AI-Driven Beyond Manufacturing: A Tri-Regional Partnership for Global Success — Vietnam, Mainland China & HKSAR
Written by Dr. Amanda Lim, Yi Chang
In the rapidly evolving landscape of global manufacturing, the integration of artificial intelligence (AI) into production processes has become a critical factor for maintaining competitiveness. This transformation is particularly evident in the collaboration between Hong Kong SAR, Mainland China, and Vietnam, where AI-driven manufacturing is being leveraged to optimise operations, reduce costs, and navigate complex international trade environments. For Chinese product manufacturers, this tri-regional collaboration presents an unparalleled opportunity to achieve global success through strategic deployment of AI technologies.
AI-Enhanced Distributed Manufacturing
The concept of distributed manufacturing is gaining traction as a strategic response to the challenges posed by export tax discrepancies and supply chain vulnerabilities. In Mainland China, where the manufacturing sector is well-established, AI technologies such as AI-powered digital twins, robotic manufacturing on demand, and advanced data analytics are transforming production processes. These innovations enable manufacturers to maintain high levels of efficiency and quality, even as they adapt to changing market demands and global trade dynamics.
Hong Kong SAR, with its robust intellectual property (IP) protection framework and attractive tax incentives, plays a pivotal role in this collaboration. The region’s Patent Box Tax Incentive, effective from July 2024, offers a reduced tax rate of 5% on profits derived from qualifying IP rights, making it highly advantageous for manufacturers to develop and commercialise AI-driven technologies in Hong Kong . This incentive not only enhances profitability but also encourages the development of innovative AI solutions that can be applied across manufacturing hubs in China and Vietnam.
Vietnam’s Strategic Manufacturing Advantages
Vietnam, while still developing its manufacturing capabilities relative to China, offers significant cost advantages and a growing pool of young, tech-savvy talent. The country is also investing heavily in data centres to support its digital transformation efforts, which are crucial for the deployment of AI in manufacturing. Although Vietnam’s manufacturing infrastructure is not as advanced as China’s, AI technologies can compensate by enabling smarter, more efficient production processes that maximise the potential of Vietnam’s workforce.
One of the most compelling benefits of incorporating Vietnam into the AI-driven manufacturing ecosystem is the potential for tariff advantages. Products manufactured in Vietnam and exported to the United States may benefit from lower or even zero import taxes, compared to the high tariffs (up to 25%) imposed on goods shipped directly from China. This provides a strong incentive for manufacturers to diversify their production bases, leveraging Vietnam’s strategic location and cost advantages to optimise their global supply chains.
Hong Kong SAR: A Hub for AI-Driven R&D
Hong Kong SAR’s role in this tri-regional collaboration extends beyond tax incentives and IP protection. The region is a thriving hub for AI-related research and development (R&D), supported by extensive government funding through initiatives such as the Innovation and Technology Fund (ITF). These funds are available for projects across the spectrum of AI development, from fundamental research to applied innovation, making it easier for companies to develop and deploy cutting-edge AI technologies .
For Chinese product manufacturers, establishing AI R&D operations in Hong Kong offers multiple benefits. Companies can leverage the region’s favourable tax policies, benefit from government grants, and take advantage of Hong Kong’s strategic position as a gateway to Mainland China and Southeast Asia. This combination of factors ensures that AI innovations developed in Hong Kong can be effectively commercialised and deployed across the broader manufacturing ecosystem.
Collaborative Success in Global Manufacturing
The collaboration between Hong Kong SAR, Mainland China, and Vietnam in AI-driven manufacturing is more than just a regional partnership; it represents a strategic alignment that enhances global competitiveness. By leveraging the unique strengths of each region — China’s manufacturing capabilities, Vietnam’s cost advantages, and Hong Kong’s innovation ecosystem — Chinese product manufacturers can achieve unprecedented levels of efficiency, sustainability, and profitability.
As AI continues to revolutionise the manufacturing industry, this tri-regional collaboration will serve as a model for other regions seeking to harness the power of AI in their manufacturing processes. The success of this collaboration will not only drive the global success of Chinese product manufacturers but also set new standards for innovation and efficiency in the manufacturing sector.
References:
Innovation and Technology Commission, 2024. Research and Development Support. Available at: https://www.itib.gov.hk/en/i_and_t_support/research_development.html [Accessed 2 Sep. 2024].
Intellectual Property Department, 2024. Patent Box Tax Incentive — Hong Kong. Available at: https://www.ip.gov.hk/en/ip-trading-centre/policy-initiatives/patent-box-tax-incentive/index.html [Accessed 2 Sep. 2024].
Kaizen Institute, 2023. AI in Discrete Manufacturing. Available at: https://kaizen.com/insights/ai-discrete-manufacturing-industry/ [Accessed 2 Sep. 2024].
The Business Research Company, 2024. AI in Manufacturing Global Market Report. Available at: https://www.thebusinessresearchcompany.com/report/ai-in-manufacturing-global-market-report [Accessed 2 Sep. 2024].
World Economic Forum, 2022. AI in Manufacturing — Global Report. Available at: https://www3.weforum.org/docs/WEF_AI_in_Manufacturing_2022.pdf [Accessed 2 Sep. 2024].
