Adventure Works Annik Stahl July 2002

1
ICT Industry in Hong Kong Market Trends,
Opportunities and Challenges
Nicholas Yang Hong Kong Cyberport Management
Company Limited April 2006
2
First the 2005 Facts

• Mobile phone penetration gt120, one of the
  highest in the world (was only 44 in 1998)
• Internet penetration 64.6 for household and
  54.7 for business
• Broadband penetration 62.1 for household and
  50.1 for business
• PC penetration 70.1 for household and 58.4 for
  business
• One of worlds best e-government practice
• A robust legal framework for e-business and a
  high community awareness of information security

3
More Facts from 2005

• Total IT spending gtHK26.4 billion (US3.4
  billion)
• gt60,000 people directly employed in the IT
  services industry
• Most software developers have lt20 employees,
  highly flexible and responsive to customer needs,
  strong in customized software for the financial
  sector, e.g. world class brokerage and commercial
  banking packages
• gt13 million Octopus Card in use, gt9 million
  transactions per day
• Hong Kong leads the APEJ region in total number
  of IPTV subscribers, accounting for 55.8 of all
  the IPTV subscribers in the region in 2005
  (China is 2 with 25.2)
• PCCW NOW Broadband TV gt500,000 subscribers at end
  2005, providing gt100 channels of digital
  entertainment

4
Digital 21 Strategy from HKSAR Government

• To be a leading city in the world for the
  development and application of IT, especially in
  electronic commerce and software engineering
• To be a regional centre for multimedia-based
  information and entertainment services
• 1st edition Nov 1998
• 2nd edition May 2001
• 3rd edition Mar 2004
• Digital entertainment became
• a focus area in 2004

5
The Push by HKSAR Government

• Hong Kong Cyberport
• US2 billion broadband intranet community and
  platform
• Digital content and digital entertainment focus
• Market driven
• Hong Kong Science Technology Parks
• US1.5 billion high technology development park
• Focus on 4 technology sectors ICT, electronics,
  biotechnology and precision engineering
• Home of ASTRI
• Innovation and Technology Commission
• US640 million Innovation and Technology Fund
• RD centers, incubation centers, innovation
  technology projects
• Office of the Government Chief Information
  Officer (OGCIO)
• The IT Department of HKSAR Government since Jul
  2004
• Policy setting and execution on all e-government
  initiatives
• Communication Authority (soon)

6
Challenges for Hong Kongs ICT Industry

• Relatively small local market
• Low emphasis at local universities
• High cost of living standard
• Lots of SMEs, no flagship company
• Overshadowed by the China market and integration
• But

7
Hong Kong Has What China Needs to Develop Further

• Rule of law
• Unrivalled location
• Low and simple taxes
• Worlds freest economy
• International finance centre
• Free flow of information
• World class infrastructure
• Skilled workforce
• International lifestyle
• Gateway to the Mainland (CEPA)
• Safe, multi-cultural and the worlds freest
  economy
• BUT all these come at a price

Hong Kong is Expensive !!!
8
The View of Hong Kongs Future is Positive

• "Hong Kong will continue to be a very
  important financial and business center for a
  long time, irrespective of the importance of
  Beijing or Shanghai. The skills of the city's
  workers in everything from accounting to
  preparing an enterprise for a public offering far
  outstrip those available in China, The
  intellectual capital here is qualitatively
  different from what exists in cities in the
  mainland
• Neil Torpey, Partner, Paul, Hastings,
  Janofsky Walker
• quoted in Business Week May 2005

9
Hong Kongs Future Can Be Found from its Past
Thanks to Kiron Chatterjee of Best Practice
International
10
Hong Kongs Future Can Be Found from its Past
Thanks to Kiron Chatterjee of Best Practice
International
11
Summary

• With its state-of-the-art ICT industry, Hong Kong
  has contributed to and benefited from the period
  of high growth in the Mainland during the 80s and
  90s
• Mainland China is now in control of its next
  stage of growth including its ICT industry and
  all the sub-sectors
• Old formula for success no longer works for Hong
  Kong as a middleman
• Hong Kong must build and strengthen its role as
  Mainlands preferred partner as Chinese
  enterprises get outside

12
Hong Kong The Global Valley

• If you want to be global, Hong Kong is the
  place to test the waters.
• Leverage Hong Kongs strengths to identify and
  bring together world class products and services
  which can be made even better by blending with
  Chinas market and capabilities to be sold
  globally.

Thanks to Kiron Chatterjee of Best Practice
International
13
Thank You!
14
Backup

• Slides

15
Opportunities in China

• Worlds largest telecom market (mobile or fixed
  line)
• 759M telecom users (355M in fixed line 404M in
  mobile) as of Feb 2006, 86M new users in 2005
• Mobile penetration 30.3 up to 2005, 3G coming
• SMS 305B messages in 2005 (39.9 increase)
• Total capital investment in telecom
  infrastructure was about US25.8B in 2005
• Worlds largest consumer market
• gt1.3 billion population gt20 of world
  population share
• GDP growth gt9 p.a.
• US37B ad spending in 2005 (3rd in the world)
• US75B total consumer goods retail sales (growing
  very fast)
• Worlds largest manufacturing machine
• gt100 categories of products made ranked first in
  the world
• 40 of worlds PC manufactured
• 1 in desktop PC, television, DVD player, video
  cassette recorder, mobile phone, refrigerator,
  microwave oven, air conditioner, toys, shoes,
  etc.
• over US1.12T total trade (3rd in the world
  behind USA Germany as of 2004)
• Worlds largest content market

16
Worldwide Deployment of IPv6

• Since 2003, commercial IPv6 services and IXs are
  already are operating over the world
• Japan NSPIXP6, JPNAP6 (Tokyo)
• United States PAIX (CITIC 1616st Coast), EQUI6IX
  (CITIC 1616st Coast, East coast)
• Europe LINX, UK6X (London), AMS-IX (Amsterdam),
  PARIX (Paris), DE-CIX (Frankfurt), ESPANIX
  (Madrid)
• Cyberport enabled IPv6 network for its tenants in
  April 2006

17
Hong Kongs IT Core CompetenceOnes Not Many
Know About

• Hong Kong Bank (HSBC)
• 2400 IT staffs
• Best banking and financial management software
  in-house
• Hong Kong Jockey Club
• 300 IT staffs
• Best totalizer betting system in the world
  reliable, totally secure, real-time
• Hong Kong Hospital Authority
• 500 IT staffs
• Best medical informatics database
• OGCIO of HKSAR Government
• 800 IT staffs
• Best e-government practice and implementation
• Logistics (OOCL), airlines (CX), utilities (CLP),
  transportation (MTR), etc.

18
Value Chain Continuum for IT Service Industry
Differentiated
Not-Expected
On Demand
Relationship Management
Commoditization
Experience
Customization
Turnkey Solution
Service
Product/Resource
ITO
Not Differentiated
Expected
19
Value Chain Continuum for Content Industry
Convergence Experience Knowing Managing
Consumer Expectations (e.g. Hollywood)
Content Convergence Trans-media,
cross-media Integration between content and
other industries
New Standards or Platforms for Content Creation,
Management and/or Delivery
Platform New Media and Tools Development (e.g.
MTV)
Content Evolution Adaptation Philosophy
Story Culture Environment Context
Turnkey solution Differentiation takes
shape (e.g. Pixar, Dreamworks)
Content Generation Production Application of
Media Tools
Standardized Product / Services