led applied R&D in smart products, smart manufacturing, automation, new materials, surface treatment, smart mobility, green transportation and environmental technology. HKPC also provides consultancy, technology transfer, training and other support services to enterprises in Hong Kong. 

Latest Government Initiatives

In the 2018-19 Budget, the Government identified four key areas for development, namely biotechnology, artificial intelligence, smart city and financial technologies (Fintech). The Government is stepping up efforts in I&T development in eight major areas, including: increasing resources for R&D; pooling together technology talent; providing investment funding; providing technological research infrastructure; reviewing existing legislations and regulations; opening up government data; enhancing procurement arrangements; and strengthening popular science education. In the past three years, the Government allocated over HK$100 billion to support the development of I&T in Hong Kong.

Funding Support

Currently, there are 17 funding schemes under the ITF, with various objectives including supporting R&D, facilitating technology adoption, nurturing technology talent, supporting technology start-ups and fostering an I&T culture.

One example is the “Technology Start-up Support Scheme for Universities” (TSSSU) launched by the Innovation and Technology Commission (ITC) in 2014. Under TSSSU, annual funding of up to HK$8 million is provided to each of the six local universities to encourage technology start-ups. Each funded technology start-up may receive up to HK$1.5 million each year for no more than three years. Staff, students or alumni who set up a company with a significant focus on “knowledge” and “technology” are eligible to apply.

In addition, a HK$2 billion Innovation and Technology Venture Fund was set up in 2017 for co-investing in local innovation and technology start-ups with private venture capital funds on a matching basis. Through this Fund the Government is expected to bring "smart money" into Hong Kong to boost investment in local I&T start-ups.

As at the end of 2020, the ITF has supported 19,008 projects with a total funding of around HK$22.4 billion approved, across a number of industrial sectors, including foundation industries (17% of the total accumulative approved projects), information technology (14.6%), electrical and electronics (14.4%), biotechnology (9.7%), etc.

I&T Infrastructure

Another area of focus for the Government is to provide sufficient technological research infrastructure to strengthen the growth of I&T ecosystem in Hong Kong. In order to increase the supply of R&D and working spaces, the Government has set aside resources for the Phase 2 of the Science Park Expansion Programme and the development of Cyberport 5, providing about 28,000 and 63,000 square metres of floor area respectively mainly for R&D or operation of I&T enterprises.

The Data Technology Hub (DT Hub) in the Tseung Kwan O Industrial Estate (TKOIE) has commenced operation in the fourth quarter of 2020. DT Hub aims to accommodate uses ancillary or complementary to the data transfer operations and global telecommunications at the data centres and switching centres at TKOIE and Hong Kong.

In addition, the InnoCell adjacent to the Science Park was completed at the end of 2020, providing around 500 residential spaces with flexible design and facilities such as shared workspaces for the research personnel in the Science Park.

The Advanced Manufacturing Centre in TKOIE and the Microeletronics Centre in the Yuen Long Industrial Estate will be completed in the coming years, providing a total gross floor area of over 140,000 square metres for smart production and high-end manufacturing industries.

Promote R&D

The Government has stepped up investment in I&T development. In the 2017 Policy Address, the Government announced to double the expenditure on research and development as a percentage of the gross domestic product from 0.73% to 1.5% in five years. The gross domestic expenditure on R&D activities has seen rising in recent years.

The Government is also developing two "InnoHK Research Clusters" at the Science Park, including Health@InnoHK on healthcare technologies and AIR@InnoHK on artificial intelligence and robotics technologies. The first batch of about 20 R&D laboratories will commence operation progressively in the first quarter of 2021. The Government is actively exploring the establishment of a third InnoHK Research Cluster.

Nurture Talent

The Government introduced the Technology Talent Admission Scheme (TechTAS) in May 2018, which provides fast-track arrangements for overseas and mainland research and development talent.

In order to nurture I&T talent, the Government has been actively promoting STEM education. A number of measures have been implemented, including curriculum updating, providing professional training for teachers, subsidising and organising large-scale learning activities. The Government will also launch a Global STEM Professional Scheme in the first half of 2021 to support universities in attracting world-renowned I&T scholars and their teams to Hong Kong to participate in STEM teaching and research.

Other efforts in providing job opportunities and continuous training include the Research Talent Hub which has funded over 3,700 R&D positions; the Re-industrialisation and Technology Training Programme which has provided on-the-job training for over 3,500 employees of some 1,800 enterprises; and the Greater Bay Area Youth Employment Scheme launched in 2021 providing around 700 I&T places for Hong Kong’s university graduates undertaking I&T-related work in Hong Kong and other GBA cities.

FinTech

As an international financial hub complemented by a highly developed ICT sector and an increasingly effective start-up ecosystem, Hong Kong has seen its Fintech industry grow significantly in recent years. The number of Fintech start-ups in Hong Kong more than tripled from 138 in 2016 to 468 in 2020.

Hong Kong ranked the world’s eighth best performed Fintech ecosystem in the “Global Fintech Ecosystem Report 2020” published by Startup Genome. There are many factors that make Hong Kong ideal for Fintech companies, of which the most attractive advantages are:

1. Providing a base for new and established Fintechs targeting Hong Kong and the Asia-Pacific region which, particularly given the large number of regional financial operations based in Hong Kong, constitutes the territory’s natural catchment area;
   
   
2. Focusing on B2B Fintech, i.e. Fintech firms and businesses that serve incumbent financial institutions, aiming to meet their regional needs;
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3. Attracting mainland Fintech, IT and e-commerce companies to set up in Hong Kong as a base for regional and international expansion.

Hong Kong is also able to support incoming international Fintechs seeking expansion into the mainland. Major mainland banks and insurance companies have a presence in Hong Kong, and companies operating in Hong Kong also have easy access to the mainland’s Fintech leaders.

Hong Kong’s most significant Fintech technology developments have come in data analytics, robotics, big data, P2P technologies and natural language processing. In recent years, key changes driven by Fintech have been seen in the foreign exchange, cybersecurity, e-commerce, wealth management and robo advisory sectors of financial services.

Dedicated Fintech platforms have been set up to facilitate communications and collaboration between Fintech market participants and the public sector. These include the FinTech Facilitation Office set up by the Hong Kong Monetary Authority (HKMA), the Fintech Contact Point established by the Securities and Futures Commission (SFC) and the Insurtech Facilitation Team under the Insurance Authority (IA).

To encourage financial institutions to make use of Fintech, supervisory sandboxes have been launched by HKMA, SFC and IA to allow financial institutions to gather real-life data and user feedback on their Fintech products/services in a controlled environment.

In supporting Hong Kong’s entry into the Smart Banking Era, the HKMA has granted licences to an initial batch of eight virtual banks, which primarily deliver retail banking services through the internet or other forms of electronic channels. In addition, the IA has granted authorisation to four virtual insurers, which are seeking to enter the insurance market in Hong Kong using solely digital distribution channels.

In November 2020, the HKMA introduced new market development initiatives, including the Commercial Data Interchange, which is a consent-based financial infrastructure that enables more secure and efficient data flow between banks and sources of commercial data, and the Central Bank Digital Currency, which aims to enhance cross-border payments.

Biotech

Excellence in frontier science and continuous research breakthroughs have fuelled development of a competitive biotech industry in Hong Kong. It is estimated that Hong Kong universities currently produce about 250 biomedical publications of high impact factor per annum. Hong Kong has also made a mark in its scientific contributions in international, large-scale genomic projects, and in the identification and characterisation of emerging infectious diseases such as SARS and the avian flu virus.

Hong Kong has two excellent medical schools, rated among the top in the world in the field of clinical medicine by the ISI Essential Science Indicators. Some of the achievements of these two medical schools include molecular diagnostics research using circulating cell free DNA in blood, and the development of the prescription drug “Oral Arsenic Trioxide” to treat Acute Promyelocytic Leukemia (APL). Patents held by Hong Kong universities have been licensed and sublicensed globally and been commercialised by start-ups.

Hong Kong is a major clinical trial centre for new drugs. Two Phase I Clinical Trial Centres set up in Hong Kong in 2014 have established extensive collaborations with multinational pharmaceutical companies. Apart from conducting clinical trials for the new US drugs, the Hong Kong Eye Hospital, the University of Hong Kong and the Chinese University of Hong Kong are the first three institutions located outside mainland China to gain approval from the National Medical Products Administration (formerly the China State Food and Drug Administration) to carry out clinical trials in a number of disciplines for drug registration purposes in China.

Supported by various public funds and investment, several research institutes have been established to advance the development of life science and biotechnology. These include the Hong Kong Institute of Biotechnology (HKIB) and the Biotechnology Research Institute (BRI). Founded in 1988, the HKIB provides R&D support, as well as facilitating technology transfer and product commercialisation for the biotechnology industry. In 1996, the HKIB also established a Biotechnology Incubation Centre for local start-ups and international biotechnology companies, providing equipment, technical and administrative support.

Hong Kong’s biotech ecosystem is favoured by world-renowned research institutions. In 2016, Sweden’s leading university of medicine, the Karolinska Institutet, established an overseas research branch in Hong Kong, focusing on disease areas including stem cell technology. In 2017, the Guangzhou Institutes of Biomedicine and Health set up a stem cell and regenerative medicine research centre at the Science Park.

On 30 April 2018, HKEX launched a new listing regime to allow pre-revenue biotech companies and new economy companies with non-standard share structures to raise capital in Hong Kong. In 2020, 23 healthcare companies listed in Hong Kong, raising a total of HK$98 billion through IPOs, including 14 pre-revenue companies listed under the new regime, which together raised HK$40 billion. To strengthen Hong Kong’s position as a leading funding hub for biotech, the Central Government has agreed to include pre-profit biotech companies listed in Hong Kong and stocks listed on the Mainland Sci-Tech Innovation Board meeting certain prescribed criteria into the stock universe of the mutual market access programmes between the Mainland and Hong Kong financial markets.

Artificial Intelligence

Artificial Intelligence (AI) is the major driving force of the fourth Industrial Revolution which is characterised by automation and connectivity. With the wide adoption of internet-connected devices and advancement of cloud computing technologies, AI has become a mainstream technology, and is an increasingly integral part of many industries, including finance, marketing, retail, and logistics.

Hong Kong has a number of leading private AI technology companies such as SenseTime. This company was co-founded in 2014 by Professor Sean Tang, who developed a novel facial recognition system with deep learning with an accuracy rate of over 99%, and in just three years grew into a unicorn. Other examples include WeLab, an online lending platform utilising AI to come up with personalised lending proposals for its clients.

In the Smart City Blueprint published in December 2017, the Government has committed to building the infrastructure to allow more applications of AI in both the public and private sectors. Moreover, the Government will adopt more AI in its services in city management, including transport, customs inspection and cyber security.

In May 2018, Alibaba, SenseTime and HKSTP announced the launch of a not-for-profit AI lab in Hong Kong (HKAI Lab), a new initiative to support and promote Hong Kong to grow as a global hub for AI. The objective of the HKAI Lab is to advance the frontiers of AI, which includes helping start-ups commercialise their technology, develop ideas and promote knowledge sharing in AI.

Smart City

As one of the most densely populated cities in the world with world-class ICT infrastructure and Internet connectivity, Hong Kong is an ideal testing ground for many smart city applications. To build Hong Kong into a world-class smart city, the Government released the Hong Kong Smart City Blueprint in December 2017, mapping out development plans for the next five years.

Hong Kong’s Smart City Blueprint highlights I&T for a smart Hong Kong in six major areas: (1) smart mobility – intelligent transport system and traffic management, (2) smart living – free public wi-fi access and eID for government and commercial services, (3) smart environment – green buildings and technology applications in energy efficiency, waste management and pollution monitoring, (4) smart people – I&T capacity building, (5) smart government – open data, smart city infrastructure and e-public service, and (6) smart economy – leveraging I&T to strengthen existing economic pillars and develop new ones, and promote the sharing economy.

The Government released Blueprint 2.0 in December 2020, setting out more than 130 smart city initiatives. Some examples of new initiatives include application of “Building Information Modelling”, enhancement of smart tourism platforms, development of the Traffic Data Analytics System, and Smart Village pilot, etc. Amid the COVID-19 pandemic, Blueprint 2.0 has also put forward the idea to further explore the use of telehealth, video-conferencing and remote consultation in Hong Kong, as well as covering measures already undertaken or being planned in combating COVID-19 with the use of I&T such as the “LeaveHomeSafe” mobile app.

In addition, HKSTP and industrial manufacturing company Siemens have officially launched their joint Smart City Digital Hub at the Science Park. The hub will focus on accelerating the development of smart city applications specifically designed for the Hong Kong market.

Mainland and International Collaboration

With its strong linkage with the mainland companies and research institutions, Hong Kong is in a good position to bridge mainland China and the international market.

Currently, there are 16 State Key Laboratories (SKLs) approved by the Ministry of Science and Technology of China and six branches of the Chinese National Engineering Research Centres in Hong Kong. These research labs are managed by Hong Kong’s publicly funded universities and research centres. Besides these, the Guangzhou Institutes of Biomedicine and Health under the Chinese Academy of Sciences have set up a stem cell and regenerative medicine research centre at the Science Park.

Some Hong Kong universities have set up branches in Shenzhen to enable faculty members to perform research work in the mainland, and to expand into the mainland market.

To enhance the role of the local technology sector in promoting national technological advancement, universities and research institutions in Hong Kong have been allowed to apply for science and technology funding from the Central Government and use the funding for research in Hong Kong since mid-2018. The arrangements on cross-boundary remittance of research funding to Hong Kong encourage local technology talents to collaborate with the Mainland and participate in major technology missions of the country.

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 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 expected to emerge as one of the key bases for co-operation in innovation and technology research. The first batch of facilities is expected to be completed in phases from 2024 to 2027. Upon full development, the park will be the largest ever I&T platform in Hong Kong, providing a gross area of 1.2 million square metres. 

Hong Kong is favoured by several world-renowned research institutions. Cornell University initiated a collaboration with CityU in 2010 to create the first academic programme for veterinary medicine, fulfilling the need for veterinarians in Hong Kong. MIT set up its first overseas Innovation Node in Hong Kong in 2016 to take advantage of Hong Kong’s “ready access to a unique manufacturing infrastructure that encourages prototyping and scaleup”. Sweden’s Karolinska Institutet opened a research facility at the Science Park, its first overseas centre, in 2016 to strengthen research in regenerative medicine. These activities and international collaborations highlight Hong Kong’s attractiveness.