Background

For most electronic products nowadays, major product functions are incorporated into the IC chips. ICs are the core technology of these electronics products, and IC design is the most important portion of the value chain of electronics manufacturing.

The electronics industry is Hong Kong's largest export earner. In 2003 the total exports of electronics products has increased by 20% over the previous year to $732 billion. There has been an increasing demand of IC chips from Hong Kong manufacturers. However, most local manufacturers still source their critical IC components from overseas suppliers. Over-reliance on overseas IC suppliers has limited their ability in product innovation and their profitability.

The IC market is forecast to grow substantially from 2003 to 2005 due to the high demand from the Asia-Pacific region, particularly the Mainland and Japan, on consumer products such as DVD recorders, mobile phones and personal computers. According to a recent survey, the Mainland alone accounts for 25% of semiconductor demand in the Asia-Pacific region.

The Mainland has well recognized the strategic importance of the semi-conductor industry and has identified IC design as one of the key industries in the Five-year plan. Tax incentives have been provided to the IC design industry and many IC fabrication/foundries have been set up in the Mainland. The Ministry of Science and Technology has designated regional IC design centres in seven major cities (i.e. Beijing, Chengdu, Hangzhou, Shanghai, Shenzhen, Wuxi and Xian).

Hong Kong also supports the development of the IC design industry and the ITF has funded projects ranging from specific IC product development to setting up of infrastructure. The Semiconductor Product Analysis and Design Enhancement Centre at the Hong Kong University of Science and Technology and the IC Design and Development Support Centre at the Hong Kong Science and Technology Parks Corporation (HKSTP) have been set up with a total funding of $91 million. The HKSTP has also teamed up with the seven regional IC design centres in the Mainland to form a strategic alliance, known as the “7+1” arrangement.

Strengths and opportunities

Geographically, Hong Kong is conveniently located at the centre of many nearby foundries in Korea, Singapore, Taiwan and the Mainland. Moreover, IC design involves intellectual property. Hong Kong has a robust IP protection regime backed up by a well-respected legal system, and this is a favourable factor to support the development of the IC design industry.

Hong Kong manufacturers have been well known for their adaptability and responsiveness to market and technology changes, and have been doing well in consumer electronics. There is already a big local market for ICs in the PRD and the rest of the Mainland.

Risks & Weaknesses

Hong Kong needs a large pool of IC design professionals to support the development of the industry. However, Hong Kong companies are mostly SMEs which do not possess strong capability in product innovation and are cautious in investing in product design and development. At present, only a small number of IC design teams can be found in certain big companies and in fabless design houses.

IC design is part of a complete semi-conductor product development cycle. While expensive EDA tools are required for IC design, other types of equipment are also needed for other parts of the cycle, such as wafer fabrication, packaging, wafer bumping, testing, etc. Currently, most Hong Kong IC design companies have to rely on overseas companies to perform these tasks.

R&D Centre for Information and Communications Technology

Under a new strategy of innovation and technology, the Government has set up R&D centres for a number of focus technology areas, IC Design being one. ASTRI is hosting the R&D Centre for Information and Communications Technology. Further details can be found here .