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Telecommunications Equipment Industry in Hong Kong

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 telephones/mobile phones in value terms in 2014.
  • Hong Kong’s total exports of telecommunications equipment were stagnant in the first half of 2016. Exports to the Chinese mainland, the largest market, as well as the US, were sluggish in the period.

Industry Features

Hong Kong exports a variety of telecommunications equipment, ranging from basic telephones to sophisticated system products. Major export items include corded phones, cordless phones, mobile phones, etc. According to the latest available statistics, Hong Kong was the world’s largest exporter of telephones/mobile phones in value terms in 2014.

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 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 Telecommunications Equipment ^

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


Hong Kong’s total exports of telecommunications equipment were stagnant in the first half of 2016. Exports of major items like parts of telecommunications equipment and other apparatus for transmission/reception of voice, images or other data were sluggish in the period.

Exports to the Chinese mainland, the largest market, as well as the US, were sluggish in the first half of 2016. But exports to the EU and the ASEAN continued to expand in the period.  

Distribution 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. On the other hand, a few Hong Kong companies promote 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.

Notably, Hong Kong is an important trading hub for parts of telecommunications equipment and related finished products in Asia-Pacific. Many items from the US, Europe, Japan, Taiwan, and South Korea are re-exported via Hong Kong to the Chinese mainland, and vice versa. A number of multinational manufacturers of parts and components have set up their offices in Hong Kong, engaging in R&D, distribution and/or sourcing activities in the region. 

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.

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 telecommunications 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. In particular, 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).

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

Mobile communication has become part of the daily lives of consumers in most countries. In particular, sales of high-end smartphones are rising rapidly. Many models are now compatible with certain wearable electronics and other smart devices. This has lured demand especially from youngsters and higher-income consumers. Some players are trying to introduce further AR (augmented reality) technology to mobile applications in order to stimulate the market demand.

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.

With respect to domestic telephone products, there is a constant appetite for cordless phones. Yet corded telephones are not expected to obsolete in the medium term.

Content provided by Picture: Wing Chu
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