1 Sept 2001
Visions Of Steady Growth(HKTDC Optical,2001)
INDUSTRY TRENDSVisions Of Steady Growth
AS the spectacles industry evolves from a purely medicinal to a consumer-based fashion-accessory business, Hong Kong has emerged as a powerhouse in the global optical trade. Manufacturers are producing more upmarket goods, using the latest in design and technology to stay on top of the export rankings.
Hong Kong is the largest exporter of spectacle frames in Asia and second in the world after Italy. Total exports of spectacles, lenses and frames surged 18.2% year-on-year in the first five months of 2000 to reach HK$2.84bn (US$364.57m), after such exports in full-year 1999 rose 3.1% to HK$5.73bn (US$734.62m). The US is Hong Kong's top optical market, accounting for 43.1% of its total exports in January-April 2000.
The majority of Hong Kong manufacturers have relocated their labour-intensive manufacturing to southern China to take advantage of the low labour and land costs. Factories that remain in Hong Kong concentrate on key functions such as marketing, product design and development, mould-making and quality control. Hong Kong's spectacle frame industry, mostly OEMs and ODMs, is able to cope with small orders and can offer a variety of frame designs. The big players have diversified into licensing and retailing in mainland China. Some manufacturers export under their own brand names as well.
"Hong Kong manufacturers are innovative in technology and design, have good management, and offer good service and competitive pricing," says Hui Leung Wah, president of the Hong Kong Optical Mfrs Assn (HKOMA) and managing director of Elegance Optical Mfy Ltd.
Thanks to low production costs on the mainland, Hong Kong suppliers have long been able to offer competitive prices. However, they now rely on top-notch design and advanced technology to stay ahead.
Says Cary Ma, managing director of Moulin Optical Mfy Ltd: "To maintain a leading position, it is not sufficient nowadays to just maintain low costs. Regions like South Korea or Taiwan can produce even cheaper goods than Hong Kong. Therefore, Hong Kong manufacturers should produce goods of higher added value."
"For example, the quality and design of the goods have to be improved by using advanced technology in order to stay competitive relative to the European or Japanese manufacturers," says Ma.
Moulin Optical is a prime example of a Hong Kong company that recognizes the value of technology transfer. "For example, we formed a joint venture with Nikon to manufacture titanium frames. Apart from importing technologies, our own R&D team develops CAD/CAM and laser-engraving technologies," says Ma.
The average technology level of Hong Kong's spectacles industry is perceived to be above that of South Korea and Taiwan, according to Billy Wong, economist at the Hong Kong Trade Development Council (TDC). "Large Hong Kong manufacturers have made use of advanced machinery and the latest information technology to improve production efficiency and product design. CAD/CAM technologies are being used by some manufacturers to enhance the design and production process," Wong says.
Tony Chow, a vice-president of HKOMA and director of Mandarin Optical Mfy, points out that companies are installing new equipment to upgrade their technology. Hui says big manufacturers have acquired large-scale computer systems for production control, and some have also started developing their e-commerce capability.
To improve technological support for the industry, the Hong Kong Productivity Council and the HKOMA have jointly developed a knowledge-based design system and numerically controlled production technology. The system is able to deliver a 3D parametric human facial database and a full-scale human head sample for actual testing. "Hong Kong manufacturers, with their talents, have come up with a great range of designs," Chow says.
"Many big Hong Kong manufacturers have attained quality management certification such as ISO 9000 or Q-Mark. They also conduct internal CE testing," Hui says. Q-Mark is a quality recognition awarded by the Federation of Hong Kong Industries.
Hui says Hong Kong-based suppliers take pains to conduct research to improve quality. "For example, we do research on how to improve spring hinges and machinery."
In terms of service, they are able to cope with small orders with a variety of frame designs, and high-quality products can be delivered in a short period of time.
Hong Kong manufacturers are good at business management, of which cost control is a key aspect. "There is cost-cutting by streamlining procedures and materials control," Hui says.
"By implementing the Just-in-Time production management concept, inventory level can be minimized," Ma says, using his company for illustration. Moulin Optical is implementing an Enterprise Resources Planning system, which can integrate the company's manufacturing, distribution and retailing business. "It also enables efficient production and material planning, so that costs can be minimized," Ma adds.
"The industry is well supported by ancillary industries, including the production of cellulose acetate sheets (for plastic frame production), optical parts (such as spring hinges, nose bridges and temples) and other industrial supports such as electroplating and mould-making," Wong says.
Hong Kong's optical frame sector is largely self-contained, except for the import of lenses and raw materials. The trade also benefits from a well-established subcontracting network.
Harvey Fung, a pioneer in the production and export of spectacle frames and a co-founder and director of HKOMA, attributes Hong Kong's competitiveness to a combination of factors. "In Hong Kong, we have free trade, efficient information transmission, a good financial system, advanced designs and talents. Therefore we are very competitive," says Fung, who is also managing director of V.I.P. Optical Int'l Ltd.
Industry leaders believe Hong Kong will stay important in the worldwide optical trade. Hui says neighbours such as Japan, Taiwan, South Korea and mainland China do not pose any threat at present. "Hong Kong's position as a leader in optical frames will be maintained for a pretty long time," Chow says. "Buyers like sourcing from Hong Kong since there is a concentration of optical manufacturers."
Manufacturers are looking to develop the mainland China market, now accounting for only about 5% of Hong Kong's optical exports. "With its entry into the WTO, [mainland] China offers many more business opportunities in the years ahead, and Hong Kong will benefit," Ma says.
Hong Kong firms are attempting to broaden their business base by setting up retail optical businesses in mainland China and distributing brand-name products. At present, most Hong Kong exports consist of orders from renowned international brands and designer labels of overseas buyers.
"An increasing number of Hong Kong manufacturers export products under their own brand names. Also, licensing arrangements to produce for world-famous designer brands are growing. The spectacles industry has evolved from a medicinal to a consumer-based business, and designer brands are likely to offer higher perceived value to consumers," Wong concludes.
HONG Kong manufacturers offer a wide array of metal and plastic frames. For metal frames, nickel-silver and Monel are the most widely used materials, though titanium and stainless steel also come into the picture. Most plastic frames are made of cellulose acetate, although some are made of cellulose propionate or nylon.
The focus of mainstream styles is still on metal frames, according to most industry veterans. "The demand for metal frames has been growing rapidly in recent years because of their lightness and simple designs, especially with the development of light and durable titanium frames," says Billy Wong, economist at the Hong Kong Trade Development Council.
Hui Leung Wah, president of the Hong Kong Optical Mfrs Assn (HKOMA) and managing director of Elegance Optical Mfy Ltd, says that titanium is growing popular because it is hard and light -- and will be the material of choice for most manufacturers if its price becomes more attractive. "There is, in the meantime, a trend of combining metal and plastic materials," Wong says.
Cary Ma, managing director of Moulin Optical Mfy Ltd, says both plastic and metal are popular materials for sunglasses, as long as the models are of innovative design and good quality.
Hong Kong manufacturers source materials mainly from France, Japan, Germany and South Korea.
"Big frames are hot items this year," Ma observes. "In [mainland] China, spring hinges are popular. Gold, silver and burgundy colours are still commonly accepted. They also like bigger frames."
Design is crucial to the industry's growth, and the Hong Kong Optical Mfrs Assn is doing its part to raise design awareness among member companies. The association is organizing its 2nd Eyewear Design Competition, whose winners will be announced at the Hong Kong Optical Fair in November 2000. The event is open to participants from both within and outside the industry. "It aims to seek more designers to help the industry," says Tony Chow, a vice-president of HKOMA and director of Mandarin Optical Mfy.
"Through this competition, we want to raise people's awareness of the importance of design," Hui explains. "It makes those in the industry feel that serious attention is paid to them, and creates interest among people outside the industry."
WRITTEN BY LIZA LEE
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