30 Sept 2016
Information Technology Equipment Industry in Hong Kong
- 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 world’s second largest exporter of computer parts and accessories in value terms in 2014.
- Hong Kong’s exports of IT equipment decreased 14% in the first half of 2016. Exports to the Chinese mainland and the US were lacklustre, although exports to the EU expanded moderately in the period.
Hong Kong exports a wide range of information technology (IT) products, especially computer parts and accessories like motherboards, keyboards, power supplies, display cards, memory cards and cables and harnesses. According to the latest available statistics, Hong Kong was the world’s second largest exporter of computer parts and accessories in value terms in 2014.
Also, a number of Hong Kong companies are engaged in the trading and/or manufacturing businesses of computer peripherals and items like USB flash drives, monitors, hard disk drives and optical disk drives, as well as complete set computers such as notebooks, desktops and tablets.
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 IT Equipment ^
Hong Kong’s exports of IT equipment decreased 14% in the first half of 2016. Exports of computer parts/accessories, complete set computers and office machines were lacklustre in the period.
The Chinese mainland was the largest export market for Hong Kong’s IT equipment industry, absorbing over half of the total exports. Exports to the mainland, mainly parts and accessories, as well as sales to the US, were lacklustre during the first half of 2016. But exports to the EU expanded moderately in the period.
Many IT equipment manufacturers in Hong Kong are engaging in electronics manufacturing services (EMS) for large manufacturers and reputable 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.
In view of the keen market competition, Hong Kong companies have changed to strengthen their competitiveness by moving towards business of higher value-added and more sophisticated products. Now, they put more focus on ODM business and more sophisticated EMS, aiming to render 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 are also their edge.
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.
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:
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.
On the back of technological advancement and falling prices amid keen competition, conventional IT products like desktop and notebook computers have become mass products. Now, the industry is focusing on further technological enhancement to sustain their business. Notably, mobile computer devices with wireless connectivity, in particular the tablets, are well received in the market.
Meanwhile, Internet of Things (IoT) technology now allows a wide range of indoor and outdoor devices to be connected. This is expected to spark tremendous opportunities for industries. Smart homes will be one of the major IoT application areas that would elicit huge demand for related IT systems, hardware and devices.
On the other hand, the industry is exploring business opportunities by applying 3D display technology to computer products. And some of the players are keen to introduce their 3D printers into the market in view of the falling printing and other material costs. Also, some are heading to integrate the VR (virtual reality) technology with their products and solutions in a bid to elicit further market demand.