The sale of Nokia - once the world's largest mobile phone brand - to Microsoft for $7.2 billion came as a surprise to people of Nokia and Finland as it has long been a major growth driver of the Finnish economy. Its demise signifies a changing era in the global information industry and market, the benchmark of the new economy of the 21st century.

Nokia's descent has accompanied the decline of the traditional computer industry's core technology parts and components. Smartphones represent the integration of computer and telecommunication industries that are not dominated by Wintelism (Microsoft OS and Intel chips supported by Japanese key parts and components, and Taiwanese assembling capabilities), which had controlled the development success of personal computers since birth. Instead, the success of Apple's iPads and iPhones suggests a smart integration of communication and computing functions plus design and marketing, are more important than technology monopolies and manufacturing excellence. 'Soft' capabilities overtake 'hard' technologies as the determining factor in global competition.

Wintelism may be collapsing, but no new regime has emerged to replace it in the new mobile devices world. Apple is being challenged by Samsung and competitors are disappearing in the process. Blackberry and HTC are under threat from hostile takeover or waiting for friendly merger. Microsoft's Windows phones have failed to gain market share as its propertied OS is no challenge to the open-source Android, used by most others. Smartphones and their variants (like WiFi or 3G enabled tablets) are set to eliminate personal computers and will start the evolution of a new generation of integrated devices and technologies.

The other era change is the rise of China. Though China has been long viewed as the manufacturing base for the US, Japanese and Korean computer firms, the Chinese computer manufacturer Lenovo replaced Hewlett Packard as the largest personal computer brand in 2012. The same year, China's smartphone market exceeded the US market. In the second quarter of 2013, according to market researcher Canalys, five Chinese companies (Lenovo, Yulong, Huawei, ZTE and Xiaomi) made up the top-10 positions in the global smartphone market and made up 20 percent of its total market, up from less than 15 percent a year ago. Market leaders Samsung and Apple both lost market share to Chinese competitors. The size of the Chinese smartphone market was 88.1 million users in the second quarter of 2013, almost triple the US market. Chinese companies excel in the low-end market segments, and as smartphones spread to developing countries, with India already the third-largest market in the world, they look set to expand into the overseas markets and dominate there. The immediate future in the global integrated information market will belong to Chinese firms.

Both Huawei and ZTE are Shenzhen-based and have benefited greatly from proximity to Hong Kong. The industrial ecosystem in Shenzhen and the Pearl River Delta (PRD) region has been conducive to entrepreneurial development in various segments of the information industry value chain. The emergence in the past of many low-cost imitations of popular notebooks, mobile phones and even iPads and iPhones, testifies to the incubation ability of the local system. Shenzhen and the PRD-at-large, have in-store skill, knowledge, experiences, innovative ideas and manufacturing ability to turn these ideas into products cost-effectively. Many of the entrepreneurs and factories involved are from Hong Kong and given the intimate business connections of its firms in the region, it would not be difficult for them to set up their own small innovative factories or do sourcing from other indigenous firms.

It is a pity that with such business and spatial proximity to the region, Hong Kong has not developed together with the region into the production and service base for all these electronic information products from computers to smartphones. Probably the firms, banks and government have been too pre-occupied with the low-cost production of labor intensive industries to have noticed the rapid evolution of the information industry that may have been utilized to their advantage.

Hong Kong needs a serious structural upgrade to escape from the trap of low-value-added services industries. This would be an appropriate time for the city to use its established business connections in the PRD and jump on the bandwagon. Hong Kong could be a global showroom and distribution center for mainland smartphones and their variant products; it could encourage designers - of semiconductors, software, products and content - for products and services; it could create firms to promote services offered by the new generation; it could attract venture capital and other private funds for investment into such industries; it could serve as headquarters for these aggressive mainland firms and their global businesses, and much else.

Opportunities are there and Hong Kong must invest in and indulge them with determination. What irony and misfortune if Hong Kong misses this new "Made in China" and "Made for China" mobile electronic information age.

The author is the director of the Public Policy Research Institute and head of the China Business Centre at Hong Kong Polytechnic University.

(HK Edition 09/14/2013 page7)