Overview
- Hong Kong exports a wide range of IT equipment, with computer parts and accessories being the largest export item. According to the latest available statistics, Hong Kong was the second largest world exporter of computer parts and accessories in value terms.
- Hong Kong’s exports of IT equipment grew robustly by 25% in the first half of 2011. Exports to the Chinese mainland, mainly parts and accessories, increased strongly amid the robust input demand stemming from expansion in outward processing production. Sales to the EU and the US also grew by double digits in the period.
- Small and mobile devices with wireless connectivity, in particular the tablet computers, are well received in the market. Meanwhile, industry players are in the pipeline to promote their 3D computer devices. Also, the industry is in the process to launch computer products with interfaces of faster communication speed or higher data transfer rate, especially those in USB 3.0 specification.
Industry Features
Hong Kong exports a wide range of information technology (IT) products, especially computer parts and accessories like motherboards, keyboards, computer cases, power supplies, display cards, memory cards, LAN cards and cables and harnesses. Also, a number of companies are engaged in the trading and/or manufacturing businesses of computer peripherals and items like mice, USB flash drives, LCD monitors, hard disk drives and optical disk drives, as well as complete set computers such as notebooks, desktops, netbooks and tablets.
According to the latest available statistics, Hong Kong was the world’s second largest exporter of computer parts and accessories in value terms in 2009 after the Chinese mainland.
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 IT 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, CPU’s, memory chips and other integrated circuits are mainly sourced from overseas suppliers like the US, Japan, Taiwan and South Korea. Other items such as PCB’s, passive components, mechanical parts and connectors may be sourced from other local manufacturers, or local enterprises on the mainland.
There are an increasing number of Hong Kong manufacturers adopting a strategy of vertical integration to enhance value-added content to their products. Product design and development, software programming, tool-making, production and/or quality assurance are all done under one roof. In view of the short product life cycles of IT products, Hong Kong companies place much emphasis on the collection of market intelligence. This enables them to start the development of new products at the earliest stage to catch up with the fast changing market environment.
The success of Hong Kong’s IT equipment industry also lies in efficient management. Against the fast changing markets, Hong Kong companies emphasise quick response to ensure effective marketing services to their customers, and to monitor the changing product trends. Many Hong Kong 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 IT Equipment ^
| |
2009 |
2010 |
Jan-Jun 2011 |
| HK$Mn. |
Growth% |
HK$Mn. |
Growth% |
HK$Mn. |
Growth% |
| Domestic Exports |
1,187 |
-27 |
1,142 |
-4 |
1,024 |
+75 |
| Re-exports |
248,510 |
-11 |
331,677 |
+34 |
188,468 |
+25 |
| of Chinese Mainland Origin |
174,484 |
-13 |
238,925 |
+37 |
136,943 |
+28 |
| Total Exports |
249,697 |
-11 |
332,819 |
+33 |
189,492 |
+25 |
| Total Exports by Major Markets |
2009 |
2010 |
Jan-Jun 2011 |
| Share% |
Growth% |
Share% |
Growth% |
Share% |
Growth% |
| Chinese Mainland |
67 |
-4 |
69 |
+37 |
68 |
+23 |
| US |
7 |
-17 |
6 |
+14 |
5 |
+16 |
| EU(27) |
7 |
-24 |
6 |
+20 |
6 |
+17 |
| Netherlands |
2 |
-12 |
2 |
+10 |
1 |
-3 |
| Germany |
2 |
-15 |
2 |
+30 |
2 |
+26 |
| ASEAN |
7 |
-32 |
7 |
+32 |
9 |
+68 |
| Japan |
3 |
-17 |
3 |
+30 |
3 |
+13 |
| Total Exports by Categories |
2009 |
2010 |
Jan-Jun 2011 |
| Share% |
Growth% |
Share% |
Growth% |
Share% |
Growth% |
| Computer Parts & Accessories |
50 |
-16 |
49 |
+31 |
48 |
+20 |
| Computers |
30 |
-4 |
30 |
+34 |
32 |
+38 |
| Office Machines |
20 |
-6 |
21 |
+39 |
20 |
+19 |
^ 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.
Hong Kong’s exports of IT equipment grew robustly by 25% in the first half of 2011, after a strong growth of 33% in 2010. Exports of computer parts and accessories, complete computers and office machines surged by different degrees in the period.
The Chinese mainland was the largest export market for Hong Kong’s IT equipment industry, absorbing over two-thirds of the total exports. Exports to the mainland, mainly parts and accessories, increased strongly by 23% in the first half of 2011, amid the robust input demand stemming from expansion in outward processing production.
Meanwhile, exports to the EU and the US grew by double digits, while exports to ASEAN expanded rapidly. Exports to Japan also performed well.
Sales Channels
Many IT equipment manufacturers produce on OEM/ODM basis for large manufacturers and brand-names in the US, the EU and Japan. While some sell directly to the Hong Kong purchasing offices of prominent Japanese, European and US computer companies, some large manufacturers have subsidiaries or sales offices in the US and EU for marketing and after-sales services. Others export directly to overseas importers/distributors, which may distribute and sell the products under their private labels.
For Asia, Hong Kong companies usually appoint agents, which may be exclusive distributors, to cater for distribution, technical support and after-sales services. Small manufacturers of computer parts usually sell to local dealers, who assemble the complete set computers with parts imported or sourced locally.
Promotion via participation in trade fair missions organised by the Hong Kong Trade Development Council (HKTDC) is an effective way for Hong Kong’s IT equipment companies to explore market opportunities. Important trade fairs include the CES Show held in the US, CeBit in Germany, Japan Electronics Show and Hong Kong Electronics Fair. Business missions organised by the HKTDC to the Chinese mainland and other emerging markets also provide opportunities for Hong Kong IT equipment 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 manufacturers have shifted the more labour-intensive processes across the border. They have also changed their product mix to strengthen their competitiveness, moving towards higher value-added and more sophisticated products.
Moreover, they have focused more on ODM business, rendering increased value-added services to overseas customers. The most important attribute of their success in ODM business is product design and development capability, while knowledge of world product trends and consumer preferences in different markets are also their edge.
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 IT Products
Exports of IT equipment to most overseas markets are subject to safety requirements of the corresponding countries. For instance, certain electronic products sold to the US have to be in compliance with the safety requirements of UL/ETL listing or equivalent. Likewise, products exported 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 EU’s CE-mark has also required the compliance with relevant EMC directives. As for sales in the China market, most electronic products, including IT equipment, 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 European Union law on chemicals, REACH (Registration, Evaluation, Authorisation and Restriction of Chemicals), came into effect in June 2007. REACH requires all companies manufacturing or importing chemical substances into the EU in quantities of one tonne or more per year to register these substances with the European Chemicals Agency.
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
On the back of technological advancement and falling prices amid keen competition, conventional IT products like personal and notebook computers have become mass products.
Now, the industry is focusing on further technological enhancement to sustain their business. Notably, small and mobile computer devices with wireless connectivity, in particular the tablet computers such as the iPad, are well received in the market.
On another development, the industry is exploring business opportunities by applying 3D display technology to computer products. Indeed, a number of industry players are in the pipeline to promote their 3D computer devices, such as shutter glass 3D monitors, naked-eye 3D monitors and 3D webcams.
Also, the industry is in the process to launch computer products with interfaces of faster communication speed or higher data transfer rate, especially those in USB 3.0 specification.
