Can Hong Kong build a ‘Silicon Harbour’? Nah, probably not

hong kong skylineI might be back in London now but I’m still keeping one eye on the East. My latest for IDG Connect is a piece on whether Hong Kong can really lay claim to the title “Silicon Harbour”, given its dubious track record of under-investment and the increasing strength of rival Asian cities including Tokyo, Shenzhen, Shanghai and Singapore.

Well, as always, the jury’s still out. There are a lot of good things going on in Hong Kong, as this upbeat infographic shows. It’s politically stable, safe from most natural disaster and you can use the internet freely (unlike in mainland China). It’s also well connected internet-wise and relatively cheap, as Frost & Sullivan analyst Danni Xu told me: “enterprises in Hong Kong using 100 Mbps Ethernet Point-to-Point (P2P) per month are paying only one third the price of a similar set up in Singapore”.

“However, despite these advantages/benefits, Singapore remains popular in certain cases over Hong Kong when it comes to selecting a destination to set up a data centre,” she added. “Google was a prime example of this when its plan to establish a data centre in Hong Kong did not materialise. The cost and difficulty of acquiring suitable land were cited as the key reasons for this.”

It also seems like HK’s key strengths, its value as a financial centre and proximity to China, are also its biggest drawbacks.  This means Singapore and other cities are usually preferred as regional hubs while HK is the choice as a base for firms looking to expand into China. It also means investors can be reluctant to plough their money into untried or tested tech start-ups as the culture is mainly about finance and property.

Forrester analyst Clement Teo had this:

“There are some structural factors may constrain ICT development in HK e.g. its relatively small domestic market and shrinking manufacturing and industrial sector do not provide sufficient incentives to spur technological developments. Moreover, HK needs to divvy up scarce resources – like land, office space and investment funding and talent – among established economic pillars such as financial services, real estates and retail.”

The HK government this year released an ambitious Digital 21 Strategy – the latest in a long line of such policy documents from the SAR – and certainly talks a good game. But I’m still hugely sceptical whether the political will is there to help smaller tech firms – the start-ups and similar which could genuinely turn the city state into a ‘Silicon Harbour’.

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China’s Yulong Coolpad: One to watch for 2014?

coolpad logoIn the world of Chinese smartphone makers the name on everyone’s lips at the moment is Xiaomi, but how many of you have heard of Yulong?

Well, it’s a name which may well become more familiar to tech-watchers in 2014 if its sales predictions for the year turn out to be more than the usual new year marketing hype.

The Shenzhen-based firm, which is slightly better known under its Coolpad brand, said it’s hoping to shift 40 million 4G handsets this year in China, in addition to 20m 3G devices.

Some local media reports have the company claiming this will help it topple global leader Samsung in the 4G stakes, even though the Korean giant is currently way out in front in the Middle Kingdom with a market share of nearly 20 per cent – almost double that of Yulong.

They would appear to be a combination of mis-reporting and vendor hype, though, as Samsung told me it hasn’t even released any predictions on how many 4G handsets it will sell this year.

A Lenovo spokeswoman, meanwhile, said: “It’s not our practice to comment or make prediction on unannounced products.”

That aside, however, Coolpad has been gradually creeping up the smartphone rankings in its home country over the past few years, largely without the media attention that has greeted Huawei, ZTE, Lenovo and, of course, Xiaomi.

That might be because it has neither Xiaomi’s flair, Huawei’s big bucks, nor ZTE’s propensity to court controversy.

It’s currently third in the rankings just behind Lenovo, according to IDC stats for Q3 2013. If it’s to continue to climb it’ll need to make sure it’s competitively priced relative to Samsung, around the 1-2,000 RMB mark, IDC’s Bryan Ma told me.

Apart from that, “speed to 4G” will also count, he added. To this end, Yulong has already struck a deal with China Mobile to sell its TDD/FDD-LTE handset the Coolpad 8920 and there’ll certainly be more to follow.

So will the firm join Huawei, ZTE and others in aggressive overseas expansion? Well, it already is selling in markets like the US, but headway there has been more difficult given its low brand recognition.

It might have overtaken Apple in the Middle Kingdom last year but 2014 will be a tough year for Yulong and its parent company China Wireless to make an impact abroad – that is, outside of emerging markets where the appetite for cheap smartphones is greater.


No shanzhai please, we’re Hong Kongers

sincere podiumOne of the most frustrating things about being a Hong Kong technology journalist is having people ask you what the next big tech trends are; what kind of weird and crazy gadgets you’ve managed to track down, etc etc.

The truth is, as I’ve discovered over the past 18 months, despite its famously futuristic neon-kissed city-scape Hong Kong is not where you’ll find such weird and wonderful or early adopter technologies. They don’t even really exist in Japan’s famous Akihabara “electronics town” district either – a spot now filled with maid cafes and adult video shops.

The truth is that for pimped out shanzhai goods like these, you’ll need to go to Shenzhen, just across the border from Hong Kong.

This city, and its Chinese neighbours around the Pearl River Delta, has always been the epicentre of cheap, sometimes illegal but usually grey market goods – whether they be recognisable brand name items assembled or sourced from non-official channels, or white box weirdness from tiny makers you’ll never have heard of.

It’s not as if, as I originally thought, there has been a government crackdown on these items in Hong Kong. You see, they’re not technically even illegal – it’s more market driven than that.

“In Hong Kong the government is not banning these products, it’s that the market is not that big,” Frost&Sullivan analyst Lu Shuishan told me. “Some people are willing to pay relatively low prices for shanzhai goods but the market presence of branded products is just bigger.”

People can afford better quality goods in Hong Kong without breaking the bank, unlike in China where an iPhone can cost a months’ salary and grey market versions of the big brands are sought out by virtue of being cheaper, he added.

According to Forrester’s Bryan Wang, Hong Kongers also benefit from buying more of their phones through operators than direct from retail as in China, with two year contracts boosting their affordability whilst locking punters into lengthy terms.

That’s not to say white box goods have completely disappeared from Hong Kong. On a trip to Sincere  Podium – a three floor mecca for smartphone fanatics in Mong Kok – there were one or two brand names I’d never heard of, like Copicell, Daxian and Shouyue.

However, there were no unusually specc’d shanzhai products, of which Western readers are inordinately fond.

As IDC senior market analyst Dickie Chang told me, skyrocketing local rents are also focusing the minds of traders.

“Dealers need to pay more to cover rental costs, so they will need to think carefully about the products
they want to sell,” he argued.

It seems that the era of the weird and wonderful shanzhai handset, at least in Hong Kong, is well and truly over.


Huawei the crouching tiger ready to bare its enterprise fangs

huawei campus shenzhenI spent the first part of the week at Huawei’s global analyst summit just across the border in sunny Shenzhen. There wasn’t an awful lot of news per se, but a good many bold financial predictions from the fast-growing firm, which is trying to manage the unheard of triple whammy of success in carrier, enterprise IT and consumer device markets.

No firm has managed to succeed in all three, but Huawei is certainly going the right way about it. The firm stands third in the worldwide smartphone market, is breathing down Ericsson’s neck in the carrier space and has big plans to grow its enterprise business. On that front we heard the firm expects 45 per cent growth this year, and a CAGR of around the same to reach $10bn in revenue by 2017.

It’s not all hunky dory at the Shenzhen headquartered vendor though. Alternate CEO and EVP Eric Xu effectively said at the event that it had given up on the US as a potential growth market. Now that’s not to say it wouldn’t like that to change in the future, but given the intractable stance of Congress on this it’s not likely. So where’s the enterprise growth to come from?

Analysts told me developing markets like Indonesia and Myanmar represent potential but not immediate revenue growth at the moment – for that it needs to tap developed regions. China still represents the major slice of the enterprise pie for Huawei and that’s all dandy, but there are mutterings that local government spending may tighten in the near future, which would be bad news for the firm.

“In enterprise, Huwaei is strong in the networking and infrastructure segment. It also has other products around unified communications, contact centre and security, but overall market share is very small outside China,” Frost & Sullivan analyst Pranabesh Nath told me.

“Like the Japanese firms of the post-world war era, it is mostly positioned as a value oriented player, but is trying to improve its products to move up the value chain.”

A potential roadblock on this journey is a perceived lack of clarity around its product lines, according to IDC’s Ian Song. He said the Fusion datacentre brand in particular has caused some confusion amongst the analyst community, which view Huawei’s enterprise message as a “work in progress”.

That said, its technology is sound, R&D spend is massive and it’s got a great base to start with its strength in the carrier space. IBM, Cisco, HP et al won’t be breaking into a sweat just yet but they’d be foolish not to see the crouching tiger hidden in plain sight.

On the device front, we heard from CMO Shao Yang about Huawei’s plans to shift 60 million smartphones this year. This won’t exactly propel it into the top two among Samsung and Apple, but it’s a pretty clear statement of intent. In this industry, brand perception is all-important, and it’s something Huawei, which didn’t really have a brand until it launched the Ascend line last year, has historically struggled in.

That said, it’s learning fast and the high-end handsets its coming out with are pretty slick, so expect a whole lot more on the marketing front this year and an increasing number of Huawei-branded devices to manage as part of your BYOD strategy.


Most of China’s tech producers die in their teens

factoryAn interesting bit of research cropped up on one of the few English language sites covering Chinese news in this region, Taiwan’s WantChinaTimes, claiming the average lifespan of a Chinese electronics manufacturer is a shade over 13 years.

Now this sounded pretty low to me, not having anything to compare it to, but it struck as an interesting stat which serves to illuminate a lot of the pressures Chinese manufacturers are facing today, and where the country wants to be in a few decades time.

The research itself came from a Chinese manufacturer called Global Market Group, which interviewed over 1,000 firms in the economic zones of the Pearl River Delta and the Yangtze River Delta. It’s not a huge sample, given the sheer size of the industry in the PRC, but it’ll have to do.

The first thing to note is that 13.2 years is much longer than the average for survey respondents of 11.1 years – the report argues that this could be because electronics makers are forced to adapt quickly to changing tech to keep afloat.

More generally, though, 13.2 years doesn’t seem like a long time for a firm to be in business. But it does illustrate the rapid pace of change in the tech industry – where many fall by the way side in time because they simply can’t keep up with the latest trends.

It also shows, as Forrester analyst Dane Anderson told me, the intense pressure on Chinese manufacturers burdened with rising labour and energy costs and competition from other low cost suppliers in Asia.

US politicians and loathsome right wing media outlets often make out China to be the bad guy – taking American jobs by offering  brand owners by far the lowest cost of production. However, increasingly it’s becoming a more complex picture than this.

“The perception in the West is often that the manufacturing industry in China is a bullet-proof juggernaut, but this view is inaccurate,” said Anderson. “It is a dynamic and highly competitive sector squeezed by thin margins and demanding customers.”

Too true.

But as China looks to move up the stack, away from being a land of contract manufacturers mass producing at low prices in incredibly competitive market conditions, things might change, according to IDG’s senior research manager William Lee.

“The electronics industry is typically a high clockspeed industry, meaning the average product lifecycle time span is shorter than say automotive, aerospace, industrial equipment. So electronics manufacturing companies’ lifespan is typically shorter than other companies in other industry,” he told me.

“However when the manufacturing industries mature and many of these companies begin to evolve to brand owners, the average lifespan will increase.”

With China still some way behind Taiwan, South Korea and other countries, it will be a while before this happens, but it surely will, as this is the direction the Chinese government wants it to go in. It recently announced ambitious plans to create eight super-companies in the tech space each the size of Lenovo ($100bn in revenues per year), which would have globally recognised brands.

When that finally happens, and the sweat-shops move out to Vietnam, Indonesia and elsewhere, maybe the US will have to invent another bogeyman.


ZTE in 2013: do smartphone designers dream of electric sheep?

blade runner posterI popped down to ZTE’s pre-Chinese New Year lunch for journos in Hong Kong earlier this week to see what the world’s fifth largest smartphone maker had to say for itself.

It’s not been an easy year for it or Shenzhen rival Huawei, who were both named as a national security risk in a US congressional committee report released at the tail end of 2012 in the bi-partisan hubbub typical of pre-election months.

In addition, ZTE has been under lengthy investigation by the FBI on suspicion of selling embargoed US-made tech to Iran and then covering it up when found out. Then there were the false rumours of swingeing job cuts at the firm and a $5bn cash injection from the Chinese government.

Despite its problems, however, ZTE remains on the move in the smartphone space, an innovator in telecoms infrastructure with its LTE offerings and has plans to grow the enterprise business despite the kind of government roadblocks put up in Australia, the US and now India.

Head of handset strategy Lv Qian Hao battled manfully with the flu to show me the firm’s latest high-end handset, the 5.7in Grand Memo (no pics I’m afraid). It comes across as a smallish version of Huawei’s massive six-incher the Ascend Mate and probably benefits from not being quite as large – in other words I could just about use it as a phone without looking daft.

In the rapidly developing smartphone space, specs like 13 megapixel camera, quad core 1.7Ghz Snapdragon processor and a 720p screen – specs which might once have elicited gasps of awe from the assembled masses – are now pretty standard at the high-end.

This is no criticism of ZTE but it certainly makes its job of climbing up the smartphone rankings and a goal of 50 million shipments this year that bit harder.

So where can it differentiate? Well, with high-end specs almost commoditised now, design is obviously one key area. With the best will in the world ZTE is not know for its beautiful design, but it’s hoping to change that with Hagen Fendler on board.

Pinched from cross-town rival Huawei, Fendler’s appointment and a new design centre in Shanghai certainly serve to highlight the firm’s vaulting ambitions in this space.

Fendler explained that his job is to create a design DNA which can be seeded throughout the firm’s handsets to help create a brand identity. It got off to a flyer with the launch at CES of the Grand S, an HD handset which at 6.9mm is currently the world’s thinnest.

It won’t be an easy job creating handsets that are both beautiful and distinctively “ZTE” but with 400 staff working on design alone, they’ve as good a chance as any.

It can be a frustrating time for a journalist talking to a designer, because so many of the concepts they tend to reference are abstract, ethereal and emotive rather than the nuts and bolts practicalities of engineering.

However, Fendler did reveal that much of his design inspiration comes from outside the immediate environs of the smartphone space – from books, magazines and films.

1982 sci-fi classic Blade Runner was singled out for particular praise for sparking interesting ideas about “how humans interact with the technology around them”.

Just don’t expect to see the ZTE Blade Runner phone anytime soon. Actually, Google already got there with the Nexus, didn’t it?


Meet Huawei, the not so hidden dragon

huawei campus shenzhenI’ve just spent a fascinating two days with Huawei in Shenzhen. If you haven’t heard of the firm you will soon – it’s the world’s number two manufacturer of telecoms kit, powering all the UK mobile operators and BT, Talk Talk and Virgin Media’s fixed line operations.

It’s also number six in the mobile devices market globally, with its eyes on a higher position, and has entered the enterprise IT space where it sees big growth potential.

The trip was a chance to see and be impressed by Huawei HQ, a sprawling campus in a suburb of Shenzhen in the south of China next door to Hong Kong, rather than have an opportunity to quiz senior execs on the firm’s roadmap.

The firm has been spending rather a lot of money to show rather a lot of journalists the same thing – well, it can afford to, having made around $32bn last year.

The reason is that despite its best efforts it’s still not winning a huge amount of enterprise custom, its devices don’t have great brand recognition and, most irritatingly for the firm, it’s the subject of a high profile US Congressional investigation into links with the Chinese government.

The US has regarded Huawei with great suspicion and reckons it may have links to the PLA and the Communist Party (via its founder Ren Zhengfei) which make the firm’s products a potential risk to national security.

Needless to say, Huawei’s PR team were more keen to focus on the less contentious part of its story. And it is a very impressive story. Ren apparently founded the firm with a few thousand pounds and today, 25 years later, it has 140,000 employees, makes billions, operates in 150 countries and the average age of employees is just 29.

Yup, not really the impression many might have of the company. Due to its unique corporate structure which makes it wholly employee-owned, staff can retire at 45 if they’ve spent more than eight years with the firm with their share dividends providing a handsome retirement fund.

The analysts are in agreement that it has great technology, bags of patents and huge potential, so is the US just being protectionist?

Well, yes and no. Huawei may open up some of the source code of its products for investigators to scrutinise but apparently the big sticking point is info on how the firm is run, and past a certain point Huawei will not divulge that, so it may be deadlock for some time yet.

Ren is still a member of the Communist Party and for anyone who’s read the book The Party by Richard McGregor, this will be a cause of concern to some foreign governments – although it must be said not to the UK, which has welcomed the firm’s investment with open arms.

Now, I’m not saying I fully agree with all of the book but McGregor speaks very convincingly of the Party as acting “like a large magnet that makes iron filings suddenly cling together as it moves into position above them”, making them “stand to attention when it focuses its attention on them”.

In the end, both the West and Huawei are learning to cope with one another. We’re just starting to understand the firm a bit better and it is beginning to understand the greater level of media scrutiny, demands for more transparency and need for a more media friendly executive board – all of which are pretty alien to Chinese companies.