Hong Kong Manufacturing SMEs: Preparing for the Future

59Some Hong Kong owned firms have addressedthe labour issue by providing benefits that areattractive to workers in the PRD and which areabove those being provided by competing firms.Firms that view this as not feasible or as being atemporary solution to the problem have relocatedor will consider relocating their operations to anarea where labour is less costly and more abundant,such as the Northern part of the PRD, the YRD,or China’s interior. Relocation within MainlandChina is becoming an option for some firms in thesector, and it will become a more attractive optionif the trend of larger companies moving to partsof Mainland China other than the core of the PRDcontinues.Although some other countries including Vietnamand Indonesia offer low-cost manufacturingenvironments, most firms in the sector currentlyfeel that it is would be premature for them tomove there because those locations currently lackthe infrastructure that is needed to support thebusiness that an SME in the consumer electronicssector would need to run. For instance, if a HongKong owned SME set up an electronics factory ina location that does not have a critical mass in allthe segments in the value chain, then the companywould need to buy all the materials in Hong Kong,package and ship them to the other location,produce the products, and ship the products backto Hong Kong. The only real advantage in settingup in a low-cost location would be to access lowcostlabour and most firms agree that chasing lowcostlabour is not a sustainable long-term strategy.Some Hong Kong firms have attempted todifferentiate themselves by innovating throughbetter design, better technology, or throughbranding, so as to expand to do ODM or OBM.Some are developing new niches, such as greenmanufacturing opportunities in LED lighting andelectric vehicles.Some Hong Kong SMEs have turned their attentionto the Chinese Mainland market, though manythat are finding it difficult to compete in China’sdomestic market have opted not to do so for now,continuing to focus instead on supplying to marketsoutside of the Chinese Mainland where the firm cancompete more effectively.Case Study – Suga Holdings LimitedSuga International Holdings Limited (Suga) wasfounded in 1991 and is headquartered in HongKong. Suga is an Electronics ManufacturingServices (EMS) provider offering Original EquipmentManufacturing (OEM) and Original DesignManufacturing (ODM) solutions.In 1992, Suga commenced manufacturingoperations in Huizhou in Guangdong Province.The business grew rapidly and in 1994 anothermanufacturing base was set up in Shenzhen, whichwas further expanded in 1999 and in 2005. In2002, Suga set up a third manufacturing base, oncemore in Shenzhen. Suga was listed on the mainboard of the Hong Kong Stock Exchange in 2002.Suga has made its name as a manufacturer ofniche products that have gone on to become verysuccessful. This includes a series of interactiveeducation products (since 2003) and specialisedprofessional audio products (since 2006).Beginning with just seven staff including the founderMr Ng, Suga has approximately 2000 employees.The firm started with a relatively small investmentof HK$2 million. Suga has experienced substantialgrowth since then and has won wide recognitionfrom both clients and third party agencies for itsconsistent quality and excellent management.Except for some high-end corporate managementactivities including a portion of its research anddevelopment, all of Suga’s main activities arelocated in China.