Hong Kong Manufacturing SMEs: Preparing for the Future

55The Consumer Electronics IndustryConsumer electronics refers to any device containingan electronic circuit board that is intended forregular use by individuals. This includes televisions,cameras, digital cameras, PDAs, calculators, VCRs,DVDs, audio devices, headphones, camcorders, andmany other home and office products.Consumer electronics companies engage either inOEM, OBM, or ODM, or a combination of the three.The global consumer electronics industry is mainlydominated by branded companies from Japan,South Korea, Europe, and the US. These companiestypically concentrate research and development intheir home country and place their manufacturingactivities throughout the world, with assembly oftenin the Chinese Mainland.China is one of the world’s largest consumerelectronics manufacturing bases. The 2009 ChinaStatistical Yearbook reports that the “communication,computer, and other electronic equipmentmanufacturing enterprises above designated size” 109in China employed 6.8 million workers, contributeda Gross Industrial Output (GIO) of RMB 4,390billion and value added tax (VAT) payable of RMB61.9 billion in 2008. 110 Electronics production inChina is concentrated in the Pearl River Delta andthe Yangtze River Delta. Guangdong reported thatcommunication, computer, and other electronicequipment manufacturing enterprises in the provinceemployed 2.9 million workers, contributed a GIO ofRMB 1,537 billion and VAT payable of RMB 26 billionin 2008. 111Japanese and South Korean firms have developedglobally recognised brand names on the back oftechnological superiority. Taiwan firms are alsovery active, mostly on an OEM basis. Hong Kongcompanies have leveraged knowledge of markets,customers, technologies, and production locationsin the Chinese Mainland to carve out a positionin the industry. Firms from the Chinese Mainlandare considered to be in the early stages in termsof technology and brand development, but aredeveloping stronger positions and some haveintroduced their own brands into global markets. 112China has been increasing its strength as aproduction location for consumer electronics. Inaddition, the Chinese market is among the fastestgrowing in the world. Industry analysts note thatto a certain extent Hong Kong companies arecaught between the Japanese and Korean firmswho develop their own brands and products on theone hand, and firms from the Chinese Mainland,who have lower costs. In contract manufacturing,Hong Kong firms often face direct competitionfrom much larger Taiwanese companies. However,the electronics market is a large market with manyniches and Hong Kong companies have becomeskilled at supplying such niches. Thus, there appearsto be room for creative Hong Kong companies thatcan find the right niches in the marketplace.Basic Facts about the IndustryThe global consumer electronics industry generatedrevenue of around US$694 billion in 2008 and isexpected to grow at a Compound Annual GrowthRate (CAGR) of around five per cent over theperiod 2010 to 2013. 113 The category that bestrepresents this sector in Hong Kong statistics is“Radio, television and communication equipmentand apparatus.” The GIO for this sector in HongKong was HK$1.1 billion in 2008, employment was1,266, and the estimated average annual wagewas HK$134,281. Wages for the sector in HongKong are four times those for the sector in Chinaas a whole. This is likely explained by general wagedisparities between Hong Kong and China as wellas the employment of more senior staff in HongKong. Wages were approximately 16 per cent oftotal sector costs in Hong Kong. 114109 Enterprise above designated size refers to the enterprise withannual revenue of RMB 5 million or above.110 2009 China Statistical Yearbook.111 2009 Guangdong Statistical Yearbook.112 ESA interviews.113 www.reportlinker.com.114 Hong Kong Census and Statistics Department data on “Radio,television and communication equipment and apparatus,”2009.