Early life and career of Chung Nam Watch Co. Ltd's founder, Outline of company history from 1960s to 1990s
Founder of the Chung Nam Watch Co., Ltd., Chong Ching Um spent his early career in Guangzhou’s banking sector. In 1935, he moved to Hong Kong with just $100 in his pocket. Before World War II, all watches in Hong Kong were imported from Europe. As watch bands at that time were easily replaceable, customers liked swapping the look of their watches from time to time by changing watch bands. This created a lucrative replacement market for the watch band business that Chong Ching Um and his wife were quick to spot. The couple subsequently established a workshop in their home. During the day, Chong Ching Um visited watch shops where he sold watch bands produced at his and his wife’s workshop. At night, the couple made leather and cloth bands at home. Chong Ching Um proved to be very good at dealing with people and forging valued long-term relationships with both customers and suppliers. While making money to feed his family, he never forgot that other parties in deals also needed to profit from their efforts. Always ready to give a helping hand to business friends suffering from financial problems, Chong Ching Um succeeded in building up his credibility in both Hong Kong’s watch and banking sectors. Indeed, so highly was he regarded that factories holding purchase orders for supplying spare parts to Chung Nam could easily obtain bank loans. Having gradually become familiar with trade practitioners, he adopted their ideas and began trading finished watches, also becoming an agent for Swiss brands in addition to the family watch band manufacturing business. At the turn of 1950s and 1960s, Chung Nam had set up its first factory at Sai Wan Ho and moved into the manufacture of steel "expansion bands”. In introducing roskopf (pin-lever) movements from the Soviet Union and Switzerland, the company also became one of the Territory’s first ever manufacturers of finished watches. The 1960s saw Chung Nam purchase a five-storey building at No. 59 Des Voeux Road Central which was used for assembling watch components, warehousing and wholesale operations. The company’s watch band production remained at the Sai Wan Ho factory. In the early 1970s, Chung Nam relocated to an 11-storey building equipped with an elevator, and eventually moved into the present home on Lockhart Road in 1982. During the 1970s, the company manufactured LCD and LED electronic watches. Starting in 1978, Chung Nam set up its first factory in mainland China to produce watch movements in co-operation with a Swiss partner. At the same time, the company began to expand its OEM business. Working outwards from its Southeast Asian base, Chung Nam actively promoted its products in the Middle East, Europe and U.S. markets and also worked to build its own brands. In the 1980s, the Swiss Swatch Group launched its plastic "Swatch" range. Transforming watches from merely timing equipment into fashion items, the move generated a measurable increase in global demand for timepieces. As a result, Hong Kong’s export of finished watches entered a golden age that lasted until the mid-1990s. From the 1990s onwards, Chung Nam began putting its focus on RandD and introduced new German technologies that enabled the company to expand its business to other sectors such as mobile phones, glasses and jewellery.
Upstream expansion of production line: from watch band to mechanical watch movement
Manufacturing watch bands was Chung Nam’s main business in its early years. In addition to supplying watch bands to the U.S. and Europe, the company also manufactured watch cases at a lower volume. In the 1960s, Chung Nam was amongst Hong Kong’s pioneers in manufacturing watch movements, a technology which had long been monopolized by the then Soviet Union and Switzerland. During peak periods, the company was exporting around 1,000,000 finished watches monthly. When it was unable to meet tight production schedules, Chung Nam sub-contracted part of its production orders to other watch suppliers. Chong Hok Hoi explained that the 1960s was a time when one judged a watch’s value by the number of jewels in its movement. Roskopf (pin-lever) movements had one jewel while high-precision watch movements might have up to 17 jewels. After quartz analog and electronic watches became popular in the late 1970s, precious stones became less important. In 1978, Chung Nam began manufacturing watch movements in Hong Kong in cooperation with Swiss suppliers. In doing so, it became the first local watch manufacturer producing mechanical watch movements. It later also produced quartz analog movements. Manufacturing movements demanded high-level technical skills and while Switzerland produced high precision parts, Hong Kong could only produce watch components of lower technological precision. Because of this, Chung Nam imported machinery from Europe and invited engineers from Switzerland to supervise the assembly of watch components in Hong Kong as a way of training local engineers in the production of watch movements. Chong Hok Hoi believed that companies that produced watch movements and expanded their investment upstream to include brand design could secure better profits. Since the watch movement is essentially the core of a watch, manufacturers who designed and produced this technological component in-house tended to enjoy more autonomy for development. Ultimately, enhanced quality control to better satisfy buyer requirements meant such companies were more competitive and enjoyed greater development.
Manpower of Chung Nam in the early days
In the years immediately following its establishment, around half of Chung Nam’s labour force came from Chaozhou. In those days, finding work was not easy. Chong Ching Um was generous about offering jobs to his friends and relatives to work in his factory. In the 1960s, workers had low expectations of living conditions and often slept in their employer’s factory. Chung Nam’s early adoption of an apprenticeship system saw many assembly masters in its factory begin their career as apprentices although some had gained experience in repair shops before joining the company. When Chung Nam started manufacturing steel bands in the 1950s, it began to hire engineers with hardware experience. Including watch fitting masters and salesmen, the company’s labour force at this time was male-oriented, with packaging processes carried out solely by female staff. When Chong Hok Hoi joined Chung Nam in 1979, salesmen were still predominantly from Chaozhou while factory workers were largely locals. In terms of gender, skilled workers (colloquially called masters) were mainly male, with only one female master in the factory.
Education background of the second generation
Chong Hok Hoi was born in Hong Kong after World War II and received his education locally. After finishing kindergarten, he attended St. Stephen's Church Primary School and St. Louis School. While a child, he had little time to get together with his father who always used their rare gatherings to teach the boy how to be a man. Chong Hok Hoi’s mother was a housewife who did not really have specific academic expectation of her son. After completing Lower Secondary Six in Hong Kong, Chong Hok Hoi enrolled at the U.S.’s University of Southern California where his parents allowed him to freely choose subjects without insisting on engineering-related courses. As Chong Hok Hoi was interested in mathematics, he decided to study for a four-year accounting major – a decision that was to be of great benefit in his subsequent career. Upon graduating, he qualified as a U.S. Certified Public Accountant and subsequently earned a Master’s Degree in Business Administration in Finance. Returning to Hong Kong in 1979, he joined Chung Nam where he still worked to this date. While Chong Ching Um never suggested that his children should follow him into the family business, he encouraged them to do so by asking them to work at Chung Nam during their school holidays. During such breaks, Chong Hok Hoi went on the road with Chung Nam salesmen selling watches and helped out on the factory packaging line. He was very satisfied with these summer jobs, receiving care and gaining respect from his colleagues without feeling any pressure. As a result, he was delighted to eventually take over the running of the family business.
Succession of the second generation (1): Expanding European-US Market and inviting talents
Knowing that Chung Nam needed successors, Chong Hok Hoi decided to join the family business upon graduation. Initially, he was involved in sales and marketing, accompanying sales colleagues on regular trips to Southeast Asia, Middle East, Europe and U.S.A. As Chung Nam had already built a good reputation in the industry in the 1960s, Chong Hok Hoi felt he wouldn’t face much difficulty if he agreed to succeed the business. In the early 1980s, the company’s business took off and both workforce and production volume constantly increased over the years. In the beginning, Chong Ching Um spent more time developing Southeast Asian markets. As there were language and communication barriers, he remained reliant on intermediaries to explore European and U.S. orders. After Chong Hok Hoi and his elder brother, Chong Hok Shan, took over the business in the late 1970s, they were able to deal directly with European and U.S. clients as both had studied overseas and spoke fluent English. Recalling changes in communication modes, Chong Hok Hoi said Chung Nam had used different channels such as telexes, IDD telephone calls, faxes and e-mail. When Chong Hok Hoi first joined the company, Chung Nam was a typical family business. There were many senior staff including a factory head manager who had been with the company for 62 years, and all shareholders were family members. In his role as founding president of the Chiu On Association, Chong Ching Um always helped his folks with employment opportunities. Before being wholly succeeded by the second generation, all company employees were Chinese. In the early days, people engaged in the watch industry came from different hometowns and quite a number of them were from Shanghai. After the war, Cantonese and Chaozhou people began to join them. After the Chong brothers took over Chung Nam, the company start to recruit talent from overseas to supplement its old staff in coping with expansion. The introduction of private equity funds in the 1990s saw the setting up of more joint ventures and the recruitment of non-family members as shareholders.
Succession of the second generation (2): developing OEM business and buying brands' licences
During the company’s early years, Chung Nam products such as Octo and Tugaris watches were mainly for export, mostly to Southeast Asian markets. In the 1960s, the company began to move into OEM manufacture for foreign companies. After Chong Hok Hoi’s elder brother, Chong Hok Shan, joined the company, Chung Nam began to develop the Middle East, Europe and U.S. markets. At the beginning, Chung Nam exported low-end products to the U.S.A. After Chong Hok Hoi joined the company in 1979, it began focusing on expanding the brand business in the U.S. Although the OEM business initially accounted for a small proportion of Chung Nam’s business, its share later reached 80%. Early on, some clients were handled through intermediaries, but eventually all became direct Chung Nam clients. In the 1980s, the company began creating own brand timepieces which were not as long-lasting as its Octo watches. As the market performance was unsatisfactory, the lines were discontinued within a few years. The following decade saw Chung Nam purchase licences to begin manufacturing and marketing foreign designer brands such as Germany’s Caterpillar from within Hong Kong. Asked to sum up the company’s past operation, Chong Hok Hoi stressed that OEM and acquisition of brand licences were just two of the many business models that Chung Nam was involved in.
Focusing on mainland market in the recent years
Currently, Chung Nam’s major market was mainland China where it had over 300 outlets. Chong Hok Hoi said that the initial development of retailing on the mainland was tough. Key problems included stiff competition from Swiss brands and the difficulty in finding reliable wholesalers and distributors. In those days, Hong Kong mainly supplied mass-produced, mid- to low-priced watches to domestic and overseas markets. Given China’s steadily increasing per capita income and consumption levels over the previous few years, Chung Nam began to market mid-priced traditional brands such as popular Swiss watches there. The company began producing watch bands in the 1930s and later moved into the import of watches for distribution in Hong Kong and Southeast Asia. In reviewing Chung Nam’s development, Chong Hok Hoi believed that capital had never been as important as the key people who oversaw the company’s production and retailing functions. Today, manufacturing outstripped retailing, accounting for around 70-80% of Chung Nam’s business.
