Hong Kong’s path to future manufacturing: Harnessing New Quality Productive Forces and New Industrialisation
By Ir Raymond SHAN of the Manufacturing, Industrial and Systems Division
Hong Kong has long been recognised as a global financial hub, fuelled by its strategic location, robust infrastructure, and dynamic business environment. Before the 1980s, the manufacturing sector was a significant pillar of Hong Kong’s economic growth. While the economic landscape has changed over the past decades, the city’s industrial roots have also played a crucial role in shaping its development trajectory.
Since 2014, the world has been transitioning to Industry 4.0. This transition is marked by the fusion of advanced digital technologies and manufacturing. Hong Kong, positioned as an International Innovation and Technology (I&T) hub, is standing at the cusp of a transformative era. To facilitate further transitions, the HKSAR Government has launched the New Quality Productive Forces (NQPFs) and New Industrialisation (NI) initiative recently, aiming to revitalise and position the city as a leader in smart manufacturing in a sustainable way, thereby securing its competitive edge in the global economy.
In December 2022, the HKSAR Government launched the Hong Kong I&T Development Blueprint to make Hong Kong an international I&T centre. In 2023, Hong Kong was ranked second globally and first in Asia on the Emerging Ecosystems ranking. The government has been promoting NI, supporting strategic enterprises, assisting the manufacturing sectors in advanced I&T upgrades, and providing support for start-ups. The Hong Kong industry has been consistently modernising its manufacturing operations in response to NI trends moving further towards NQPFs.
Hong Kong’s industrial landscape: A historical perspective
Hong Kong’s industrial sector has evolved dramatically over the past several decades. The city emerged as a manufacturing powerhouse in the 1950s and 60s, with its economy heavily reliant on industries such as textiles and garments, electronics, electrical appliances, food, watch and clock, mould and die, critical components and toy production. In 1980, these industries not only contributed significantly to the Gross Domestic Product (GDP) at 23.7% of Hong Kong’s GDP1 but also provided employment for 47% of the total work force2, catalysing economic growth and transforming Hong Kong into a vibrant, export-oriented economy.
However, the economic landscape began to shift in the early 1980s as Mainland China opened its doors to foreign investment, offering abundant land resources and workforces, lower production costs and access to vast markets. As a result, many of Hong Kong’s manufacturing operations relocated across the border, leading to a gradual decline in the local manufacturing content and a newly arisen trend towards service-oriented industries, focusing particularly on finance, logistics, tourism, servicing, and so on. Despite this shift, many Hong Kong-based manufacturers have kept their headquarters in the city, managing high-value producer-oriented services like strategic planning, sales, Research and Development (R&D), and logistics. This led to the retention of Hong Kong engineers with key competencies in the region, although they may work across the border. Therefore, Hong Kong remains as a leading manufacturing centre, offering strategic support, innovation, and global market access.
Today, Hong Kong is on the verge of a new phase of industrialisation, driven by technological advancements and the global trend towards smart manufacturing. The integration of novel digital technologies, such as the Industrial Internet of Things (IIoT), Human Machine Interface (HMI), manufacturingGPT, Intelligent micro-factory (iμfactory), Machine Learning (ML), Artificial Intelligence (AI), autonomous robotics, into manufacturing processes presents new opportunities for economic diversification and the enhancement of innovation, quality, productivity, and safety.
"Hong Kong is on the verge of a new phase of industrialisation, driven by technological advancements and the global trend towards smart manufacturing."
New Industrialisation: The government’s vision
Position of New Industrialisation (NI) initiative in Hong Kong
The HKSAR Government has recognised the transformative potential of NI and is committed to repositioning the city’s manufacturing sector to embrace this new paradigm. NI encompasses the digital transformation of manufacturing through the integration of Cyber-Physical System (CPS), Smart Data Analytics (SDA), Digital Lean, Industrial AI and Autonomous Execution (AE), along with cybersecurity technologies that safeguard networked manufacturing data and systems.
Benefits of NI to Hong Kong
For Hong Kong, the adoption of these technologies offers numerous benefits, including increased capacity and efficiency, reduced operational costs, and the creation of high-skilled jobs. The application of these advanced technologies, combined with manufacturing engineering techniques, will realise the concept of a “microfactory”. This will increase production throughput per unit volume, which is an innovative new production mode for Hong Kong, where only limited land and factory resources are needed.
USA’s R&D 100 Awards 2021 (Special Recognition: Market Disruptor – Services – Gold): Electrically-Assisted Free Forming (EAFF) with two co-operating six-axis robot and multi-tooling equipped to realise net shape sheet metal part for highly personalised market (Courtesy of Tung Hing Automation Investment Ltd.)
Furthermore, NI allows Hong Kong to develop innovative products and services for global markets, boosting exports and economic resilience, and complementing the government’s strategy to diversify the economy while strengthening key sectors like finance and logistics. By fostering a high-tech manufacturing ecosystem, Hong Kong can achieve a balanced, sustainable economic portfolio, driving GDP growth.
The government’s support and funding schemes
The government has introduced a range of supporting infrastructures and funding schemes aimed at encouraging businesses to adopt advanced manufacturing technologies. For example, the government is developing the AI ecosystem with a new High-Performance Computing Service, supporting around 300 AI and data technology companies at Hong Kong Science and Technology Parks Corporation (HKSTP). The new AI Supercomputing Centre, with operations beginning this year, will further meet the demand for computing power.
Earlier in 2024, the Legislative Council approved the Hong Kong Microelectronics Research and Development Institute (MRDI). As the anchor tenant, MRDI will use microelectronics-specific infrastructure provided by the Microelectronics Centre (MEC), including workshops and co-working spaces. By the end of 2025, it will fully support the microelectronics industry from design to pilot run and beyond.
The Hong Kong Productivity Council (HKPC) plays a crucial role in supporting industry upgrades through the comprehensive NQPFs platform service offered by its New Industrialisation Development Centre. HKPC also set up the Future Manufacturing Hall in 2024 to widely promote the NQPFs and NI to the industry and general public, drawing level with the new industrialisation era. This platform service encompasses four key areas, which are Innovation, High-end Technology, Smartification, and Future Talent Development. HKPC will guide industry stakeholders, from enterprises down to individuals, to upgrade themselves continually for NQPFs, following four steps:
(i) Strategic assessment and roadmap: Cooperate with Mainland and international R&D institutions to provide enterprises with NQPFs strategic assessment and roadmap for innovative, high-quality, green and all-round talent development.
(ii) Technology project implementation: Help enterprises make good use of government funding to upgrade themselves for NQPFs and NI, adopting green and smart manufacturing models.
(iii) Training courses: Offer vocational training in skills that cater to the needs of industries, enterprises, and individuals to facilitate integration into new business models and high-quality employment in Hong Kong and the Greater Bay Area (GBA). (iv) Industry support: Provide research reports, study tours, feasibility studies and industry promotion to promote the development of traditional, emerging and future industries.
These holistic, value-added services aim to accelerate industry developments towards sustainable manufacturing practices. Moreover, the initiative extends to the GBA, contributing to an overall increase in GDP and fostering regional economic growth.
In addition, there are various relevant funding schemes to orient industries towards NPQFs and NI:
(i) Innovation and Technology Fund (ITF): This fund provides financial support for R&D projects that drive technological innovations and enhance the competitiveness of Hong Kong’s industries.
(ii) New Industrialisation Funding Scheme (NIFS): This scheme promotes the establishment of NI in Hong Kong by subsidising manufacturers to set up new smart production lines in it. As of mid-July 2024, the New Industrialisation Vetting Committee had agreed to support 43 applications to the NIFS, delivering a total of 68 production lines in sectors ranging from traditional to emerging industries.
(iii) New Industrialisation Acceleration Scheme (NIAS): Launched in September 2024 with HK$10 billion as the total funding amount, the NIAS aims to provide funding support for enterprises engaged in industries of strategic importance (namely, life and health technology, AI and data science, and advanced manufacturing and new energy technologies) to set up new smart production facilities in Hong Kong. These emerging sectors are expected to benefit both the upstream and downstream supply chain clusters in Hong Kong and other GBA cities and increase the overall GDP in the region.
These funding schemes reflect the government’s strong commitment to fostering a new era of industrialisation in Hong Kong, an era characterised by high-tech and high value-added sustainable manufacturing.
NQPFs: Shaping Hong Kong's manufacturing sector
In the Government Work Report of the State Council of the PRC, it was proposed to develop NQPFs, which are reshaping the business development in our country. “Striving to modernise the industrial system and developing NQPFs at a faster pace” is listed as the major task. The NQPFs initiative is at the heart of the HKSAR Government’s industrial strategy. The five elements of NQPFs—innovation, high-end technology, smartification, sustainability, and future skills— are transforming industrial operations in Hong Kong towards efficiency, flexibility, and sustainability, embodying Industry 4.0. This initiative modernises manufacturing by integrating advanced technologies, enhancing traditional industries, and fostering new sectors. The nationwide NQPFs initiative aims to elevate the economy and position the country as a world-leading manufacturing power by 2035.
Enhancing traditional industries
Traditional industries can greatly benefit from Industry 4.0 technologies like automation, AI, and Internet of Things (IoT), which boost efficiency, reduce waste, and improve product quality. Smart manufacturing technologies support customised products, swift market responses, and better global competitiveness.
For instance, the food industry can upgrade its production lines with NIFS funding by implementing new processing technology and smartification. A factory producing additive-free corn juice uses a high-pressure food disinfection system to extend the juice’s shelf life from ten to 30 days. The automated process, from corn grain removal to bottling, guarantees hygiene and increases production throughput by nine times, enhancing overall equipment effectiveness (OEE) and supporting market expansion. IIoT technology collects critical production parameters for online monitoring via Supervisory Control and Data Acquisition (SCADA) and further optimisation through SDA. These advancements boost productivity and enhance environmental sustainability by reducing energy consumption and waste, driving the enterprise toward NQPFs and NI.
The interpretation of New Quality Productive Forces (Courtesy of HKPC)
Fostering emerging industries
The aim of the NQPFs initiative is to nourish emerging industries like life and health, AI and data science, microelectronics, advanced manufacturing, and new energy. These sectors offer high value-added products and services for global markets and possess the potential to transform Hong Kong into an I&T hub.
The government is facilitating the growth of these industries with investments in R&D, academia-industry collaboration, and financial incentives for start-ups and established companies. All this positions Hong Kong to become a leader in advanced manufacturing.
The Microelectronics Centre (MEC) at Yuen Long InnoPark, to be launched in late 2024, will feature pilot production lines for Gallium Nitride (GaN) and Silicon Carbide (SiC). The MEC will support microelectronics companies from design to trial production, boosting Hong Kong’s semiconductor capabilities. The MEC’s expected 80% occupancy rate3 reflects the growing demand for such infrastructures that empower Hong Kong’s role as a competitive player in the global microelectronics market.
Shaping future industries
The NQPFs initiative also places a strong emphasis on future industries driven by technological advancements. This forward-looking approach involves anticipating market trends, investing in frontier technologies, and preparing the workforce for future challenges. By nurturing innovation and investing in talent, Hong Kong can keep its manufacturing sector dynamic and competitive.
For instance, the Low-altitude Economy (LAE), powered by Small Unmanned Aircraft (SUA) and autonomous vehicles from the advanced air mobility (AAM) industry, represents a new frontier in Hong Kong’s industrial strategy. Integrating these technologies into manufacturing, servicing, and logistics can enhance connectivity within the GBA, streamline supply chains, reduce costs, and speed up deliveries of cross-border trade.
The establishment of up last-mile manufacturing for electric Vertical Take-Off and Landing (eVTOL) aircraft, SUAs, and hydrogen fuel cell technologies will drive economic growth and create jobs. The LAE strengthens Hong Kong’s position as a logistics hub in the GBA, leveraging cutting-edge technologies to unlock new opportunities for growth.
Emerging technology trends in Hong Kong’s manufacturing sector under NI
As Hong Kong embraces NI, several emerging technology trends are reshaping the local manufacturing landscape. These trends reflect the broader global shift towards more versatile, responsive, and sustainable manufacturing practices.
Intelligent Microfactories (iμfactory): A Game changer for local manufacturing
An AI-generated concept of iμfactory located in a multi-storey factory
In contrast to large order quantities and limited variation with a high level of automation, iμfactory presents a transformative approach to manufacturing that aligns with Hong Kong’s unique urban environment. By maximising floor and vertical space, namely, high volumetric usage, these compact, flexible facilities can produce small batches or even Lot Size-of-One (LS1) of high-quality, customised products. They integrate AI-based order planning, parametric design, and data analytics to optimise the processes and meet pers onalised market demands globally. This makes them adaptable, responsive to market changes, and compliant with environmental, social, and governance (ESG). The hyperlocal concept leverages local resources and talents to enhance Hong Kong’s manufacturing ecosystem.
iμfactory employs advanced technologies like net shape manufacturing, integrated systems, robotics, and AI for rapid prototyping and on-demand LS1 production. This allows businesses to produce goods locally, reducing lead times, logistics costs, and improving responsiveness to customer demand. This model particularly suits Hong Kong’s dense urban landscape, where space is limited and demand for fast, customised products is high.
ManufacturingGPT: Transforming the future of industrial innovation
Generative Pre-trained Transformers (GPTs) are increasingly prevalent in various applications. ManufacturingGPT is a revolutionary technology for the manufacturing sector, impacting both traditional and emerging industries. This Large Multimodal Model (LMM) understand and can generate contents from text and images to audio and video, supporting all facets of manufacturing, including product development, costing, planning, production, quality control, maintenance, repair and overhaul (MRO), and logistics.
Trained on extensive manufacturing data, ManufacturingGPT addresses a wide range of use cases without requiring other different models for different tasks. It helps manufacturers scale AI use cases and generate significant business outcomes. Some manufacturers are already using it to provide quick, tailored responses to customer queries about parts availability, technologies, and materials.
The creation of ManufacturingGPT requires expertise in machine learning, data science, software engineering, hardware infrastructure, and high-performance computing. Skills in natural language processing, computer vision, mathematics, security, privacy, and manufacturing-specific knowledge are also crucial.
The development of this model demands vast computing power, sophisticated training, and extensive data labelling. Access to massive amounts of data ranks among one of the challenges, but this barrier can be overcome by the government’s commitment and partnerships with manufacturing companies.
Various optimisation potentials for manufacturing companies using ManufacturingGPT (Courtesy of Hong Kong Industrial Artificial Intelligence and Robotics Centre (FLAIR))
Gamification for Manufacturing (GfM): Engaging the next generation
GfM is gaining traction among the next generation of workforce to enhance quality, efficiency, and productivity. By incorporating game-like elements such as rewards, challenges, and leaderboards into the virtual manufacturing process, companies may create a more engaging work environment.
The industrial metaverse will revolutionise work by allowing businesses to model, prototype, and test different designs in real-time, immersive environments before committing resources. Digital twins, enabled by metaverse technologies to realise GfM, simplifies factories’ local actions to increase productivity per capita by allowing human-AI collaboration in real and virtual worlds. This can eventually help attract younger talent to the industry, which has traditionally struggled to appeal to the digital-native generation.
Moreover, GfM offers sustainable product and process design, validation, monitoring, control, training, and MRO. It supports predictive, preventive, and corrective maintenance, promoting safer work environments, extending asset lifespan, reducing breakdowns, and minimising stockouts. Its usages as a tool for continuous learning and skills development also allows Hong Kong’s manufacturing sector to stay productive and competitive in the fast-paced world of Industry 4.0.
The development of GfM, through which the design, build, operate and training processes will be optimised, will drive technological advancement in smart wearables, Virtual Reality (VR), Augmented Reality (AR), Mixed Reality (MR), HMI, intelligent sensors, haptics, and tactile technologies.
Supporting New Industrialisation: Professional Engineers’ critical role
Professional Engineers (PEs) play a pivotal role in driving Hong Kong’s new industrialisation and ensuring the successful implementation of smart manufacturing technologies. Their expertise and innovation are critical in overcoming the challenges associated with the transition to smart manufacturing and in realising the full potential of the NQPFs initiative.
Challenges in implementing NI in Hong Kong
There are several challenges in adopting Industry 4.0 technologies in Hong Kong’s manufacturing sector. These include outdated infrastructure, high costs, and a shortage of skilled workers. Also significant are the concerns over data security and potential job displacement due to digitalisation and automation.
“Manufacturing Optimisation in the Industrial Metaverse”, a developed GfM application which won a silver accolade in the 2023 Edison Awards, being showcased in Celesphere, a technology hall set up by HKPC (Courtesy of HKPC)
PEs are crucial in addressing these challenges. With strong engineering capabilities and technological knowledge, they can leverage the expanded Body of Knowledge (BoK²) and continuing professional development (CPD) programmes to understand and integrate future advanced technologies into manufacturing. By developing innovative solutions and overcoming technical hurdles, PEs drive the development of NQPFs and NI in Hong Kong.
Key competencies for PEs
In the New Industrialisation era, human capital is crucial. PEs need multidisciplinary skills beyond traditional engineering, including AI, IIoT, robotics, R&D, design, engineering, planning, production, quality assurance, and logistics. They must also have strong interpersonal skills, including problem-solving, creativity, and communication to navigate modern manufacturing complexities. A comprehensive framework of concepts and activities, typically established by professional associations, is essential.
The BoK² for Engineers and Technologists, developed for engagement in the New Industrialisation era, plays a pivotal role in advancing the skills of local professionals. It is structured to foster innovation, sustainability, and integration of cutting-edge technologies. Core areas include Industrial Engineering and Operations Management, IT and Systems, Quality, Reliability and Maintenance, Product and Process Design, Safety and Facility Management, Material and Manufacturing Technologies, and Control and Automation. Additionally, advanced knowledge areas meeting the demands of NI include Knowledge Management, Creativity and Innovation, Eco-design, Industrial Virtualisation, Non-traditional Manufacturing, Digitalisation and Cyber Security, Gamified Manufacturing, Digital Lean and ESG Data Analysis, and New Emerging Industries Knowledge.
Continuous learning and adaptability are vital in this evolving landscape. PEs must stay agile and committed to upskilling to remain relevant and lead future industrial transformations and technological advancements.
Safety, responsibility, and ethical standards
PEs bear a significant responsibility to ensure the safety, reliability, and ethical integrity of smart manufacturing systems. Part of this responsibility is to adhere to stringent local manufacturing rules and regulations, such as Factory and Industrial Undertakings (F&IU) and Occupational Health and Safety (OHS), in the design and operation of automated systems to ensure efficient and safe operations. Additionally, PEs must consider the broader societal implications of their work. They must uphold ethical standards and sustainability practices in the development and implementation of technologies, ensuring that their innovations contribute positively to a sustainable society and do not compromise public safety or privacy.
A new “Body of Knowledge (BoK2)” framework for Future Professional Engineers and Technologists proposed by the HKIE’s Manufacturing, Industrial and Systems Division for propelling the New Industrialisation era
"Professional Engineers must uphold ethical standards and sustainability practices in the development and implementation of technologies."
Bridging the skills gap: Continuing professional development
To build a workforce adept at navigating this dynamic landscape, the Hong Kong Institution of Engineers (HKIE) and educational institutions are aligning curricula with industry needs, emphasising engineering, technology and industrialisation competency development, and CPD programme derived from BoK2. To this end, the HKIE plays a key role in providing CPD opportunities, enabling engineers to stay up to date with the latest technological advancements and industry trends. In promoting a culture of lifelong learning, the HKIE supports engineers in developing the skills and knowledge listed in the BoK2 to thrive in the new industrial era.
Ensuring professional standards in manufacturing enterprises
PEs are crucial for maintaining professional standards and ensuring the integrity of Hong Kong’s manufacturing sector. The registration process of PEs, administered by Engineers Registration Board (ERB), serves as a mark of quality, assuring employers and the public that PEs possess the necessary competencies and adhere to the highest standards of ethical conduct. In supporting the development of smart manufacturing, PEs contribute to the city’s reputation as a hub for advanced and high-quality manufacturing.
Conclusion: Empowering New Industrialisation: The Future is Engineered!
There is no single path to developing NQPFs; the government is implementing tailored approaches based on Hong Kong’s unique conditions. As the city embarks on its journey towards NI, it has the opportunity to revitalise its manufacturing sector and position itself as a global leader in advanced manufacturing by embracing advanced technologies and fostering a culture of innovation.
A collaborative approach involving the government, industry, academia, and research institutions is essential to promote innovation ecosystems, support start-ups, and advance R&D, thereby supporting the development of the international I&T Centre in Hong Kong. It is believed that the success of this transformation hinges on the active engagement and empowerment of PEs across various sectors. With the highest standards of professional competency and ethics, and continuous development of new skills and knowledge, PEs will play a pivotal role in shaping the future of manufacturing in Hong Kong.
"Empowering New Industrialisation: The Future is Engineered!"
The HKIE and its Divisions, including the Manufacturing, Industrial and Systems Division, will continue to offer a platform for engineers to exchange knowledge, share experiences, and contribute to industry development, while helping young engineers seize opportunities from NQPFs and NI via its BOK2 and CPD programmes. Through collaboration and innovation, Hong Kong’s engineers will lead the way in creating a prosperous and sustainable future for the city’s manufacturing sector, thereby supporting our country to achieve the next level of manufacturing industry enhancement for boosting economic growth.
References
- Census and Statistics Department of HKSAR (2000). ‘Gross Domestic Product’. 1961 to 1999. Available at: https://www.censtatd.gov.hk/en/data/stat_report/ product/B1030002/att/B10300021999AN99E0100.pdf [Accessed on 28 October 2024]
- Census and Statistics Department of HKSAR (1992). ‘SPECIAL REVIEW - Employment and vacancies of manufacturing industries in Hong Kong’. 1980 to 1992. Available at: https://www.censtatd.gov.hk/en/data/stat_report/ product/FA100072/att/B79211FA1992XXXXE0100.pdf [Accessed on 28 October 2024]
- Hong Kong Science and Technology Parks Corporation (2024). Hong Kong’s First High-Performance Computing Service Commences Operation and Microelectronics Centre Ready to Launch. Available at: https://www.hkstp.org/en/park-life/news-and-events/news/hkstp-unveils-key-innopark-projects-driving-hong-kongs-newindustrialisation-to-new-heights [Accessed on 28 October 2024]