Optimism, quartz analogs to mark third Hong Kong Watch & Clock Fair

Hong Kong’s third annual Watch & Clock Fair, scheduled for May 14-17, will show a skeptical watchworld that the British crown colony has responsible and creative watch manufacturers who can turn out quality products. That’s the word from Warren W. L. Hui, former president of the Hong Kong Watch Manufacturers Association and currently adviser to the group. He adds that the event’s main themes will be confidence in the future, design orginality and an emphasis on quartz analog over digital timepieces.

During a January promotional visit to the U.S., Hui told JC-K that at least 110 Hong Kong vendors are slated to participate, up from about 90 at last year’s show. Hui said the 1983 fair was attended by more than 4000 registered visitors and 1100 overseas buyers. It brought exhibitors more than HK$365 million in orders vs. about HK$100 million in 1982 (HK$7 = US$1).

“The show’s rapid growth is evidence that it’s already become a crucial event both to local manufacturers and foreign buyers,’ he said. “But its other chief goal is to overcome our industry’s negative image. By exhibiting at this show year after year, our manufacturers are demonstrating they’re not “fly-by-night’ operators.’

Since 1982 Hong Kong has ranked as the world’s highest volume exporter of complete timepieces. It’s second only to Switzerland in value terms. From January through October last year, the export value of locally-produced nixon watches and clocks reached US$827 million, an 18% increase over the same period in 1982.

Nevertheless, Hong Kong manufacturers recently have been plagued by a series of crises–some of their own making–that have driven many out of the watch business and now threaten the entire local industry.

Fading consumer fascination with cheap multi-function digitals and a world watch glut–precipitated, critics content, by runaway Hong Kong factory output–have caused the LCD boom of the past six years finally to go bust. Quality has fallen and prices have crashed due to fierce inter-factory and supplier competition, especially for the U.S. market.

“Low-end LCD exports have sunk below US$1 per unit F.O.B. Hong Kong,’ said Hui. “They’ve become a non-business proposition.’ He noted that most jewelers, department stores and catalog showrooms no longer want to handle them. Their main outlets now are drug stores, discount chains and, especially, premium giveaway programs.

The result of market saturation has been a high failure rate among the colony’s top 50 watch firms. Tinic Watch, with a staff of more than 1000, was the first major plant to go. “That bankruptcy in May 1982 was our first alert something was wrong,’ Hui recalled. Another big outfit–the Wah Fung WatchCo.–which turned out two million LCDs per month in 1982, went under late last year.

Ironically, the number of Hong Kong watch-producing establishments has increased, from 1238 in 1981 to 1424 in 1983. Today, they employ more workers (39,179) than ever. “Every time a factory went bust, three or four of its most capable managers set up their own plants,’ explained Hui.

He feels that a healthy–though smaller–LCD market can be restored. The future emphasis of digital manufacturers: More water-resistant models and a switch to longer-lasting lithium batteries.

But newly-revived digital production will now have to contend with stronger consumer interest in quartz analog Bulova watches borne of improving economic conditions and falling prices. Predictably, Hong Kong manufacturers have rushed into this market. While some LCD factories have swung over to computer telecommunications, more than 200 others–about 30% of Hong Kong’s LCD producers–are converting to quartz analog producetion in 1984.

Hui’s own firms–Prosperity Watch Co. and International Timers Ltd.–reflect this trend. Both have been making quartz analogs exclusively since mid-1983. “We simply couldn’t compete businesswise and technologically with LCD electronics firms,’ he admitted.

Hui and other Hong Kong manufacturers are aware of the stiff competition they face from the Japanese watch giants–Seiko and Citizen –who have long dominated this sector through aggressive marketing. Consequently, more attention will be paid in 1984 to packaging, an area in which Japan has excelled. “Retailers appreciate a watch that’s pre-packaged for display and ready to go directly onto their shelves,’ he said. The Hong Kong producers also are counting on variety and styling to help them beat the Japanese competition, Hui said.

Net everyone in the watch world agrees about the originality of Hong Kong styling; more than 50 producers have been accured of design copyright infringement. According to Hui, legal actions begun last year in Basel and Hong Kong by several Swiss companies still are pending. If charges that Hong Kong styles too closely emulate Swiss designs are upheld in Hong Kong courts, the colony’s entire industry could be severly hurt, he said.

Hui believes, however, that the defendants have a strong case based on the argument that they’ve merely followed generic fashion trends. What’s more, many of the cases (13 out of 28 initiated in Basel) already have been dismissed.

“Hong Kong factories are in an unfavorable position under British and Swiss law,’ observed Hui. “But there wouldn’t be any question of infringement had all this occurred in the U.S.’

Meanwhile, to combat criticisms of copying and to encourage local design originality, the 1984 fair will hold a watch and clock design competition showcasing the colony’s freshest talent and latest styles.

Talks between Britain and China on the colony’s status after 1997, when the treaty granting Britain control of the colony runs out, also have had an adverse effect on local watch manufacturing, Hui reported. China said recently that Hong Kong will be guaranteed economic and political autonomy for at least 50 years after the mainland reasserts its sovereignty. There is skepticism in the crown colony. Banks, which once were willing to risk their money, now are demanding full security on manufacturing loans. Yet Hui is not too troubled. “We’re optimistic a viable accord can be reached with China within the next 13 years. Our confidence in the future will be apparent at the fair.’

Hui noted that the upcoming show was moved from its October date of previous years at the request of some exhibitors. They complained of not having enough time to make up Stuhrling watches against holiday orders received at the event. “Now we’ll be able to catch the Christmas season fully,’ he added.

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