HONG KONG: Waking the ‘sleeping giant’ for Silicon Valley North

By KRYSTLE CHOW
Published in the Ottawa Business Journal newspaper and website.
Sept. 5, 2011 (Sept. 12 on OBJ.ca)

China’s five-year focus on ICT, clean tech gets Ottawa firms fired up

Bernard Herscovich, CEO of BelAir Networks.
Photo by MARK HOLLERON for the Ottawa Business Journal.

For many of Ottawa’s technology companies, the Hong Kong market is but a starting point for an enormous opportunity.

As a special administrative region of China, Hong Kong is uniquely positioned as the economic gateway for the massive Asian country, says OCRI’s Mike Darch. And that’s especially important given the four trillion renminbi, or roughly C$800 million, China has pledged towards IT and low-carbon technologies as part of its five-year strategic plan.

“There’s a joke that (with Chinese projects) you take the largest project you’ve ever seen and add six zeros at the end,” says Mr. Darch.

Among the strategic emerging areas on which it wishes to focus, China has identified three clean energy-related areas – namely new energy sources such as wind, solar and nuclear, energy conservation, environmental protection initiatives, and clean-energy vehicles – and next-generation information technology surrounding the convergence of conventional communications, broadcast and Internet, Mr. Darch explains.

Undoubtedly, opportunities abound for the residents of Silicon Valley North. But for many of Ottawa’s technology firms, particularly the smaller ones, it can be a challenge to dive into the Chinese market, given its size, the obvious cultural and language barriers, and distance from North America.

As such, local companies are leveraging relationships with the Hong Kong market as a way of accessing Chinese technology spending.

Take, for instance, networking equipment maker BelAir Networks, which is making a major international push after years of concentrating on the North American market, amid the global migration of networks from voice to data.

Hong Kong, says BelAir CEO Bernard Herscovich, is a perfect entry point for the company’s mobile broadband Internet focus, with its high smartphone penetration – a key predictor of business for BelAir – and close ties to both the culture and industry of the huge Chinese market.

“The Chinese companies are not shy at looking at experiences in Hong Kong and will deploy similar projects if they like what they see; that’s why we’ve been focusing on Hong Kong trials,” says Mr. Herscovich, who adds the trials are expected to lead to rollouts in the next few months.

The relatively small Hong Kong population means the market represents a tiny fraction of BelAir’s overall business – Mr. Herscovich estimates it will grow to about five per cent by 2013 – but the signs are “very encouraging” that it will lay the groundwork for BelAir to get into China in a bigger way.

GOALS FOR CHINA’S 12TH FIVE-YEAR PLAN

 

  • National GDP growth rate of 7%
  • Focus on seven Strategic Emerging Industries: Biotechnology, new energy, high-end equipment manufacturing, energy conservation and environmental protection, clean-energy vehicles, new materials and next-generation IT
  • Pledge to have 15% of energy from non-fossil fuels by 2020 (from 8.3% in 2009, to approximately 11% by 2015)
  • Next-generation IT to focus on information networks, mobile communication, the Internet, and R&D for cloud computing and digital and virtual technologies

Source: APCO Worldwide December 2010 report

“(China) could easily become 20 to 25 per cent of our business by 2014,” he says.

Having a local presence has definitely helped video conferencing technology provider Magor quickly gain traction in the Chinese market, says Ken Davison, Magor’s vice-president of marketing.

“When we … looked at how best to enter (the Asian market), being the size that we are, we liked the aspect of Hong Kong being very advanced in its (technological) infrastructure, with close ties to the Chinese government,” says Mr. Davison. “We took the decision 12 months ago to (get into the Hong Kong market), and in a very short time, it’s proven beneficial for getting products into China.”

Already, the company is in trials with a reseller in Hong Kong and four others in China, and it recently signed a significant deal with global manufacturer Christie Digital to install its telecollaboration systems in Shenzhen, Beijing and Shanghai. As well, it’s been able to seize on opportunities in the Hong Kong strongholds of finance, health care, logistics, manufacturing and software development.

Even companies that don’t necessarily see Hong Kong as an end market are keen to have their operations there in order to capitalize on the region’s strengths.

“With a lot of these massive projects (in China), the expertise often has to be brought in from somewhere on how to manage and finance them … and the managers are likely to be from the Hong Kong region,” notes OCRI’s Mr. Darch. “The emerging role of Hong Kong is as a major service centre for a lot of these projects undertaken in China.”

Solar cell maker Cyrium Technologies is an example of a firm that isn’t directly targeting Hong Kong business, but that sees opportunities in forging ties with the region. In February, the company launched operations in Hong Kong and hired a general manager for the office, with the view of using the location as a “business staging area” for China and the rest of the Asia Pacific region, says CEO Harry Rozakis.

“By establishing a Hong Kong presence, we’re gaining increased exposure as a company … and it’s easier from a business standpoint, not only because we’re doing business in real time, but also there’s a certain comfort level when talking to wholly owned Chinese firms or state enterprises,” says Mr. Rozakis, who worked in Asia for more than 30 years before taking Cyrium’s helm in 2009.

Cyrium’s concentrator photovoltaic cells, or CPVs for short, are already installed in a 200-kilowatt solar project – currently China’s largest deployment of CPVs – through a partnership with manufacturer Suntrix.

But given how quickly things are ramping up in that market, the company isn’t resting on its laurels, which is where its Hong Kong general manager Nelson Fan comes in, says Mr. Rozakis.

“Because of the relationship (Mr. Fan) has established with Suntrix in Shanghai, we’re beginning to create more relationships in China,” Mr. Rozakis says. “Our Hong Kong guy is always on the go.”

It’s a play that’s paying off for Cyrium and its compatriots in the race to nab Chinese ICT and clean-tech business. “Our presence in Hong Kong and the ability to work on a daily business with (China’s utility companies) has really created brand recognition in China,” says Mr. Rozakis.

“It’s amazing to think that for a little Ottawa company with 20 people, if you go to Hong Kong and China and ask who the leading company of CPV cells is, that people would recognize Cyrium.”

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