Returnees crank up idle industrial base

money-glitz | Staff reporter 19 Oct 2020

Hong Kong's homegrown manufacturers, from fashion retailers to electronics makers, are relocating back to the city from mainland China, in a move to relaunch the local manufacturing industry that accounts for only 1 percent of the economy.

Some social enterprises are also considering building shared factories to support small-scale production of high-value products, as a way to attract more industry players to move back.

Walter Chan, founder of local clothing brand Ad-lib, moved its production line back to Hong Kong six months ago, before which the products had been designed in Hong Kong and made in the mainland.

The firm now has a space of 4,000 square feet, and half of the area has been turned into a temporary factory equipped with sample-making, stitching and printing machines. The company is selling T-shirts, canvas bags, and handbags, Chan says.

He explains that moving back allows for flexibility and meeting the needs of an e-commerce era.

He had first tried a business model of selling clothes in a variety of styles, but in smaller amounts, as offline retail declines and young people are getting used to online shopping.

However, that was dragged down by mainland factories, as some of them were not cooperating because orders were too small.

Designers can now finish making samples within a day after they moved back to Hong Kong, Chan says.

The company has been promoting pre-sale products on its online shop, through which customers can have more discounts but need to wait two to three weeks before they get the goods. Chan says this can indirectly save the storage costs of inventory.

While it is cheaper to produce in the mainland, now the company has not only saved warehouse rents but has improved efficiency, says Chan.

Ad-lib's manual production line, can only make 300 pieces of clothing a day.

Chan says they have rented another 4,000-sq-ft factory and will introduce automation, expecting an output exceeding 1,000 pieces a day. The cost of building an automatic production line would be HK$3 million, according to Chan.

In fact, many Hong Kong brands that return are facing difficulties finding factory space.

Francis Ngai Wah-sing, chief executive of Social Ventures Hong Kong, reckons that it may not be necessary to replace manual work with machinery in the re-industrialization of Hong Kong, as many developed markets have switched focus from production scale to handcraft techniques.

Ngai founded co-working factory Hatch two years ago, which has attracted Airland Mattress to bring back its sewing and stitching technologies to produce bed linen.

Compared with Ad-lib which focuses on local customers and requires flexibility of manufacturing, Hong Kong's exporters believe that only high-tech and high-value-added products made in Hong Kong can be competitive.

Arthur Lee Kam-hung, founder and chairman of quartz crystal equipment maker Hong Kong Crystal, says the company had been producing in the mainland before their core technology was stolen over 10 years ago.

They moved back the development and production of core high-tech products to Hong Kong since then, while mainland factories only produce mid- to low-end products, Lee says.

Despite the rising labor costs in the mainland, the overall cost of setting up a factory in Hong Kong is still high, he says.

Lee says many mainland factories accept orders at low prices given lower demand due to Sino-US trade tensions, while Hong Kong firms can only survive if they have self-developed products instead of traditional goods.

Lee expects to launch a new product that could be used in the auto-driving system next year, which took them four years to develop. "The lifecycle for a product depends on how long it takes other competitors to catch up," Lee says.

He adds that two years of research and development support provided by the Hong Kong government is not enough for industry players.

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