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Charging Ahead(HKTDC Enterprise, Vol 08,2008)

Electrical & Electronic Appliances

Sophisticated electrical and electronic appliances that reflect the latest trends are a Hong Kong specialty

Unfazed by challenges, Hong Kong manufacturers are powering away to produce only the best appliances

Fast-changing consumption patterns, short product life cycles and competition in the low-end market are presenting challenges to Hong Kong's electrical and electronic appliances manufacturers. In response, the industry is moving up the value chain.

"There is a shift from low-profit, mass-produced and labour-intensive products to capital-intensive, equipment-intensive and high-value-added products," observes Roy Chung, Chairman of the Hong Kong Trade Development Council's (HKTDC) Electronics/Electrical Appliances Industries Advisory Committee (EEAIAC).

Such a transformation, according to analysts, suits the latest business landscape, which also calls for nimble action. "Changing buying patterns have created a need for a quick response for inventory replenishment," observes HKTDC Economist Wing Chu.

"Product life cycles have also shortened amid the advancement in technology, leading to the need for more frequent changes to product features and cosmetic designs in order to attract consumers," he adds.

Winning strategies

Local suppliers, however, are coping well. "Hong Kong companies have a unique ability to react quickly to changing market needs," maintains EEAIAC's Mr Chung, adding that production efficiency, a sharp eye for product trends, and aesthetic design capabilities also count among the local industry's strengths.

The HKTDC's Mr Chu concurs. "Aware of fast-changing market trends, Hong Kong companies are able to deliver quick responses to ensure effective marketing, quality products and good services," he notes.

"Besides, Hong Kong manufacturers are swift to embrace technologies that lead to competitive appliances by enhancing their functions, improving their reliability and reducing the costs of their components and parts."

As part of the move up the value chain, Hong Kong manufacturers are increasingly diversifying into ODM and OBM.

"Traditionally," advises the HKTDC's Mr Chu, "Hong Kong manufacturers relied on OEM. Today, in the face of keener competition brought about by Chinese mainland enterprises competing at the lower end of the market, more and more companies are switching to ODM and OBM."

A similar observation is made by Mr Chung of EEAIAC. "In response to market changes, many Hong Kong companies have enhanced their capabilities by maintaining OEM operations while at the same time doing more work in ODM, thus providing added value to customers," he explains.

"The most important element of success in ODM business is product design and development capability while knowledge of world product trends and different consumer tastes and preferences in different markets must be carefully monitored."

Mr Chung also points to increasing OBM activity in the local industry. "A welcome and positive trend in the industry is the increase in the number of Hong Kong companies marketing electronic products under their own brand names."

Well backed

He also underscores the importance of support from the Hong Kong government, which has in recent years launched various industry-backing initiatives, including the establishment of R&D centres to help local enterprises in technology upgrading and the DesignSmart Initiative to sponsor design and branding projects. "Going forward, this type of initiative is a strong motivator for Hong Kong's electronics industry," he remarks.

Meanwhile, amid growing concerns over product quality and environmental issues, an increasing number of Hong Kong companies have achieved internationally recognised certifications such as ISO 9000 and ISO 14000.

"Environmentally friendly electronic products are an area where Hong Kong manufacturers can make strong inroads," says HKTDC's Mr Chu. "As they are already used to meeting strict US and European environmental requirements, they are in a strong position to produce leading environmental products that appeal to the new generation of consumers."

Hong Kong's exports of electronics products rose 11% in 2007 to almost US$173bn, including appliances such as computers, radios and audio and video recorders and players. The largest market was the Chinese mainland, accounting for almost 59%, followed by the US and Japan.

In the same year, the city shipped more than US$3bn worth of household electrical appliances, ranging from lamps, fans and heaters to shavers, irons and washing machines. The leading destination was the US, which took about 30% of the exports, followed by Japan and the UK.

Clearly, Hong Kong's electrical and electronic appliances industry is charging ahead and looks certain to remain a powerhouse in the global supply chain for a very long time to come.