Past and present of Hong Kong electronics industry, Suggestions to the future of Hong Kong industry
Ever since Elec; Eltek was set up in the early 1970s, electronic products in Hong Kong had been undergoing rapid changes, with new products launched every two to three years, for example, calculators, electronic watches, TV game consoles, mobile phones and personal computers. During those years, the high-technology manufacturers included V-Tech, Johnson Electric, Wang’s Computer, Chinatech Computer Limited and Elec and Eltek, etc. V-Tech mainly manufactured electronic toys and mobile phones; Johnson specialized in manufacturing motors; Wang’s was a manufacturer of circuit boards but later was also involved in trading electronic products and raw materials. Elec and Eltek was a leader in circuit board industry; there were people from their engineering, production and sales departments who resigned to set up their own businesses, some of which had even developed into unique enterprises. To David, branching out was the nature of electronics business. He pointed out that the period between 1977/78 and 1982 was the peak years for electronic parts industry. At that time, new electronic consumer products were constantly launched, forming a big local market and causing the number of parts factories and the amount of production to reach the highest record ever. After 1982, personal computer had become the main electronic consumer product. Quite a number of companies which manufactured parts had switched to technological products such as hard disk drive. Hong Kong lacked production of semi-conductor, so the computer industries’ needs could not be met. Parts such as stock memory had to be imported from places like Taiwan and Korea, where the computer industry was more advanced than that in Hong Kong. Moreover, in the mid 1980s, the assembly processes of electronic consumer products were shifting to the north, causing further shrinkage of the local market and limiting the development of technology industries such as parts and accessories. David thought that electronics manufacturers had to take the market into consideration rather than blindly pursuing technology. During the early years in Tai Po Industrial Estate there had been a few electronics manufacturers for high-technology production. One of the examples was Hua Ke Electronic which manufactured silicon wafer and therefore, was in need of funds and competent staff. However, as there was insufficient support from the government, they were not able to keep their factory in the industrial estate but had to gradually switch to consumer production including LCD and electronic watches. The recent trend in the electronics field is a shift of production to the north. Hong Kong’s mode of economy has also changed from manufacturing industry to service industry which relies a lot on fields like finance and tourism. David pointed out that Hong Kong was in a special situation as it was in between the western free economy and China’s planned economy. He thought that nowadays developing an industry in Hong Kong was the same as running a social enterprise, which did not appeal to wealthy businessmen nor large enterprises. He also stressed on the leading role played by the Hong Kong government and advised government officials to implement the modes of economy adapted both by China and the west so as to find a way out for the local electronics industry or even the whole manufacturing industry. The two suggestions he mentioned were: 1. The government should take the lead to encourage small and medium-sized enterprises to develop prototype production, which would then supply to manufacturers in the mainland or overseas for mass production. Since the orders would be small, the unit cost of the sample would be quite high – five or six times of that in mass production, and should usually be delivered within two weeks. Large enterprises would not be interested in taking orders. As the prototype production would not be operated in the mode of detailed division of labour, it would be suitable for small and medium-sized enterprises, creating living space for the local electronic enterprises. Moreover, such business would be profitable. 2. In Europe and USA, there are quite a number of small and medium-sized family factories where there are only 30 to 40 employees. These enterprises are having difficulties in running their business, and so are already at a sunset stage. However, despite the loss, they cannot be closed down due to the persistence of their families’ elderly members. In Hong Kong there are now quite a few unoccupied industrial buildings. The government can consider bringing those enterprises to Hong Kong; after establishing factories here for manufacturing, they can still keep their marketing, engineering and other departments in their own countries. Part of the products manufactured here can be delivered back to their countries for sale while part of them can be exported to the mainland.
Conditions to develop high-technology industry in Hong Kong: government policy, education and market David analyzed three aspects, namely, policy, education and market and concluded that Hong Kong lacked good conditions to develop high-technology industry. 1. During the time under British rule, the positive non-intervention policy was implemented. Therefore, the relationship between the government and the industries was estranged and limited to only the tax level. David had, over many years, asked the government for exemption from scientific research tax, but it was in vain. He mentioned an example in which the US Apple Co. set up a factory in Singapore. Since the Singaporean government granted tax concessions to Apple, the latter could set up the factory there, making transfer of electronic technologies possible. As for supporting organizations such as Hong Kong Trade Development Council (HKTDC) and Hong Kong Productivity Council (HKPC), their functions were in doubt. He thought that HKTDC mainly supported the textile industry. Moreover, it just focused on handling macro trade policies such as quota, and the foreign commercial information it provided was not comprehensive. His opinion about HKPC was that there was a lack of communication between the Council and the business sector. Moreover, implementation of new policies was usually based on subjective judgment, so it achieved limited results in exploring business opportunities. Although there was an RandD department for electronic technology in the Council, its support was not targeted on the electronics enterprises. David used the electronics research institutes in Taiwan as a counter-example. The research institutes there had a detailed division of labour, with a research team for each computer part (hard disk, main board, data device, etc.) The person who had done the RandD work would give part of the royalty from the new products to the research foundation of the institute. David mentioned the government’s policy on industrial land and pointed out that the factory buildings of industrial estates and science parks were for lease only, which hindered development of the facilities there. For example, the standard of land grant for industrial estates was so unique that it might not be able to meet the needs of industries. 2. To David, the programmes in tertiary institutions could not meet the industries’ standard, so the graduates could not meet the companies’ requirements. For instance, only theoretical subjects with little practical elements were taught in the electronics faculty. He thought that there was a lack of communication between tertiary institutions and the industries. There were few professors who offered courses for people in the industries, and senior industrialists seldom lectured in their expertise in tertiary institutions. The only collaboration between tertiary institutions and the industries was arrangement of student internship in companies. In 2000, Elec and Eltek and The Chinese University of Hong Kong collaborated in setting up a scientific research incubation centre. Unfortunately, no substantial result had been yielded. David thought that tertiary institutions were not very enthusiastic about scientific research. In addition, very often individual professors were reluctant to collaborate with enterprises due to issues on copyright tax and shares. As a result, scientific research still could not get out of the laboratory. 3. Electronics industry was capital-intensive or technology-intensive, with high cost but long return period. According to David, the local market was small, so companies lacked motivation to invest in electronic technology. An ideal electronics factory should be housed in a bungalow covering a large area. If a factory were on a high level, it would easily cause vibration, which would affect the machines and production. The price of land in Hong Kong, which was high, hindered the development of electronics industry. David mentioned the role played by chamber of commerce and thought that in general, it did not have much effect on technology development. David and Tang Koon Yiu, CEO of HKPC had once worked together to form Hong Kong Critical Component Manufacturers Association, with an aim to exchange technologies with the mainland and overseas counterparts.
Development of Hong Kong’s electronics industry (1): OEM, ODM and OBM operations
Nowadays the three kinds of production used by electronics companies in Hong Kong are OEM, ODM and OBM, whose development path is OEM→ODM→OBM. Wong thought that the OEM mode of business, which was manufacturing for overseas clients, was no longer popular and had mostly been moved to the mainland. On the other hand, the ODM mode provided a one-stop service of design and manufacturing, with less demand in market expansion than that of OBM. As for OBM, which manufactured products of its own brand, required more investment in sales and marketing before launching the products. In the early 1970s, the technical staff of electronics industry was mainly provided by foreign companies, and there were not many companies which also did the design work. The engineers employed by the companies in Hong Kong had many responsibilities but not enough training, so they found their work very tough. On the other hand, US companies were encouraged by their government to set up factories and provide more technical support for the engineers in Hong Kong. During those years, the few high-technology companies were represented by Wong’s, Fong’s, Luks and Sonca. The former two were specialized in single-side PCB while the latter two were specialized in television and torch respectively. Later emerged a company which manufactured double-side PCB – Elec Etlek. After the 1970s, training of electronics talents became more intensified in The University of Hong Kong, The Chinese University of Hong Kong and Vocational Training Council. While Wong was working as consultant at Hong Kong Polytechnic University, the number of graduates of degrees and diplomas was in the 1:1 ratio according to the rule in order to meet the demand in workforce in the society.
Development of Hong Kong’s electronics industry (2): OEM, ODM and OBM operations
The development of electronics industry in Hong Kong can be divided into three stages: OEM in the 1970s, ODM in the 1980s and 1990s, and OBM after 2000. The change from OEM to ODM was determined by the market demand – the more competition there was in the OEM business, the more compelling the change was for added value. However, the change to ODM required employment of more technical staff. Wong approved of the government’s measure of promoting the electronics industry including establishment of Science and Technology Parks and Hong Kong Applied Science and Technology Research Institute. There was an Incubation Programme in Science and Technology Parks nurturing a number of technology companies. As for setting up Tai Po Industrial Estate and Yuen Long Industrial Estate, he thought that these estates’ main function was providing space, but technical support was insufficient.
