Hong Kong's watch industry will have to focus more closely on developing its own labels if it is to survive, industry insiders believe. More than 75 per cent of the timepieces exported are produced on an original equipment manufacturing (OEM) basis, according to the Hong Kong Trade Development Council (HKTDC). This means that many of the watches sold in the United States, Europe and Japan are, in fact, produced by Hong Kong-based watchmakers, usually in factories they have established in Guangdong province under arrangements with importers, distributors, chain stores and fashion labels in these countries. Meanwhile, original design manufacturing (ODM) production, which refers to products whose designs are owned by the manufacturers themselves, accounts for a small but increasingly important share of the overall output. Most of the timepieces that are produced on an ODM basis are sold to smaller distributors that cannot afford to invest in design tooling. China, Southeast Asia and other emerging markets generally absorb the bulk of this type of timepiece production. As the mainland and other low-cost production centres gain market share, however, Hong Kong's timepiece industry is no longer able to compete on price. If makers here are to remain competitive, they will have to start building their own brands and focus on both quality and image, industry insiders say. 'Competition has been very keen from the mainland and manufacturers in Southeast Asia,' says Anne Chick, HKTDC senior exhibition manager. 'For the Hong Kong watch and clock industry to grow, it is important that it should move beyond OEM production. Makers will have to start launching their own brand names. 'Made in Hong Kong has to become synonymous with good quality, good design and good after-sales service.' Anthony Cheung, managing director of Artistic Watch, believes that even small and medium-size makers should be launching their own labels. 'China has become the world's factory and we simply cannot compete with them in terms of price,' Mr Cheung says. 'We have to build our own brand names to remain competitive.' But launching labels is not going to be enough. Image building will be one of the keys to the future success of Hong Kong's timepiece industry. 'We will have to distinguish Hong Kong manufacturers from mainland manufacturers,' he says. 'This is the only way we can increase profit margins. OEM profit margins have been falling every year.' PRG Watch is one of a growing number of locally based companies that are launching products designed in-house and marketing them under their own labels. The company's Kooltime Collection, which was introduced last year, has been doing 'extremely well', says Gary Sharma, director of the company. The collection is targeted at department stores, chain stores and fashion boutiques in the United States, South America, Europe and Asia. 'We sell them under our own label,' Mr Sharma says. 'We also do some OEM production for department stores.' Flexibility, service and speed have always been key qualities among Hong Kong-based timepiece manufacturers. As makers here start moving upmarket, they are investing heavily in modern technology to improve quality, design and productivity. 'They continue to develop better technologies in die-casting, mould-making, plastic manufacturing, metal stamping, surface finishing and plating,' a report published last month by the HKTDC says. Most companies continue to provide OEM services while they move increasingly into promoting their own lines. 'We have our own designs for our customers to choose from, but they can also give their designs or ideas to us to develop,' Sun Tai Watch general manager Candy Wong says. 'We offer a total solution. We can do everything, from prototyping to final production. 'We have our own computer numeric control machines, so we can make the sample very quickly for [customers'] approval.''