Apple complied with the Chinese government’s request to remove WhatsApp and Threads, owned by Meta, from its app store in mainland China starting on the 19th. Hong Kong, which was once the gateway for US capital to enter China, has increasingly disconnected from foreign ties in recent years. US tech companies have also stopped releasing new products in Hong Kong. Seven major US tech companies listed on the US stock market, most of which have ceased support for China and Hong Kong in their new products, have quietly followed the US government’s policy of containment. Hong Kong is gradually becoming a tech island.
In response to the continuous rise in stock prices of US tech giants, a new term “Magnificent 7” has been coined in the US investment community, referring to the seven stocks namely Apple (AAPL), Microsoft (MSFT), Alphabet (GOOGL – Google parent company), Nvidia (NVDA), Amazon (AMZN), Meta (META – Facebook parent company), and Tesla (TSLA). The combined market value of these 7 stocks is close to $13 trillion, while the total market capitalization of the Hong Kong main board is only $3.88 trillion, equivalent to just about two of the major US tech giants. The financial and technological influence of these companies is undeniable.
In the past, US tech giants were enthusiastic about entering Hong Kong, mainly as a preparation for entering the Chinese market. In 2011, Apple listed Hong Kong as one of the first release locations of iPhone 4s in the Greater China region and opened its flagship store in the International Finance Centre (IFC) in Central the same year. Moreover, Facebook, since opening up to all individuals with an email address and over the age of 13 except in the US and Canada in 2006, allowed Hong Kong residents to immediately create accounts, and established an office in Hong Kong in 2014.
However, over the past three years, US-China relations have deteriorated, and with Hong Kong leaning more towards the Chinese government, then-US President Trump signed an executive order on July 14, 2020, revoking Hong Kong’s special tariff status and special economic treatment. This, along with the technology and chip bans by the Biden administration that included Hong Kong in China’s scope, US companies have gradually followed suit with the government’s actions.
The most well-known chip company, Nvidia, has seen a surge in stock prices due to the production of artificial intelligence (AI) chips. However, starting from the initial AI chip ban issued by the US government in October 2022, Nvidia and other major companies were prohibited from supplying high-end AI chips such as A100 and H100 to Chinese customers. Following which, Nvidia launched the low-end A800 chip specifically for the Chinese market. Later, low-end chips were also included in the ban in October last year, and even commercial and production use of the consumer gaming graphics card RTX4090 was prohibited.
In March of this year, the White House further revised export restrictions, banning the export of laptops containing high-end chips to China. The overall ban includes Hong Kong and Macau, with Hong Kong no longer being used as a conduit. Additionally, at the beginning of last year, Taiwan’s Economic Daily News reported that semiconductor giant Nvidia had abandoned Hong Kong and chose to establish a logistics center in Taiwan, with rival AMD also relocating its finished goods warehouse from Hong Kong to Taiwan.
Local laws in Hong Kong have prevented the release of the hottest artificial intelligence concept in the past two years, large language models (LLM). OpenAI, which has a partnership with Microsoft, launched its product ChatGPT in November 2022, but due to potential risks and other reasons, OpenAI decided not to make it available in Hong Kong, a decision that has been upheld till now. Products like Bard and Gemini released by Google under its brand do not support Hong Kong and China, despite being available in over 150 countries. Microsoft’s LLM named New Bing, supported by OpenAI, did not explicitly prohibit Hong Kong users from using it, but some Hong Kong users were blocked by Microsoft, while the Bing image search function was not made available for Hong Kong users. Apart from Meta’s latest products WhatsApp and Threads being removed from mainland China, the company’s Meta AI is currently only available for users in the US and 13 other countries, and following the practices in the AI industry, it is also likely not to be provided in Hong Kong.
Apple still considers Hong Kong as a location for the first release of iPhones. However, starting from the iPhone 14, phones will come with satellite emergency services, treating Hong Kong the same as China, with versions sold without satellite connections, a practice that will continue with the subsequent iPhone 15.
As for Amazon, it did not operate e-commerce and e-book businesses Kindle in Hong Kong in the past. In 2004, Amazon formally entered the Chinese market by acquiring Joyo.com for $75 million, however, in 2023 Amazon.cn and the Kindle e-book ceased operations.
Tesla, which has factories in China, led by CEO Musk, although not restricted in operating new products in Hong Kong and China, has shown no plans to operate its website of another unlisted satellite network provider, Starlink, in China and Hong Kong, while expanding its network to Singapore this year.
The financial industry in Hong Kong has contracted, with nearly 200 Hong Kong bankers laid off in the past year, leading to Hong Kong’s IPO fundraising dropping to tenth globally. One of the strategies to address this dilemma is to develop technology, but various countries have also strengthened their investments in technology, minimizing Hong Kong’s advantage. A report from the EU showed that the EU’s research and development expenditure accounts for 2.24%, the US for 3.46%, Japan for 3.34%, and even China for 2.41%. At the end of last year, the Hong Kong government released “Hong Kong Innovation Activities Statistics,” showing that the total research and development expenditure relative to GDP ratio was only 1.07% in Hong Kong.
Hong Kong’s innovation sector was already lagging behind, with lower research and development investment compared to other countries, and the opportunity to catch up with low spending seems uncertain. Coupled with the seven most influential global tech companies gradually abandoning Hong Kong, the city is likely to become an international tech island.