Technology

Overview

• The information technology (IT) sector of Hong Kong is among the most advanced in the world. According to the World Economic Forum's Networked Readiness Index 2010/11, Hong Kong ranked third in Asia and 12th globally in terms of readiness to participate in and benefit from IT developments.
• A key factor contributing to Hong Kong's advance IT status is the top-notch telecommunications infrastructure of the city. Hong Kong leads the Asian region in terms of international call time and the penetration of telephone lines, mobile phones and fax machines. It also operates Asia's largest commercial satellite-earth station.
• According to a survey conducted by the Vocational Training Council (VTC) in May 2010, more than 79% of the Hong Kong IT service providers were SMEs with less than 20 employees. 31.8% of employees were employed by suppliers of IT products and services, and the remaining 68.2% were employed by IT-user organisations.
• Thanks to their technical competency, flexibility, and international exposures, many Hong Kong IT service providers are able to compete internationally while delivering effective solutions at home.
• The Hong Kong government's Digital 21 Strategy outlines a vision to turn Hong Kong into a world-class digital city. While Hong Kong continues to offer the world's most affordable internet connection and mobile telephone services, Cyberport and the Hong Kong Science Park have been developed as strategic hubs to bring together clusters of IT companies and professional talents from all over the world.

Industry Data

Source: 2010 Manpower Survey Report: Information Technology Sector, Vocational Training Council

Source: 2010 Manpower Survey Report: Information Technology Sector, Vocational Training Council

Range of Services

IT professionals provide services to clients from a wide range of businesses:

Banking and finance

Some of the world's largest and most sophisticated computer applications can be found in Hong Kong's financial sector. The electronic off-platform trading system of the Hong Kong's stock exchange and the inter-bank real time gross settlement (RTGS) system leapfrog many of the similar systems in the world. Technological innovations have brought about not just new types of electronic money, but also new bank-customer relationship through Internet/mobile phone. Online/wireless investment, securities and banking services are gaining increasing popularity.

With online financial transactions becoming increasingly popular, Hong Kong Exchanges & Clearing Ltd. (HKEx) upgraded its securities market trading system to AMS/3.8 in December 2011, resulting in a 10-fold improvement over the old system to achieve an initial capacity of 30,000 orders per second, and scalable to 150,000 orders per second.

Shipping, freight forwarding and logistics

Many shipping and freight forwarding companies have been using electronic data interchange (EDI) and Internet-based networks to transmit information and documents among themselves and with traders. Traders are able to track the flows of their goods online. Advanced applications such as global positioning system (GPS) are used in warehousing, transportation, container management and other supply chain related activities. Radio frequency identification (RFID) is used to facilitate warehouse management and supply chain management. The Hong Kong International Airport is considered one of the biggest champions for this technology in facilitating air cargo transportation.

Trading

All import and export shipments involve government documentations. Tradelink provides an electronic platform to facilitate those transactions such as certificates of origin and trade declaration applications. In turn, these documentations could be shared between government departments and different stakeholders along the supply chains. Tradelink also offers a number of value-added transaction management facilities including message checking, matching and validation, message authentication and security, electronic billing and payments, message archiving and audit trail services. Tradelink has built and maintained a customer database of over 53,000 companies.

Transportation

Founded by major transport operators in Hong Kong, Octopus Cards Limited developed and launched Octopus card in 1997 by using a kind of radio frequency identification technology. Besides being used in paying transportation fee, such micro transactions and clearing system is also being applied in small retail payments.

Wholesale and retailing

Many retail shops have installed bar-coding and point-of-sale (POS) systems for inventory control and sales analysis. Some retail chains have linked up their POS systems with vendors, exchanging purchase orders and invoices. Data mining technology has been applied to analyse the vast amount of information collected by POS to support managerial and marketing decision.

Manufacturing

Manufacturers are automating their ordering, production management, sales and distribution systems. Computer-aided design/manufacturing (CAD/CAM) is also widely used in the manufacturing sector. The collaboration with manufacturing engineering in the use of IT has improved the workflow of operation. The efficient flow of information also allows the growth of discrete manufacturing (digital manufacturing) by which manufacturing process is so flexible that customers can participate in the design, engineering, assembly and production of specific products.

Graphics and multimedia

Hong Kong possesses the best design and multimedia capabilities in the region. Computer graphics has a wide application in various Hong Kong industries. Computer generated images are becoming trends in electronic games, advertising, film production and web design.

Service Providers

According to the 2010 Manpower Survey Report conducted by the Vocational Training Council (VTC), 73,378 persons (about 3.4% of the 2.1 million employees covered by the survey in Hong Kong) were employed in principal jobs of the IT sector. IT products and services suppliers were the largest category of IT users, accounting for 31.8% of total IT employment, followed by the wholesale, retail, import/export, restaurants and hotels sector (21.5%), the financing, insurance, real estate and business services sector (18.3%), and the community, social and personal services sector (12.5%).

IT services can be broadly divided into software and hardware services:

Hardware service providers

Most hardware service providers are distributors of large international computer companies, and the largest ones combine rvice provision with software development and consultancy.

Software service providers

Software service producers in Hong Kong can be grouped into the following categories:

•    Value-added resellers
•    Custom software developers / software houses
•    System and network integrators
•    Electronic data processing departments
•    Information system consultants
•    Hardware manufacturers who also design operating systems

Exports

Exports of Computer and Information Services (HK$ million)

Sources: Report on Hong Kong Trade in Services Statistics for 2009, Census and Statistics Department

Major Export Markets of Computer and Information Services 2006-2009 (HK$ million)

Sources: Report on Hong Kong Trade in Services Statistics for 2009, Census and Statistics Department

i) Software distributors

Local dealers are growing in terms of size, scope of operations and sophistication. Many services that were once performed by computer vendors are now done by dealers. Proprietary software companies also enter overseas markets through local dealers.

ii) Software developer

Many software houses undertake software development projects for Hong Kong companies expanding overseas. They help Hong Kong companies to install the same computer systems which they used in their Hong Kong headquarters in their overseas offices. Hong Kong software firms also export services, such as designing web sites and developing "secure software" for electronic trading, to other Asian countries.

Industry Development and Market Outlook

The development of the IT industry is key to underpinning Hong Kong's position as a world centre of business and has brought innovations to many sectors. Examples include Octopus in public transport, the Airport Management System, the Modern Port Management System used in the container ports, the Online and Wireless Banking System in the financial sector, and the Smart ID of the public sector. In return, demand for premier financial and business services has provided a suitable environment to nurture the growth of Hong Kong IT businesses.

In terms of infrastructure, Hong Kong has provided the industry with the Cyberport, a hi-tech multimedia hub costing HK$ 13 billion, under the joint efforts of the public and private sectors. The Cyberport has the capacity to house about 30 large to medium-sized companies and 100 smaller companies specialising in the development of services and multimedia content to support various industries. Cyberport also provides support in different aspects, such as training, organising business matching events, offering SMEs financial assistants enhancing competitiveness of Hong Kong companies.

The Radio Frequency Identification (RFID) Centre opened in 2008 with an aim to promote the use of electronic product code (EPC) and RFID in different industries, such as manufacturing, logistic, and retailing. This can boost operational efficiency and enhance the economic competitiveness of Hong Kong in the global marketplace.

Financially, the establishment of the Growth Enterprise Market (GEM) in November 1999 has provided a fund-raising venue for Hong Kong IT-related companies. As of end December 2011, GEM's total market capitalization had reached over HK$ 85 billion, with 170 companies listed.  As the GEM also functions as an exit platform for venture capitalists, it continues to facilitate venture capital firms to consider financing local software startups.

The Hong Kong government's Innovation and Technology Fund (ITF) has provided an alternative source of funding for the IT industry.  As of end-December 2011, the ITF had approved 2,689 funding applications on projects related to IT with a total of HK$ 6.3 billion.

During 2011, Hong Kong topped the Asia Pacific Information and Communications Technology Awards (APICTA) with 5 Grand Awards and 9 Merits, the best result in Hong Kong IT industry over the years. APICTA is an international awards programme which is aimed to stimulate ICT innovation, offer opportunities for business matching between IT innovators and investors, and facilitate technology transfer and application. Participants included 16 countries and regions in the Asia Pacific region like Australia and Singapore.

In the future, Hong Kong businesses should continue to leverage this receptiveness by using Hong Kong as a platform for commercialising and exporting technologies to the world. Recent successful cases include:

• A subsidiary of Octopus Holdings Limited, the Octopus Knowledge Limited, has been providing consulting services in overseas countries, such as the Netherlands, the UAE and New Zealand, based on its know-how on the operation of smart-card system.
• Senior Citizen Home Safety Association, which is a Hong Kong social enterprise, has been providing consulting services to Shanghai, Guangzhou, Shenzhen and Macau based on its know-how on the 24-hour Personal Emergency Link Service for elderly and people in need.

China Market

According to the statistics released by the China’s Ministry of Industry and Information Technology, the software industry on the Chinese mainland grew by 31% to over RMB 1,300 billion in 2010, ten times of the market size in 2001. The surging growth continued in the first ten months of 2011, up 32.9% year-on-year (YoY). China’s software exports amounted to US$ 23.9 billion in the first ten months of 2011, up 17.1% YoY. Over the same period, software outsourcing exports increased by 45.5% to US$ 4.8 billion.

The Closer Economic Partnership Arrangement between Hong Kong and the Mainland (CEPA)

Under Supplement II to CEPA, Hong Kong service suppliers (HKSS) in the sector of information technology can apply for computer information system integration qualification certification in accordance with the provisions of relevant Chinese laws, regulations and rules. The Chinese mainland introduced in 2004 its revised National Computer and Software Technology Qualifications Examination to enhance professionalism of its IT sector. As also provided under the Supplement II to CEPA, Hong Kong residents are allowed to take the qualification examination on computing technology and software. Hong Kong IT professionals can render services related to systems integration after they have passed the examination.

With the approval of the Ministry of Personnel and Ministry of Industry and Information Technology, an examination centre for the National Computer and Software Technology Qualifications Examination has been set up in Hong Kong. The non-profit Beijing-Hong Kong Academic Exchange Centre is a centre for enrolment of mainland professional qualification examinations, and at the same time, it provides examination consultation services to examinees.

Hong Kong IT professionals who have obtained the required qualification can participate in large-scale IT projects, which usually require system integration services at the senior level of project management. Besides, HKSS with the Computer Information System Integration Qualification Certification are allowed to plan, design and develop computer application system for Chinese mainland companies. In short, Hong Kong IT companies and professionals are expected to benefit from the CEPA arrangements with enhanced access to the mainland market.

Under Supplement IV to CEPA, HKSS can set up wholly-owned company to provide software implementation and data processing services on the Chinese mainland. Under Supplement V to CEPA, Hong Kong and Guangdong started a pilot run of applications of mutual recognition of electronic signature.

As of 31 December 2011, 16 Hong Kong IT services providers were granted the HKSS certificates under CEPA.