In-depth observation of China's materialistic chip industry
The failure of Cyberport is a sore spot for Hong Kong. The prosperity of any high-tech industrial park will add another sore spot to this sore spot.
At the end of March, the Hong Kong-made chip "Lion Rock" was exposed, and it is expected to be launched next year.
"Lion Rock" can be described as a lying salary. Hong Kong's Lion Rock is 495 meters high and overlooks Hong Kong Island, Kowloon and the New Territories. In the 70s of the 20th century, the TV series "Under the Lion Rock" witnessed Hong Kong's economic development. The song of the same name performed by Koo Ka-fai, Huang Zhan and Luo Wen has become a portrayal of the indomitable vitality of Hong Kong people.
Lion Rock, Hong Kong / Source: Picture Worm Creative
The "Lionrock" chip is not much more sophisticated, and the existing application is gas meters. The name is particularly "bitter and bitter", and it also shows the "high-tech" desire of the Hong Kong people.
Even Leung Chun-ying, vice chairman of the National Committee of the Chinese People's Political Consultative Conference (CPPCC), said that Hong Kong's future "eating porridge and eating rice" depends on whether innovation and technology can develop.
Eat porridge or eat rice
On March 22, Li Jiajie, chairman of China Gas Company, announced that the Hong Kong-made chip "Lion Rock" adopts RISC-V architecture and is expected to be launched next year.
"Lion Rock" was developed by two companies in cooperation. The first is StarFive, an innovation and technology company incubated by Li Jiajie's family office "Empowerment Capital", and the first is Super Fusion, a computing infrastructure and service provider independent from Huawei. Ganghua Chip, which is also invested by Li Jiajie's family office, produced 1.6 million pieces last year and has been widely used in the mainland.
Li Jiajie
Hong Kong's semiconductor industry is still in its infancy, and there is no industrial chain. The Yuen Long InnoPark Microelectronics Centre is expected to operate this year and is yet to be completed.
Although the stock of chip companies is not much, there is a lot of increment - mainly related to the mainland.
According to the Hong Kong Companies Registry, in the past two years, about 5 to 600 I&T companies related to chips, semiconductors or microelectronics have been established each year, and nearly one-third of them have mainland backgrounds.
In 2015, riding on the tide of "entrepreneurship and entrepreneurship" in the mainland, the Hong Kong Innovation, Technology and Industry Bureau was established. When introducing Hong Kong's start-up ecosystem, government agencies emphasised the need to nurture "local start-ups" or unicorns with "Hong Kong DNA", followed by using Hong Kong as a "connector in the Greater Bay Area" to attract foreign entrepreneurs to Hong Kong and tap the springboard to explore business opportunities in Chinese mainland.
In fact, whether it is making chips or doing scientific and technological innovation, most of them are mainlanders.
Some research institutes have found that if the source of funds or founders of new companies is roughly judged from their names, up to 40% of new I&T companies are named in Putonghua Pinyin, Mainland provinces and cities, or use Mainland terms (e.g. "information technology" or "technology") instead of the "I&T" commonly used in Hong Kong.
Even though some I&T companies have names in foreign countries (most commonly Japan and Germany), others use Mandarin Pinyin. They may be wholly mainland-owned, Sino-foreign joint ventures rather than purely foreign-owned.
I&T investment accounts for less than 1% of Hong Kong's GDP. On an annual basis, about one-tenth (more than 10,000) of all newly registered companies are I&T enterprises. Less money and more companies mean that most of the new companies are "small and micro enterprises", or government-sponsored "start-ups", or companies that focus on research rather than production.
Hong Kong will launch the "Innovation and Technology Development Blueprint" in 2022, the picture shows Hong Kong Science Park / China News Service reporter Li Zhihua
In order to build an "international innovation and technology hub", the Hong Kong government has indeed spared no effort.
There are already 17 funding schemes under the Innovation and Technology Fund (ITF) alone, and locally established companies, regardless of where the funding comes from, can benefit from most of them. The ITF has approved funding of over HK$30 billion, and most of the projects are related to biotechnology, environmental protection, information technology and electronics.
To put it simply, Hong Kong's porridge is still rice, which can be seen from the sharp rise in the number of chip startups - it is precisely because of the increasingly complex geopolitical environment that the "chip war" between China and the United States is becoming increasingly fierce. Even with the ban, Hong Kong's identity can still play some role.
An interesting example is that among the newly established chip companies in Hong Kong in 2022-2023, there are "American Chip Electronic Technology Corporation", "Taiwan Semiconductor Technology Co., Ltd." and "GaN Semiconductor Co., Ltd."
Under the Lion Rock
In the seventies and eighties of the 20th century, Hong Kong's semiconductor industry was once brilliant, and the first-generation semiconductor industry was very competitive in Asia.
In 1962, Fairchild Semiconductor leased a rubber shoe factory in Heng Yip Street, Hong Kong, and built its first semiconductor factory outside the United States – the starting point of Hong Kong's semiconductor industry.
The main production process is that Fairchild produces wafers in the United States, ships them to Hong Kong for packaging and testing, and finally, some of the chips are shipped back to the United States, and the rest is sold directly in Asia. According to a U.S. executive at Fairchild Semiconductor, Hengye Street produced plastic transistors codenamed T105 and T106, which were mainly installed in radios.
Behind Fairchild, semiconductor companies such as Texas Instruments, Motorola, and NEC rushed to Hong Kong to build overseas factories. By 1970, the number of electronics factories in Hong Kong had reached 230, employing 38,000 workers, and Hong Kong's industrial exports accounted for 81% of total exports.
At that time, Hong Kong was called a "manufacturing city".
Hong Kong also has a leading chip company, Vanlead Semiconductor. At that time, Motorola, the world's second-largest mobile phone manufacturer, opened three semiconductor testing and packaging factories in Hong Kong. Its "Silicon Port Centre" in Tai Po is the second largest chip testing centre in Asia at the beginning of the 21st century.
Vanlead Semiconductor provides chips for PALM handheld computers
The "Dragon Ball Chip" developed by Vanlead Semiconductor in 1995 represents the strongest strength of Hong Kong chips and is the core component of the PDA (Handheld Device) brand electronic handbook Palm that year. In 2002, considering the rent and labor costs, Vanlead Semiconductor, which had been in Hong Kong for more than 30 years, moved most of its production lines to Tianjin.
After Wanli left, the vitality of Hong Kong's semiconductor industry was greatly damaged.
Solomon Systech Technologies, which was spun off from Vanlead Semiconductor, is still in Hong Kong. In 2004, Solomon Systech was listed on the main board of Hong Kong, making it the largest chip design company in Hong Kong and one of the few chip companies to stick to Hong Kong. In addition, there are only more than 30 semiconductor companies left in Hong Kong, such as Zhuo Rong Group, Kefan Micro Semiconductor, Weiyang Electronics, and Kaiyuan Semiconductor, which mostly do design and research and development in the mainland, and marketing and channels in Hong Kong.
The Hong Kong government had planned to build a high-tech hub, rather than relying solely on the "spontaneous agglomeration" of enterprises.
The failure of Cyberport and Silicon Port is essentially due to the fact that the "land finance" model is not suitable for Hong Kong, and the resistance is too great for the government to invest in projects with long-term interests.
Wire Bay, where Cyberport is located, is located in the southwest of Hong Kong Island, close to the University of Hong Kong. The Hong Kong government granted the land "free of land premium" to Li Zekai's Yingke Development, with the intention of building China's Silicon Valley. In March 1998, the Cyberport Plan was promulgated, and giants such as HP, IBM, Oracle, Yahoo, Ericsson, and Nokia expressed their intention to settle in. However, the government was severely charged on many fronts and had to terminate the project.
Hong Kong Cyberport cityscape night view / Source: Picture Worm Creative
The silicon port plan has also fallen through. In July 1999, Hsu Dalin, chairman of H&Q Asia Pacific Group, proposed to establish six wafer factories in Hong Kong, and cooperated with Zhang Rujing, a semiconductor engineer from Taiwan, China, to transplant the development experience of Taiwan's science parks to Hong Kong.
Both encountered the same difficulties: the government relied on selling land to developers at low prices and attracting high-tech companies to settle in the industrial park, which was regarded as "boring" by the Hong Kong media and the public, and the project was aborted.
Later, Zhang Rujing came to Shanghai, another pearl of the Orient, and founded SMIC.
Undertaking "domestic capital"
The core reason for whether Hong Kong can develop the semiconductor industry has nothing to do with land area, but geopolitics.
Although Singapore is small, the semiconductor industry chain is quite mature, with complete links such as IC design, manufacturing, packaging and testing. In recent years, it has grown by leaps and bounds, and the proportion of industry output value in the overall manufacturing industry has been close to 50%. Singapore has an area of only 719 square kilometres, while Hong Kong has 1,106 square kilometres.
Singapore itself has a good foundation. In the first decade of the 21st century, the number of semiconductor companies in Singapore has exceeded 300. Among them, there are 40 IC design companies, 14 silicon wafer fabs, 8 wafer fabs, and 20 packaging and testing companies. Asia-Pacific headquarters like Texas Instruments, STMicroelectronics, Infineon and Micron are all in Singapore.
In 2018, ZTE, Huawei and other Chinese companies were successively "sanctioned" by the United States, and the competition between China and the United States for chips gradually intensified, and the semiconductor industry chain also showed a trend of "decoupling". Many businesses are turning to Singapore to invest. For example, Soitec plans to invest 400 million euros (about 440 million US dollars) in Singapore to double the capacity of silicon fabs, among other things.
In 2020, Singapore unveiled its National Research Trust's (NFR) Research, Innovation and Enterprise 2025 Plan, which states that the Singapore government will maintain investment in research, innovation and business as a percentage of the country's GDP (about US$25 billion) between 2021 and 2025 to support the electronics semiconductor industry and capture new growth opportunities.
On September 12, 2023 local time, in Singapore, an employee wearing production clothes walked in the clean room of the fab manufacturing room / Source: Visual China
The opportunities in Hong Kong are "opposite" to those in Singapore. Singapore has taken on foreign investment, while Hong Kong has taken on "domestic investment".
Although the U.S. Bureau of Industry and Security issued an updated chip control measure on March 29, which once again imposed many restrictions on technology companies in Hong Kong and Macau, Hong Kong still has unique conditions.
In other words, China and the United States are like a pair of mirror images in the field of chip competition: the United States pursues absolute technological leadership and strengthens the so-called "de-risking" supply chain resilience, while China strives for independent technological innovation and independent supply chain control. Both regard chips as an important tool for national security and development, and behind them is the competition between the strengths, systems, allies and interests of major powers.
The United States has a technological advantage on the supply side, and China has a market advantage on the demand side. China is both the biggest competitor and the largest customer of the United States. This contradictory relationship is not only the underlying logic of chip competition, but also a certain underlying logic of Sino-US relations.
Whether to eat porridge or rice in Hong Kong depends on the "general environment" in the final analysis. Nowadays, even the Hong Kong media are talking about "the combination of a promising government and an efficient market".