19 May 2019
ASML, a Dutch company which is the world's leading supplier of chip-making machines, had some connection with Hong Kong. Photo: Bloomberg
ASML, a Dutch company which is the world's leading supplier of chip-making machines, had some connection with Hong Kong. Photo: Bloomberg

How Hong Kong lost its edge in chip technology

The US export ban on Chinese telecommunications equipment maker ZTE Corp. has highlighted China’s weakness in chip technology.

Interestingly, Hong Kong used to be a hub for research and development on semiconductor technology several decades ago. However, the industry gradually died along with the city’s manufacturing sector.

Had Hong Kong continued to pour resources into chip R&D, it would have been a totally different story for our city – and China’s technology sector.

The electronics industry started to blossom in 1970s. Many local and global manufacturers set up research labs in Hong Kong.

For example, the Hong Kong lab of Motorola Inc. developed the Dragon Ball chip in 1994 and the US company subsequently cornered over 70 percent of the global market for palm devices.

ASML, the top chip-making machines supplier, also had some connection with Hong Kong.

In 1964, Dutch engineer Arthur del Prado established a semiconductor company named Advanced Semiconductor Materials. In 1975 he set up ASM Pacific in Hong Kong to open up the Asia market. Then in 1984, Prado formed a joint venture with Philips, which was later named ASML.

Indeed, Hong Kong’s chip industry once held bright prospects. However, the factories started moving across the border for lower costs.

Then political uncertainties prevailed before Hong Kong’s handover in 1997, and this led to an exodus of talent. It is said that Philips and ADML were able to absorb many of those chip professionals.

Sadly, those who stayed in Hong Kong were not able to find relevant jobs and had to switch careers.

The success of the Netherlands in the field of technology offers valuable lessons for Hong Kong.

This European nation has a population of just 17 million, yet it is the world’s fourth-largest tech service exporter. It boasts some of the leading tech companies such as ASML and Philips, and many of its large companies spend heavily on R&D such as Airbus, Shell and Unilever.

The Netherlands shows that population size has nothing to do with a nation’s ability to become a major technology player.

It has built a reputation of being a friendly country for foreigners, enabling it to attract talents from all over the world. Its low tax rate and low crime rate have added to its attraction.

And the Dutch government has spared no effort in beefing up its talent pool. In 2016 it launched a program to lure talents from the world’s top 200 universities.

A holder of a master’s or doctorate degree from any of these 200 universities can work in the Netherlands without applying for a visa within three years after graduation. They can apply for a working visa as long as they can find a job with a minimum monthly salary of 2,314 euros (US$2,825).

This article appeared in the Hong Kong Economic Journal on April 25

Translation by Julie Zhu

[Chinese version 中文版]

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Hong Kong Economic Journal columnist

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