Government Neglect and the Decline of Hong Kong's Integrated Circuit Design Industry

Today Taiwan is recognized as the largest center of fabless integrated circuit (IC) design firms (firms which design but do not fabricate chips) after the United States, while Hong Kong is a bit player in this global industry. Fifteen years ago things looked quite different. At that time, Hong Kong was arguably ahead of Taiwan in terms of the technical sophistication of its integrated circuit industry. While Taiwan's large and cutting-edge pure-play foundries, firms which fabricate but do not design chips, were already in existence and beginning to grow, Hong Kong at that stage had a technical edge in design activities. Furthermore, these design activities were eminently suitable for Hong Kong given its lack of a tradition of state support for large capital investments for industrial enterprises, just the type of support needed to jump-start IC fabrication plants (fabs for short) in emerging economies. Thus, 15 years ago one could easily have forecast that building on their respective strengths, Hong Kong would become a center of design to complement the fabs sprouting up in Taiwan, Singapore and Korea where generous state support for investment in fabs was forthcoming. Unfortunately, Hong Kong's laissez-faire policy tradition severely circumscribed what technology policy efforts were made by the state, universities and private entrepreneurs. Thus, Hong Kong's competitive advantage in IC design disappeared