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Powering Up(HKTDC Enterprise, Vol 02,2009)


Electrical & Electronic Appliances

Suppliers of electrical and electronic appliances are charging ahead in their fight against spiralling costs and economic uncertainties

Product innovation, process automation and cost control measures are empowering manufacturers of electrical and electronic appliances in the face of fresh challenges.

Topping the industry's concerns are those about the economic downturn in major markets such as the US and Europe, as well as escalating costs of raw materials.

Hong Kong's Sanwell Industries Ltd, which manufactures electrical products such as steam irons and kitchen appliances, is trying to keep up sales by offering enhanced models at affordable prices.

"Take the steam iron as an example," says Deputy General Manager Victor Wong. "If we keep on introducing new features, then some consumers may upgrade their steam irons every couple of years or so. But if they become too expensive, consumers will simply put any upgrade plans on hold."

Smart strategies

The company has also stepped up its efforts to streamline production processes to reduce labour costs. "We introduced more automation in the factory more than a year ago, and now employ less labour.

"We are also talking to buyers about using less expensive materials to bring down costs without comprising quality or safety," Mr Wong says.

"I know of many factories that have closed down in these difficult days and we are happy just to stay afloat," he adds. "If there is one positive thing that has come out of all this, though, it is that buyers who were once lured to lower-price factories have now returned to us, either because those factories have folded or their products are no longer up to standard."

Also proactive in cost control is Grey Technology (HK) Ltd, a regional office of UK-based Grey Technology Ltd which designs, develops and distributes cordless floorcare products and garden tools.

"We had to adjust the prices of our products several times during 2007-2008 because of fluctuating materials costs, which we are now keeping under control by strategically negotiating more flexible business terms with our suppliers," imparts Senior Sales and Marketing Executive Wallis Lee.

The latest economic slowdown, however, has had little impact so far on the company's key products, including electronic rechargeable sweepers and cordless hand-held vacuum cleaners.

"These household appliances are daily necessities, so their market is pretty stable, although competition from cheaper brands is definitely heating up," Ms Lee adds.

"For us, the solution is to launch new designs more frequently, hoping that consumers will then upgrade their products more often and thus create additional demand."

Despite dimming growth prospects in developed markets, Hong Kong-based Win Global Electrical Appliance Ltd is optimistic that its broad customer base and efficient operation will help the company emerge from the economic downturn relatively unscathed.

"It is true that the market has become very challenging, while customers have become cautious and their procurement policies more conservative," says Administration Officer Rita Mak.

"However, the situation is really not that bad for us as our customer base is diverse and our products fill different market niches."

Win Global produces home appliances such as fans, heaters, humidifiers and air-purifiers for export. "While orders will inevitably drop, we will try to further improve our productivity and develop better products to meet market needs," says Ms Mak.

Bright spots

While most manufacturers are grappling with slowing demand, mainland China-based heater manufacturer Shenzhen Sunzone Electrical Appliances Ltd says the recent fluctuations in energy prices may help promote the company's sales this year.

"Demand for heaters is likely to be stronger this year because consumers have become more aware of energy conservation," says Sales Manager Wendy Weng.

"Many households in the West have central heating, but that would not be a very efficient way of using energy if all they need to keep warm is certain spaces such as the living room or reading room.

"Portable heaters, by comparison, are more flexible," she remarks. "Given the current state of the economy, consumers may want to switch to appliances that consume less power, and so we expect our heating units to sell quite well."

Shenzhen Sunzone also hedges risk through futures markets, buying forward contracts on copper and PVC to lock-in materials costs and long-dated exchange rate contracts on the US dollar to avoid losses due to appreciation in the Chinese currency.

With such comprehensive strategies, the electrical and electronic industry is clearly powered up for any challenges.