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Audio-visual Equipment Industry in Hong Kong

Overview

  • Hong Kong exports a wide range of audio-visual equipment, with parts and accessories being the largest export item. According to the latest available statistics, Hong Kong was the world’s second largest exporter of video recording/reproducing apparatus, the world’s third largest exporter of sound recording apparatus and the world’s fourth largest exporter of video cameras in value terms in 2014.

  • Hong Kong’s total exports of AV equipment decreased 14% in the first half of 2016. Exports to the Chinese mainland, which absorbs over half of the total exports, were sluggish, and exports to the US and the EU were also lacklustre.

Industry Features

Hong Kong exports a wide range of audio-visual (AV) equipment. According to the latest available statistics, Hong Kong was the world’s second largest exporter of video recording/reproducing apparatus, the world’s third largest exporter of sound recording apparatus and the world’s fourth largest exporter of video cameras (including digital cameras) in value terms in 2014.

The largest export item is parts and accessories, including parts and accessories for recorders, radios, microphones and speakers. Meanwhile, exports of finished items are mainly for domestic use. Major items include digital cameras and camcorders, headphones/earphones and microphones, as well as video recorders/players like the Blu-ray disc players. Other items like digital radios and car radios, hi-fi equipment and large-screen TV sets are also among Hong Kong’s exports.

Most Hong Kong manufacturers have relocated their production facilities to the Chinese mainland to reduce cost. Their Hong Kong offices now focus mainly on R&D activities, product design and development, management, logistic support, marketing, etc. Their setups in Hong Kong are largely classified as non-manufacturing establishments statistically, despite the fact that they have manufacturing activities across the boundary.

Against the fast changing markets and advancement in technology, Hong Kong companies emphasise quick response to ensure effective services to their customers. Also, 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, ISO 14000 - a standard for environmental management system, etc.

Performance of Hong Kong’s Exports of AV Equipment ^

Table: Performance of Hong Kong’s Exports of AV Equipment
Table: Performance of Hong Kong’s Exports of AV Equipment

 

Table: Performance of Hong Kong’s Exports of AV Equipment
Table: Performance of Hong Kong’s Exports of AV Equipment

 

Table: Performance of Hong Kong’s Exports of AV Equipment
Table: Performance of Hong Kong’s Exports of AV Equipment

 

Hong Kong’s total exports of AV equipment decreased 14% in the first half of 2016. Exports of major items like parts and accessories and TV cameras/digital cameras declined in the period.

The Chinese mainland is Hong Kong’s largest export market, absorbing over half of the total AV equipment exports. In the first half of 2016, exports to the mainland, of which the majority were parts and accessories for processing production, decreased 13%. Exports to the US and the EU were also lacklustre.

Distribution Channels

Hong Kong is a popular sourcing centre for high-end AV products. Notably, most Hong Kong companies produce for reputable American, European and Japanese brand owners. A number of overseas buyers have also set up offices in Hong Kong for direct sourcing in the region.

In view of intensified competition, especially those related to OEM production, Hong Kong companies have enhanced their value-added and put more focus on ODM business, rendering increased value-added services to overseas customers. The most important attribute of their success is their product design and development capability, while knowledge of world product trends and consumer preferences in different markets is also their edge.

There are also a number of large Hong Kong companies marketing AV equipment under their own brand names, while smaller companies also sell their brand products to smaller importers and distributors in overseas market. Their sales network covers not the advanced countries, but also emerging economies like Latin America and Eastern Europe.

Promotion via participation in trade fairs is an effective way for Hong Kong companies of AV equipment to explore market opportunities. Important trade fairs include the CES Show held in the US, CeBIT Fair in Germany 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.

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: (1) change in tariff heading; (2) performance of specific manufacturing process in Hong Kong; and (3) 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. With effect from 1 April 2012, costs of raw materials and component parts originating in the mainland can also be included in calculating the value-added percentage, provided that the value-added content originating in Hong Kong is greater than or equal to 15%.

Detailed information, as well as the origin rules for electronic items, is available from the following hyperlink:

http://www.tid.gov.hk/english/cepa/tradegoods/rules_origin.html

Compliance with Overseas Requirements

Hong Kong companies are capable of meeting the technical requirements of relevant authorities in overseas markets. These include the safety requirements of UL/ETL listing or equivalent in the US, as well as the relevant safety directives and CE requirements of the EU. With regard to electromagnetic compatibility (EMC), Hong Kong companies can well observe that 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 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).

Meanwhile, Hong Kong companies are also attentive to the growing popularity of green consumerism 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 electronic products. These include the restrictions on batteries and accumulators that contain mercury, the Directive on Waste Electrical and Electronic Equipment (WEEE) and the Directive on Restriction of Hazardous Substances (RoHS).

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 and the Management Methods on Prevention of Waste Electronic Equipment Pollution on Environment. The regulation on recycling and treatment of waste electrical and electronic equipment has also come into effect since 1 January 2011.

Product Trends

Amid the growing popularity of Internet of Things (IoT) application and the increasing availability of various kinds of smart gadgets, more and more consumers recognise the importance of smart consumer electronics. In particular, younger consumers are more interested in products, whether audio-visual products or related wearable/connected items, featuring smart functions. This is among the major development trends for the audio-visual equipment industry.

Meanwhile, the proliferation of mobile communications have spurred the demand for related audio accessories, including the high-end earphones/headphones, Bluetooth speakers and sound blasters that can work with mobile devices.

On another development, large-screen digital TVs with 3D effects and connectivity for Internet surfing with the so-called “smart TV” features, as well as the ultra high definition TVs (UHDTVs) with display resolution of 2160p or higher, are also among the industry foci for further development.

Content provided by Picture: Wing Chu
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