Hong Kong’s chip design capabilities will likely be in high demand as the Greater Bay Area further develops smart infrastructure and as the city positions itself as a hub for innovation and technology, according to a leading Hong Kong research engineer.

The bay area plan, which consists of nine southern mainland Chinese cities as well as Hong Kong and Macau, has the potential to unlock huge potential for third-generation semiconductors that can be used in electric vehicles, 5G technology and for smart manufacturing and transport, said Daniel Shi, senior director of integrated circuits and systems at the Applied Science and Technology Research Institute (ASTRI) of Hong Kong.

“We cannot find a place anywhere else in the world where so many big companies are located in such a small region, and with such huge potential demand for third-generation semiconductors,” said Shi in an interview last week.

Third-generation semiconductors, which are gallium nitride and silicon carbide-based devices with higher voltage and temperature resistance than traditional silicon-based materials, is a major focus area for ASTRI, which has around 150 engineers working on chips.

Interest from the global tech community in Hong Kong is on the rise and more than five mainland-based companies have set up branches that involve integrated circuit R&D in Hong Kong in the past couple of years, according to Shi. He attributes the growing interest to Beijing’s plan to build up the Greater Bay Area and to the Hong Kong government’s continued investment in technology R&D, including semiconductors.

The Greater Bay Area, touted as China’s answer to Silicon Valley, encompasses 65 million people and is home to some of China’s biggest technology companies, including Tencent Holdings, Huawei Technologies and drone-maker DJI in Shenzhen. To take a greater role in the bay area scheme’s development, Hong Kong wants to strengthen its R&D capabilities, enabling local institutes to enjoy the same level of the funding offered to mainland entities.

The Greater Bay Area should also be seen as an immense opportunity for Hong Kong’s entrepreneurs, Albert Wong, chief executive of Hong Kong Science and Technology Parks, said in an interview with Chinese media published this week. Shi declined to comment on whether the ongoing anti-government protests in Hong Kong would impact the city’s role in the bay area plan.

ASTRI, the largest government-funded R&D centre in Hong Kong, is one of the research institutes covered by the government’s drive. Established in 2000, the institute works with companies and start-ups globally to develop technologies applicable to their businesses.

Daniel Shi, senior director of integrated circuits and systems at the Applied Science and Technology Research Institute (ASTRI) of Hong Kong. (Picture: Handout)

ASTRI’s clients will need to set up a Hong Kong-based entity as the organisation aims to bring R&D capabilities to the city.

“The role ASTRI plays is to group people together to make a bigger impact,” Shi said.

In the semiconductor sector, the institute is a leader in the development of Narrowband Internet of Things (NB-IoT) chips, which support a wide range of applications in smart cities and consumer electronics, and the technology has been licensed to companies in mainland China, Europe and Israel, according to Shi.

The institute has set up a branch of the National Engineering Research Centre for Application Specific Integrated Circuit Systems, a leading chip design centre, which allows ASTRI’s IC partners to apply for national funding from China.

Ongoing trade tensions between China and the US has placed Hong Kong in a unique position under the “one country, two system” principle, whereby access to technology from the US and other countries is still available to companies who set up branches in Hong Kong, according to Shi.

The world’s two biggest economies are engaged in an intensifying tech war after the US added Chinese tech giant Huawei to a trade blacklist that restricts the company’s access to hardware, software and services from its American hi-tech suppliers without approval from the US government.

More mainland-based companies are setting up in Hong Kong for chip design R&D. (Picture: Reuters)

There are 143 entries of tech companies and institutes under mainland China in the blacklist, officially called the Entity List, and most of the Chinese entities are involved in fields such as electronics, aviation, semiconductors, engineering, and materials used for hi-tech components.

The local IC industry is attempting to tap an area that major mainland companies, such as Huawei, are looking into as a potential source of replacement parts should they be completely cut off from US-sourced technology for the foreseeable future.

However, Shi noted that the opportunities are “two-sided” as uncertainty looms. “We have to play it carefully. Business opportunity is one thing, but we have to follow the rules of the game and obey the rules set by the US government and companies,” Shi said. “We don’t know if the US government will change its policy [for Hong Kong] in the future.”

ASTRI is also looking to boost its own indigenous IC research in the long run to reduce reliance on imported technology.

“Our strategy is to start with very fundamental stuff from the ground up, such as the NB IoT. If we do this we won’t need to rely on the US too much,” Shi said. “From this, we can build an innovation culture, and then develop new technology. This is exactly what the Bay Area [in the US] did in the past.”