The Hong Kong Innovation and Technology Commission has launched a HK$10 billion ($1.28 billion) funding program for manufacturers in strategic sectors such as health technology and artificial intelligence to set up new smart production facilities in the city.

The program is part of Chief Executive John Lee Ka-chiu’s plan to support the innovation and technology sector, as proposed in his Policy Address last year.

Under the New Industrialisation Acceleration Scheme, each project must have a minimum cost of HK$300 million. Participating companies are required to contribute at least HK$200 million, with the government funding a maximum of one-third of the total approved project cost or HK$200 million, whichever is less. Each company can have a maximum of two projects endorsed, receiving a total of up to HK$200 million collectively under the program.

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The launch comes as manufacturers’ demands for smart solutions in digitalization and green transformation grow amid a new normal of customized production and sustainable development, according to a study by the Hong Kong Productivity Council (HKPC) and Deloitte, a professional services network.

The study, which surveyed 288 manufacturers in Hong Kong, revealed that nearly seven out of 10 agree that the emerging trend in the manufacturing sector is  “lots of variety in fewer quantities”, necessitating swift adaptation to meet customer demands.

However, the practical adoption of smartification technology remains limited while businesses acknowledge the significance of personalized small-scale manufacturing. The study showed that merely 19 percent of respondents have implemented smartification solutions, with a significant 53 percent of surveyed companies indicating a lack of strategies in this area.

Edmond Lai, chief digital officer of HKPC, said smart solutions represent a new pathway for the city’s manufacturing sector. “As customization disrupts conventional production methods, Hong Kong can seize this trend as a chance to innovate new manufacturing approaches,” he said.

The city’s garment producers serve as notable examples. Through the establishment of a digital knitted garment smart production line suitable for small-batch and diverse-style production, traditional manufacturers’ have increased their capacity by 35 percent and cut costs by 40 percent, according to the HKPC. This production line could conduct tasks ranging from product design, digital sample simulations, engineering parameters, and programming to smart production.

Meanwhile, sustainability is gaining momentum, with 67 percent of the surveyed companies reporting current or anticipated customer demands for the integration of eco-friendly sustainability practices into their manufacturing operations.

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Lai said the increasing worldwide need for eco-friendly manufacturing will emerge as a fresh catalyst for growth within Hong Kong’s service sector as green manufacturing presents immense business potential given its wide range of domains and technologies, encompassing energy management, carbon footprint reduction, sustainable certifications and training, and green finance.