Overview
- Hong Kong exports a variety of telecommunications equipment, ranging from basic telephones, mobile phones to sophisticated system products. According to the latest available statistics, Hong Kong was the world’s largest exporter of telephone sets in value terms in 2009.
- Hong Kong’s exports of telecommunications equipment surged by 31% in the first half of 2011. Exports to the Chinese mainland expanded rapidly, as there was continued demand for parts and accessories for processing production. Exports to the US and the EU also performed well amid the steady consumer demand for telecommunications products.
- Sales of mobile phones with advanced features, particularly the so-called smart phones, are rising rapidly. Broadband applications for the fixed-network, especially those making use of optical communications technologies, are hot areas for development. With respect to domestic products, higher frequency cordless phones are well sought after in the market.
Industry Features
Hong Kong exports a variety of telecommunications equipment, ranging from basic telephones to sophisticated system products. Major export items include corded phones and cordless phones, mobile phones, Internet phones, etc. According to the latest available statistics, Hong Kong was the world’s largest exporter of telephone sets in value terms in 2009.
Another major export category is parts and accessories, including parts for system products and a variety of mobile phone accessories. Hong Kong also exports different kinds of telecommunications apparatus with radio reception, like walkie talkies and base stations for telecommunications. Other items include navigational apparatus like GPS devices and telephone switching/exchange equipment.
Most Hong Kong manufacturers have relocated their production facilities to the Chinese mainland, where various production processes like PCB assembly, plastics injection moulding and sheet metal working are carried out. Their Hong Kong offices focus mainly on product design and development, industrial engineering, management, logistic support and marketing, etc. In the wake of this relocation, most of such companies have been re-classified as non-manufacturing establishments, despite the fact that they have manufacturing activities across the boundary.
Hong Kong’s telecommunications equipment industry is characterised by heavy dependence on imported parts and components. Given its free port status and the advanced telecommunications infrastructure, Hong Kong allows companies to source freely worldwide. For example, most digital processors, memories and/or other chips are imported from Taiwan, Japan and South Korea, etc. For other parts and components, such as PCBs, passive components, key-pads, display modules and mechanical parts, Hong Kong companies may source from other local manufacturers, or local Chinese enterprises on the mainland.
Meanwhile, many Hong Kong manufacturers adopt a strategy of vertical integration to enhance value-added content to their products. Product design and development, tool-making, production and/or quality assurance are all done under one roof. Moreover, most companies are equipped with relevant acoustic testers and frequency spectrum analysers for design of telephone interfaces and radios respectively.
Against the fast changing markets, Hong Kong companies emphasise quick response to render effective marketing services to their customers, and to monitor the changing product trends. Many companies have further strengthened their quality assurance and environmental management systems, and are accredited with ISO 9000 - an internationally recognised standard for quality management system, and ISO 14000 - a standard for environmental management system.
Performance of Hong Kong’s Exports of Telecommunications Equipment ^
| |
2009 |
2010 |
Jan-Jun 2011 |
| HK$Mn. |
Growth% |
HK$Mn. |
Growth% |
HK$Mn. |
Growth% |
| Domestic Exports |
7,691 |
-9 |
10,257 |
+33 |
2,258 |
-52 |
| Re-exports |
213,345 |
-2 |
284,282 |
+33 |
166,239 |
+34 |
| of Chinese Mainland Origin |
182,889 |
* |
247,478 |
+35 |
147,293 |
+36 |
| Total Exports |
221,036 |
-2 |
294,540 |
+33 |
168,497 |
+31 |
| Total Exports by Major Markets |
2009 |
2010 |
Jan-Jun 2011 |
| Share% |
Growth% |
Share% |
Growth% |
Share% |
Growth% |
| Chinese Mainland |
39 |
+2 |
41 |
+41 |
44 |
+49 |
| US |
12 |
-4 |
13 |
+35 |
10 |
+10 |
| EU(27) |
15 |
-24 |
13 |
+22 |
12 |
+6 |
| Netherlands |
5 |
-19 |
5 |
+31 |
4 |
-5 |
| Germany |
2 |
-33 |
2 |
+21 |
1 |
* |
| ASEAN |
7 |
-3 |
7 |
+26 |
6 |
+4 |
| Singapore |
3 |
-11 |
3 |
+26 |
2 |
-7 |
| India |
4 |
+24 |
5 |
+86 |
6 |
+30 |
| Total Exports by Categories |
2009 |
2010 |
Jan-Jun 2011 |
| Share% |
Growth% |
Share% |
Growth% |
Share% |
Growth% |
| Parts of Telecommunications Equipment |
44 |
-5 |
46 |
+39 |
47 |
+45 |
| Other Apparatus for Transmission or Reception |
35 |
+1 |
33 |
+28 |
28 |
+5 |
| Telephone Sets |
20 |
* |
20 |
+30 |
24 |
+46 |
| Radar/Radio Navigational Aid Apparatus |
1 |
-8 |
1 |
+50 |
1 |
+5 |
^ Since offshore trade has not been captured by ordinary trade figures, these numbers do not necessarily reflect the export business managed by Hong Kong companies.
* Insignificant
Hong Kong’s exports of telecommunications equipment surged by 31% in the first half of 2011, after a strong growth of 33% in 2010. Exports of major items like parts of telecommunications equipment, apparatus for transmission/reception of voice, images or other data, and telephone sets all increased by different degrees.
Exports to the Chinese mainland expanded rapidly in the first half of 2011, as there was continued demand for parts and accessories on the back of increases in mainland’s processing production.
Exports to the US and the EU, accounting for about one-fourth of the total exports, also performed well amid the continued consumer demand for telecommunications products. Sales to ASEAN were also facilitated by a steady demand for telecommunications parts for processing production in the region.
Sales Channels
Hong Kong companies usually sell their products on OEM and ODM basis to overseas telephone companies and specialised importers of telecommunications equipment, which are capable of obtaining approvals from relevant telecommunications authorities in the corresponding markets. After-sales services, such as installation and maintenance, are usually undertaken by the overseas buyers, while Hong Kong suppliers provide technical support to their buyers.
On the other hand, a few Hong Kong companies market their own brand products in markets like the US and the EU. Some companies also have offices in overseas countries to monitor local distribution and/or after-sales services.
Promotion via participation in trade fairs is an effective way for Hong Kong’s telecommunications equipment companies to explore market opportunities. Important trade fairs include the CES Show held in the US, CeBit in Germany, Japan Electronics Show and the Hong Kong Electronics Fair organised by the Hong Kong Trade Development Council (HKTDC). Business missions organised by the HKTDC to the Chinese mainland and other emerging markets also provide opportunities for Hong Kong companies to establish connections with potential buyers.
Industry Trends
Increasing competition from mainland and other Asian suppliers has long been a threat to Hong Kong companies. In response, many Hong Kong companies have differentiated their products by enhancing product features, and enriched their product lines through new product development.
Meanwhile, Hong Kong companies put more emphasis on ODM manufacturing. Buyers can now provide the industrial design only, such as cosmetic drawings and features, and their Hong Kong suppliers undertake other operational activities, which range from hardware design, software programming, mechanical drawing, building prototype and samples, to tool-making and production. Some industrial designs may even be done by Hong Kong companies.
As more design works are undertaken by Hong Kong companies, there is a tendency of overseas importers to shift liabilities arising from defective products to local manufacturers and traders. It has thus become increasingly critical for Hong Kong exporters to observe laws and regulations in relation to consumer protection and product liabilities in overseas markets.
On the other hand, the fast changing consumer pattern has resulted in low inventory levels in major export markets, requiring quick response for inventory replenishment. Product life cycles have also shortened amid advancement in technology, leading to the need for more frequent changes in product features and specification in order to lure consumers. In this respect, Hong Kong companies are well known for their adaptability and responsiveness to the rapidly evolving consumer tastes and technological changes.
CEPA Provisions
Since the implementation of the third phase of the Mainland and Hong Kong Closer Economic Partnership Arrangement (CEPA III) in January 2006, all products of Hong Kong origin can be imported into the mainland at zero tariffs. According to the stipulated procedures, products which have no existing CEPA rules of origin will enjoy tariff-free treatment upon applications by local manufacturers and upon the CEPA rule of origins being agreed and met.
In the main, the CEPA origin criteria for Hong Kong items include change in tariff heading, performance of specific manufacturing process in Hong Kong, as well as fulfillment of value-added requirement, under which at least 30% of the FOB value of the products, and that the final manufacturing or processing operations should be completed in Hong Kong. Product development cost incurred in Hong Kong, in addition to material costs and labour costs, can be taken into account in calculating the value-added percentage.
Detailed information, as well as the origin rules for electronics items, is available from the following hyperlink:
http://www.tid.gov.hk/english/cepa/tradegoods/files/mainland_2011.pdf
General Trade Measures Affecting Exports of Telecommunications Equipment
Most telecommunications equipment sold to overseas markets should have to obtain the approval by corresponding telecommunication authorities, e.g. the Federal Communications Commission (FCC) in the US, BABT in the UK and BZT in Germany. Also, these exports are subject to safety requirements. For instance, telecommunications products sold to the US have to be in compliance with the safety requirements of UL/ETL listing or equivalent. Likewise, products exporting to the EU have to comply with relevant safety directives, including those of low voltage electrical equipment, and have to carry a CE-mark to show their compliance. With regard to electromagnetic compatibility (EMC), products sold to the US require compliance with FCC standard, while the EU’s CE-mark has also required the compliance with relevant EMC directives. As for sales in the China market, most telecommunications products have to be in compliance with the safety and other requirements of a unified compulsory product certification system known as 3C (China Compulsory Certification or CCC).
Hong Kong exporters should be attentive to the growing popularity of green concept in the marketplace. Especially in Europe, consumers are generally conscious of environmental protection. Not surprisingly, the EU has adopted a number of directives for environmental protection, which may have an impact on the sales of IT equipment. These include the restrictions on batteries and accumulators that contain mercury, as well as the Directive on Waste Electrical and Electronic Equipment (WEEE) implemented in August 2005, and the Directive on Restriction of Hazardous Substances (RoHS) that came into effect in July 2006.
The Chinese mainland has adopted similar environmental protection regulations. These include the already effective Management Methods on Prevention and Control of Pollution Caused by Electronic Information Products since March 2007 and the Management Methods on Prevention of Waste Electronic Equipment Pollution on Environment since February 2008. The regulation on recycling and treatment of waste electrical and electronic equipment has also come into effect since 1 January 2011.
Product Trends
Mobile communication has become part of the daily lives of consumers in most countries. Sales of mobile phones with advanced features, particularly the so-called smart phones, are rising rapidly. Enhanced features, especially those related to Internet applications, have been added on to the majority of the models, in addition to other features like digital/video cameras, multimedia playback functions and GPS. This has lured demand especially from youngsters and higher-income consumers.
Nevertheless, fixed-line network will continue to play a vital role in the communication world. Spurred by the demand for high-speed data transmission and Internet access via the fixed-network, broadband applications, especially those making use of optical communications technologies, are hot areas for development. But some companies have continued to concentrate on the digital subscriber line (DSL) technology, which utilises the existing copper telephone lines to deliver high-speed data services.
With respect to domestic telephone products, there is a constant appetite for cordless phones. Thanks to changing regulations of telecommunications authorities, a certain radio frequency spectra have been opened for cordless phones operating at higher frequency, including the DECT phones for Europe, and the 900MHz, 2.4GHz and 5.8GHz cordless phones for the US. Higher frequency products are well sought after due mainly to their better communication quality and enhanced security. Yet corded telephones are not expected to obsolete in the medium term.
