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Household Electrical Appliances Industry in Hong Kong

Overview

  • Hong Kong produces and exports a wide range of household electrical appliances, including kitchen appliances, home care appliances, personal care items and household lighting products. According to the latest available figures, Hong Kong was the world’s second largest exporter of hair dressing apparatus in value terms in 2014.

  • Hong Kong’s total exports of household electrical appliances decreased 15% in the first half of 2016. Exports to the US and the EU were lacklustre amid the slower global economy.

Industry Features

Hong Kong produces and exports a wide range of household electrical appliances, including: (1) kitchen appliances ranging from food grinders, mixers and juicers to thermic appliances like coffee makers, toasters, electric knives, electric kettles and ovens; (2) home care appliances like electric fans, air conditioning machines, vacuum cleaners, floor polishers, space heaters and irons; (3) personal care products like hair dressing and hand drying apparatus, shavers, hair clippers, massagers, face steamers and electric toothbrushes; and (4) household lighting products.

According to the latest available figures, Hong Kong was the world’s second largest exporter of hair dressing apparatus in value terms in 2014.

Today, most Hong Kong manufacturers have relocated their production facilities to the Chinese mainland to maintain cost competitiveness. Their offices in Hong Kong are mainly responsible for R&D activities, product development, quality control, management, marketing and logistic support.

Apart from original equipment manufacturing (OEM), a large portion of Hong Kong companies have their principal business based on original design manufacturing (ODM). These cover product design and development, mechanical drawing, prototyping and sampling, tool-making and production, with buyers providing the industrial/conceptual design only, such as cosmetic drawings and features. In some cases, the industrial/conceptual designs are undertaken by Hong Kong companies.

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 Household Electrical Appliances ^

Table: Performance of Hong Kong’s Exports of Household Electrical Appliances
Table: Performance of Hong Kong’s Exports of Household Electrical Appliances
Table: Total Exports of Household Electrical Appliances by Major Markets
Table: Total Exports of Household Electrical Appliances by Major Markets
Table: Total Exports of Household Electrical Appliances by Categories
Table: Total Exports of Household Electrical Appliances by Categories

Hong Kong’s total exports of household electrical appliances decreased 15% in the first half of 2016. Exports of major items like household lighting products, thermic domestic appliances and hair dressing/hand drying apparatus declined in the period.

The US, EU and Japan were the largest export markets, together constituting about two-thirds of Hong Kong’s total exports of household electrical appliances. But exports to these major markets were lacklustre amid the slower global economy.

Distribution Channels

Hong Kong manufacturers of household electrical appliances mostly produce on OEM and ODM basis for famous US, European and Japanese brands, of which some have set up buying offices in Hong Kong for direct sourcing. Hong Kong companies also sell to specialised importers and traders in advanced countries, who may distribute the merchandises through their own channels or re-sell to their clients for further distribution.

There are a few large Hong Kong manufacturers like Goodway and Megaman marketing electrical appliances under their own brand names, while a number of smaller companies also sell their own-brand products to overseas markets. Their sales network covers not only the developed economies, but also emerging markets like Latin America and Eastern Europe.

Promotion via participation in trade fairs is an effective way for Hong Kong companies of household electrical appliances to explore market opportunities. Important trade fairs include the CES Show held in the US, CeBIT Home Fair and Domotechnica in Germany, and 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 household electrical 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

Household electrical appliances carrying a single function are much sought after in western markets. These include heating-based products, like coffee/tea makers and toasters; and motor-based appliances such as food choppers, blenders and juice-extractors. Yet many electrical appliances are now featured with electronic controls and LCD/LED displays. To enhance user friendliness, some wired appliances have evolved into wireless versions powered by charged batteries, including wireless coffee makers, electric irons and vacuum cleaners.

Along with the growing concern on environmental protection, provision of environmentally appealing electrical appliances which comply with, for instance, European or North American eco-labelling and energy-saving schemes, is becoming a competitive edge of Hong Kong exporters of household electrical appliances.

On the other hand, lighting models of high efficiency and longer lifetime are in demand. In particular, a number of industry players are focusing on the development of LED lamps and lighting apparatus, which can reduce power consumption with an even longer lifetime than the electronic compact fluorescent lamps.

In addition, the industry has continued to focus on internet application and networking technology to develop the so-called smart appliances, aiming at bringing the fully automated households to life. Smart appliances for air-conditioning, security, entertainment, lighting, etc. can be remotely controlled via the internet. Coupled with the mobile technology for internet access, a touch of a button on the mobile phones will let consumers turn on the air-conditioners before arriving home, or programme their recording and lighting apparatuses.

Yet small appliances of novelty design will not obsolete in the medium term, thanks to a stable demand in the market. Design, quality and environmental features, in addition to price, are the selling points for such items.

Content provided by Picture: Wing Chu
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