Electronics Industry in Hong Kong
?Overview
?Industry Features
Hong Kong’s electronics industry is the territory’s largest merchandise export earner, accounting for 72.6% of total exports in 2021. A substantial portion of these exports are regarded as high tech products, especially those related to semiconductors，telecommunications equipment and computer items. Mainland China is both the major source of and the major destination for Hong Kong’s electronic products trade.
According to the latest available statistics, Hong Kong was the world’s largest exporter of electronic integrated circuits; the second largest exporter of mobile phones, computer parts/accessories and video cameras; and the world’s third largest exporter of video recording apparatus in value terms in 2020. This is thanks to the huge re export business handled through the territory, as Hong Kong is among the major global trading hubs.
Parts and components constitute about three quarters of Hong Kong’s electronics exports, of which the majority are re exported to mainland China for outward processing production. Finished goods constitute about one quarter of the exports, of which the majority are consumer electronics for domestic use, including a wide range of audio visual equipment, computer products and telecommunications equipment.
Performance of Hong Kong’s Exports of Electronics
Hong Kong’s electronics exports significantly increased by 27.7% in 2021. The major export markets were mainland China (accounting for 65.1% of the total exports in 2021), the EU (6.8%), the ASEAN (6.1%) and the US (4.6%). Exports to mainland China greatly increased by 28.6% in tandem with the sustained revival of the global economy.?
Distribution Channels
Hong Kong companies engaging in parts and components business are capable of producing on a custom made basis and offering total solutions for famous US, European and Japanese companies, e.g. parts and accessories of computers, RF modules for telecommunication purposes, chip sets for LCD modules, etc. Meanwhile, standard components are usually exported directly to distributors and manufacturers in overseas markets, while some Hong Kong companies also have their own sales offices and/or representative offices in mainland China and other overseas markets.
As regards finished items, Hong Kong companies mostly produce on an ODM basis for reputable brand names in overseas markets. Some of these major buyers have set up offices in Hong Kong for direct sourcing. Hong Kong companies also sell to specialised importers and traders in North America and Europe, who distribute the merchandises under their own channels or re sell to their clients for further distribution.
There are also a number of Hong Kong companies marketing electronic products under their own brand names, including?Truly,?V-Tech,?Group Sense,?Venturer,?GP?and?ACL.?Their sales network covers not only the advanced countries, but also economies like Latin America, Eastern Europe and various parts of Asia.
Promotion via participation in trade fairs is an effective way for Hong Kong’s electronics companies to explore market opportunities. Important trade fairs include the?CES?Show?held in the US,?Electronica?in Germany,?Taipei International Electronics Show?in Taiwan,?CommunicAsia?in Singapore and the?Hong Kong Electronics Fair?organised by the?Hong Kong Trade Development Council (HKTDC). Business missions organised by the?HKTDC?to the mainland and other emerging markets also provide opportunities for Hong Kong companies to establish connections with potential buyers.
Product Trends
On the back of technological advancement and falling prices amid keen competition, conventional IT products like notebook computers have become mass products. Now, the industry is focusing on further technological enhancement to sustain business. Notably, mobile devices with enhanced smart features are in demand around the globe.?
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Meanwhile, 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 attracted demand especially from youngsters and high income consumers.?
In consumer electronics, one key development is digital imaging, in particular, large screen digital TVs with connectivity. This enables internet surfing with the so called “smart TV” features and the ability to communicate with mobile devices, as well as the ultra high definition TVs (UHDTVs) with display resolution of 4K or higher.?
In addition, some players are keen to promote 3D printers in view of the falling printing and other material costs. Also, the industry is keeping an eye on the development of certain niche items, such as action camcorders and drones, as well as products related to the Internet of Things (IoT), which are taken by some players as means to inspire the market and create new business. Smart homes will be one of the major IoT application areas that could elicit huge demand for related IT systems, hardware and devices.
Covid-19?pandemic has affected daily life in unprecedented ways. The rising awareness on personal hygiene and health has driven a strong demand for health related electronic products, such as air purifiers and infrared thermometers etc. As for businesses, the pandemic has accelerated the adoption of digital technologies. Many enterprises have introduced smart devices to their offices, such as interactive whiteboards and smart meeting rooms to make remote conferences more productive and engaging for employees, thereby driving the demand for electronic products.
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.
In December 2018, the mainland and Hong Kong signed the?Agreement on Trade in Goods,?which further enhanced the arrangement for rules of origin (ROOs). Starting from 1 January 2019, goods of Hong Kong origin fully enjoy zero tariff when imported into the mainland. In addition to the product specific ROOs (PSRs), Hong Kong and the mainland introduced a general rule of origin (General Rule) based on a calculation of the value added to the products in Hong Kong. Products without PSRs would instantly enjoy zero tariff upon importation into the mainland, subject to the fulfilment of the General Rule.
The?CEPA?origin criteria for Hong Kong items largely include:
(1) change in tariff heading;
(2)?performance of specific manufacturing process in Hong Kong;
(3) fulfilment of the regional value content (RVC) requirement, under which the value of originating raw materials and component parts, labour costs, as well as the product development costs should account for at least 30% of the FOB value of the products when calculated by the build up method, or the value of non originating materials accounting for not more than 60% of the FOB value when calculated by the build down method.
For the Product Specific Rules of Origin for electronic products, as well as other detailed information, please visit the following webpages:
https://www.tid.gov.hk/english/cepa/tradegoods/rules_origin.html
https://www.tid.gov.hk/english/cepa/legaltext/cepa17_note.html
Compliance with Overseas Requirements
Hong Kong companies are capable of meeting the technical requirements of relevant authorities in overseas markets. These include the safety requirements of UL/ETL listing or equivalent in the US, as well as the relevant safety directives and CE requirements of the EU. With regard to electromagnetic compatibility (EMC), Hong Kong companies should note that products sold to the US require compliance with?FCC?standards, while EU’s CE mark also requires compliance with relevant EMC directives. Most electronic products for sale in the Chinese market 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).
(Above reference source: HKTDC Research）