Hong Kong is relying on its reputation for protecting intellectual property rights (IPR) to challenge Shanghai as the semiconductor design centre of Greater China. The number of chip design companies at the Hong Kong Science and Technology Park has grown to 30 from just three in June last year, employing about 1,500 staff. Many choose the city for its proximity to Chinese electronics manufacturers and Hong Kong's status as a logistics and financial services centre. A key selling point, however, has been Hong Kong's strong legal structure to protect intellectual property, which is sometimes woefully lacking on the mainland. There are about 45 semiconductor design companies in Shanghai, and about 460 throughout the mainland, although many have fewer than five staff and less than US$120,000 in capital, according to a recent report from iSuppli. The Hong Kong government has been strongly criticised for wasting public money on a US$40 million project to build a domestic chip design industry - a programme sceptics argue is doomed to fail as companies bypass the city to go directly into China. 'My worry is not that China can pick up fast and catch up to us; my worry is whether Hong Kong can maintain its high standard of integrity,' said park vice-president of business development and technology support S.W. Cheung. Hong Kong's legal system, inherited from the British, would continue to give the city the upper hand in attracting semiconductor design companies for many years, Mr Cheung said. 'Outside companies wanting to come into the China market are afraid because people will copy them. 'We are making good use of 'one country, two systems' - we belong to China but we are still using the English law, and that's why people from outside trust us.' Recent central government efforts to strengthen enforcement of IPR would do little to reshape mainland attitudes towards violations, Mr Cheung said. 'To build up this intellectual property culture, it's not just by law or by system, it's through people, and people have to learn it while they are children. 'You look at China - fake medicines, fake food - things that are dangerous for you. So how can they think about intellectual property?' The debate over the science park's long-term prospects mirrors the debate over the future of Hong Kong. The city's traditional gateway role is being undermined as China opens up to foreign companies following its accession to the World Trade Organisation. Hong Kong's proximity to manufacturers in the Pearl River Delta is meaningless if foreign companies set up offices in Guangzhou. Hong Kong remains a strong draw in areas the mainland will always struggle to match - business infrastructure, open government and a trusted legal system. United States-based Andigilog International chose Hong Kong for its regional office because it believed the mainland would be too risky. Managing director Y.L. Cheung said: 'Design involves people and to control people is difficult. Most of the students and the people of Hong Kong ... respect intellectual property and the engineers have better discipline in this respect.' The city had other advantages, such as efficient logistics. 'In Taiwan, to import or export electronics components requires at least 24 hours for paper processing,' Mr Cheung said. Although Hong Kong was 15 to 20 per cent more expensive, the higher premium was justified, he said, adding that flexibility in doing business often outweighed cost as a concern. Mr Cheung expected there to be about 50 semiconductor design companies at the park by the middle of next year. Last month, the park signed an agreement with the Beijing government allowing tenants to partner with Chinese companies on lucrative technology standards. Mr Cheung said the deal was attracting significant interest, especially from Taiwanese firms. In the long run, however, Hong Kong's competitiveness in the region may depend on the talents of the 6,000 science and engineering graduates the city's local institutions churn out each year. In the meantime, Hong Kong is playing all its cards in the race for market share of the global semiconductor industry, which Gartner predicts will be worth U$400 billion by 2010.