25 Sept 2019
Hong Kong Companies in the GBA (8): The Hong Kong-Shenzhen Synergy in R&D and Application
Interview with Sam Ho, CEO of Shutang Information Technology (Shenzhen) Co., Ltd.
- Photo: Dr. Li Chun Hung (left), Chief Information Officer, and Sam Ho, CEO, of Add Care
- Photo: Glutrac’s first-generation smart wearable for non-invasive glucose monitoring
- Photo: Glutrac collects user data and transfers the data to the phone app via Bluetooth. The app then sends the information to Cloud’s AI Hub for computation after which the result is returned to the wearable device and phone app
Diabetes is a growing health problem across the globe. In 2017, 425 million people worldwide were living with the condition, according to figures from the International Diabetes Federation – 114 millions of them in China. The disease has become a major burden on China’s healthcare system, with diabetes-related medical expenditure reaching RMB173.4 billion in 2017, some 13% of the country’s total medical bill.
One of the main issues encountered in dealing with diabetes is how to measure sufferers’ blood sugar level safely, painlessly and efficiently. All the meters currently on the market have adopted invasive means to measure the level, with users needing to endure painful finger pricking and risk getting infected. Because the meters do not provide a constant flow of data, the measurements lack reliability and continuity, while the tests can be costly over the long term.
In order to overcome these problems, the glucose testing industry is looking to develop non-invasive testing methods. Sam Ho, CEO of Shutang Information Technology (Shenzhen) Co, spoke recently to HKTDC Research about his company’s experience in developing non-invasive, continuous blood glucose monitoring in the Greater Bay Area (GBA), and about how to utilise the competitive advantages of different cities in the region to build a strong team and develop a business.
Non-Invasive Glucose Monitoring
Ho established Add Care Ltd in Hong Kong in 2013 to develop non-invasive glucose testing devices. The company collaborated with the Hong Kong Productivity Council to conduct market studies and evaluate previous research on non-invasive blood glucose testing before deciding what direction to take its own R&D in. In 2015, after performing well in a series of technology innovation competitions on the mainland, Add Care received a grant from the Science, Technology and Innovation Commission of Shenzhen to establish Shutang Information Technology (Shenzhen) Co., Ltd. in Shenzhen’s Qianhai.
Shutang developed its first non-invasive glucose meter prototype in 2016. It relied on sensors which clipped on the ear, but Ho admitted that it became clear during trials that the device was unsuitable for women, saying: “Many women have their ears pierced, which can cause ear-clipping sensors to receive some meaningless sensor signals. This may affect the accuracy of the data collected, which was why we eventually gave up developing this hardware.”
Detailing how the company continued its research into non-invasive meters, Ho said: “We tried developing wearable devices for use on different parts of the body, such as the arm, the back of the hand, the wrist and the finger, ultimately deciding on the wrist. In order to achieve continuous automatic monitoring of blood sugar level, the device must be easy to wear for prolonged periods. Since most people have watches, we decided that users should find it easier to adapt to wearing a device on the wrist.” Shutang completed the hardware applications and fusion algorithms  for its second-generation wristband Glutrac in 2017.
The design of the prototype was completed in 2018. Results from clinical trials show that the accuracy of the data it provides is consistent with the requirements for non-invasive glucose monitors set by China’s National Medical Products Administration (NMPA). Remarking on his company’s success so far with Glutrac, Ho said: “We think it is time to market the product and we have published international research reports in preparation for a launch. We also won funding support from the Hong Kong and Shenzhen governments as a Sino-foreign co-operation project under the Science, Technology and Innovation Commission of Shenzhen and under the Enterprise Support Scheme (ESS) of the Innovation and Technology Fund (ITF) of Hong Kong.”
Developing Medical Grade Products for Mass Market
Ho added that Shutang is currently undertaking large-scale clinical trials involving 1,000 patients in conjunction with several hospitals in Shenzhen, saying: “We are conducting trials on users chosen from different places, because the weather differs from place to place. We hope to test the performance of our products in different temperatures and humidity levels. Glutrac is applying for different medical certifications, including CE MDR, NMPA and FDA, and plans to upgrade itself into a medical-grade product by the end of 2019 or early 2020.
“Products targeting the mass consumer market will go on sale in August 2019 and we are developing both online and offline sales channels. For online channels, Shutang has co-operative ties with www.120ask.com (a platform for patients seeking online consultation) and www.iiyi.com (an online healthcare platform). Through these channels, products are recommended to patients and telemedicine data collected. For offline channels, we are starting from Shenzhen and the Jiangxi city of Ganzhou. We are also co-operating with BGI, iCarbonX and some medical groups and plan to recruit some offline agents in the future.”
Leveraging Mutual Strengths for Synergy
The company hopes that the development of the GBA will help it to combine the different sets of advantages provided both by mainland China and Hong Kong and create synergy. In particular, it is looking to use Hong Kong’s talent for scientific research and professional services, and the mainland’s manufacturing strength and the size and power of its market to good effect. Illustrating this last point, Ho said: “I have been working in Hong Kong and Shenzhen for more than 20 years and seen with my own eyes the rapid growth of the mainland market.”
1. Comparison Between Mainland and Hong Kong in Talent and Support
Pointing to the differences in terms of skill sets between Hong Kong and the mainland, Ho said: “There are more people doing basic research in Hong Kong, including the scientists on our R&D team, who have obtained doctoral degrees in Hong Kong or overseas universities. Mainland China’s industry chain covers all aspects of application, from mould-making to PCBA  and integrated circuit (IC) support . Technical support for IC companies, different types of sensors for hardware and applied engineering personnel are all available on the mainland, which is why companies choose the mainland, especially Shenzhen, for hardware applications, because the electronics-related industry chain is by and large based in Shenzhen.”
2. Comparison Between Mainland and Hong Kong in Financing
Shutang has gone through three funding rounds in the past six years. The first and second angel rounds were done in mainland China, while the Pre-A round was completed in Hong Kong. Ho pointed out that mainland investors are more adventurous. They buy the idea of “high risk, high return” and are willing to invest in companies in their initial stage. Hong Kong investors, in general, are more interested in companies that have passed the R&D stage, have actual products and stand a chance of IPO at the Hong Kong bourse. Explaining what this means for companies at different stages of their growth, Ho said: “Financing is easier in mainland China for start-up companies. Companies with IPO as their goal, however, should consider their own needs when choosing Hong Kong or the mainland for their IPO placement.”
3. Comparison Between Mainland and Hong Kong in Industrial Environment
Ho maintained that, while Hong Kong enjoys an advantage as an important global financial centre, the mainland has a competitive edge in manufacturing and logistics, adding: “The establishment of the Greater Bay Area is good for Hong Kong and Macao as well as for mainland cities. By letting them give full scope to their respective strengths, it will be easier to achieve synergy of the flow of capital, people, goods and information within the bay area.”
Claiming that Shutang’s operations in Hong Kong and Shenzhen best illustrate how the advantages of different cities in the bay area complement each other to create synergy, Ho went on: “Our Hong Kong company is mainly responsible for basic research while our Shenzhen company is responsible for hardware applications. Hong Kong’s financial advantage can help us secure more funding, while Shenzhen’s competitive edge in electronic manufacturing can help us produce products of higher sensitivity and accuracy.”
Making Use of GBA Support
In Ho’s view, the mainland can affect the Hong Kong economy in important ways. He pointed to the announcement by the mainland government in recent months of a number of policies to support Hong Kong businesses, and said Hong Kong companies looking to venture into the mainland should study them carefully.
For example, in March 2019 the Ministry of Finance issued the Circular on Preferential Individual Income Tax Policies for the Guangdong-Hong Kong-Macao Greater Bay Area, granting subsidies to foreign (including Hong Kong, Macao and Taiwan) high-end and urgently-needed talent working in the GBA. These subsidies are designed to offset the individual income tax differentials between mainland China and Hong Kong and are exempt from individual income tax. Explaining that he hopes this will encourage people to work in the GBA, Ho said “The fact that Hong Kong people working in the GBA can pay income tax at Hong Kong tax rates may attract more Hong Kong people to go and work across the border.”
Ho added that Shenzhen’s Peacock Plan encourages and supports overseas high-tech talent to work and start their business in the city, saying: “Some of our team members have received subsidies through this plan. They don’t have to change their household registration and can expect to receive RMB1.6 million in subsidy over five years, averaging more than RMB300,000 a year, just by working and paying social insurance premium in Shenzhen. It is easier for enterprises to keep their high-tech talent with subsidies from the government.”
Different districts of the city also offer incentives of their own. For example, Futian, Longgang, Longhua and Nanshan districts have similar subsidy policies to attract talent. Noting how this works, Ho said: “Basically the districts will match the city’s subsidy at 50%. In other words, the same high-tech talent can expect to get an additional RMB800,000 in Futian.” The Shenzhen government also implements a preferential housing policy for high-tech talent, who only need to pay about 60% of a district’s market price to rent or buy property there.
“Localisation” Recommended Upon Market Entry
Ho said that Hong Kong companies intending to enter the mainland market should remember the importance of “localisation”, including getting to know the local policies well and making good use of local talent. He suggested that Hong Kong companies should first familiarise themselves with the local government’s development priorities and check the relevant government websites for information on the mainland market. Hong Kong businesses should also regularly take part in exchanges hosted by the government.
Ho pointed out local administrations already make a reciprocal effort to work with incoming companies, saying: “Mainland government officials take the initiative to understand the operations and market conditions of start-up businesses. The Futian government organises face-to-face exchanges with enterprises every two months to check on the status of these businesses and the difficulties they face. For example, because our company is involved in the healthcare sector, the government puts us in touch with the health and family planning commission, the civil affairs bureau and other departments.”
Ho suggested that Hong Kong companies should also take part in government-sponsored competitions, such as those organised by the Science, Technology and Innovation Commission. Explaining how this can help them acclimatise to business on the mainland, Ho said: “Competitions involve a long process, during which companies can get in touch with local governments and familiarise themselves with the administrative procedures more easily.”
Ho also encouraged Hong Kong companies to make good use of local talent. He illustrated this point by explaining how his company had used local trainees to apply for mainland funding, saying: “We have employed many trainees. They have made similar funding applications under their supervisors in their post-graduate years, so they have experience in applying for national funds and know the procedures well. This translates into a higher success rate.”
Enhancing Hong Kong’s Competitive Edge
Because Hong Kong is an international financial centre with much richer and more flexible investment products on offer than the mainland has, it is in a better position to attract capital. It is also an international trading centre, which means it is easier to buy the latest technical equipment and instruments here than in mainland China. Hong Kong’s easy access to information on cutting-edge technology is also an asset for scientific research.
However, Ho thinks there is room for Hong Kong to improve its competitive edge in these fields. Stressing that Hong Kong should enhance the administrative efficiency and freedom of its financing channels, he said: “For example, when applying for subsidies, it normally only takes nine to 10 months to complete the approval process in Shenzhen, but may take as long as two years in Hong Kong. We hope Hong Kong can shorten the administrative process and expedite the approval and issuance of subsidies. If financing channels are further liberalised and ICO  regulations are relaxed, it may be easier for businesses to raise funds.”
 Fusion algorithm: Data collected by means of different hardware technologies is calculated in fusion using the algorithm developed by Shutang.
 PCBA (Printed Circuit Board + Assembly) refers to the mounting of various types of electronic components on the surface of circuit boards.
 IC Support: Integrated Circuit Support
 ICO (Initial Coin Offering): First token sale for blockchain projects.