FOR PLAYERS IN the watch industry, the ticking of clocks may be a familiar sound but it is the ringing of cash registers that really pleases them. Watches are a big business in this part of the world. In terms of volume, China is the biggest exporter of watches worldwide with approximately 85 per cent of the market, and this share is rising. In terms of value, watches are Hong Kong's fifth-largest export industry. Along with Switzerland and Japan, China is at the top of the global timepiece industry. Much of the burgeoning watch industry in China - both manufacturing and retail - has been driven by Hong Kong companies and their expertise and many of them have migrated to the mainland to take advantage of low operating costs. Hong Kong-based companies remain in the driving seat and they are expected to continue increasing the strength of their mainland operations in the next few years. Nevertheless, many changes that affect the players are under way. The spotlight is on industry standards as concerns about human rights, environmental impact and the new minimum wage across the border become regular topics of discussion in boardroom meetings. 'Big international watch buyers such as Wal-Mart and Avon are increasingly concerned about human rights issues and will not give manufacturing jobs to any Tom, Dick or Harry,' said Tommy Leung, president of the Hong Kong Watch Manufacturers Association and managing director of the Hong Kong-listed Peace Mark Holdings. 'They [watch buyers] have to be careful and the manufacturers must be careful, which means that reliable and trusted companies are getting a bigger share of the market. So the watch business is becoming more focused around certain manufacturers as the supply chain comes under increased public scrutiny,' he said. However, despite such changes, Mr Leung expects the overall growth trend in the local watch industry to continue. It is just a case of who gets a larger slice of the pie. 'The watch industry in China is still growing significantly because the GDP [gross domestic product] continues to increase. Quite simply, more people can afford to buy more expensive watches and there is a huge potential for growth,' he said. Indeed, only 5 per cent of China's population buys watches in a year - far below the average consumption rate of 23 per cent for developed countries - but the country is catching up. According to a report from the China Centre for Information Industry Development, the demand for watches reached 16 billion yuan in 2004. Local retail sales of watches are also doing well thanks to an increasing number of mainland shoppers. Peace Mark has 10 retail outlets in Hong Kong and the company expects to open another 10 shops to 20 shops this year, adding up to 100 staff. The company has production facilities in the mainland, Hong Kong and Switzerland and employs more than 4,000 people around the world. Skilled and educated individuals looking to enter the watch industry have good prospects. 'Three types of professionals are in high demand with us at the moment - designers, engineers and marketing people. Fresh graduates, especially from business studies or design disciplines, are certainly in contention for these jobs,' Mr Leung said. Charles Ng Kin-kwok is the marketing manager for Hong Kong-based Pacific Time Enterprises, which manufactures its watches in the mainland. He agrees that the Chinese market is expanding the size of the industry but adds a word of caution. 'While the rise in the number of watch manufacturers on the mainland is all very well, it is not all good news. Many of these new manufacturers are trying to attract customers by charging very low prices but the quality is sometimes poor. Additionally, the drop in prices also adds pressure for established manufacturers because buyers expect that we should drop our prices too,' he said. In recent years, Pacific Time has responded to the new challenges from low-priced watchmakers by focusing more on the premium end of the watch market and also by making sales over the internet. 'We expect that the internet will play an increased role in watch sales and we intend to make the most of these developments,' Mr Ng said. Swiss-based Swatch is one of the world's most famous brands and has had a presence in Hong Kong since 1989. Last year the company launched new local points of sale, taking the total number of shops or department store counters to 15. Swatch Hong Kong and Macau vice-president Nancy Tse expects the positive trend to continue, especially with the Beijing Olympics approaching. 'We enjoyed single-digit growth in 2005 and this year we expect double-digit growth. We foresee a boom towards the end of 2007 as Swatch is the worldwide partner of [the] 2008 Beijing Olympics,' Ms Tse said. KEY PLAYERS Watchmaker Watch designer Watch technician Merchandiser Marketing executive Sales executive JARGON OEM An original equipment manufacturer makes products on contract that are sold by another company Case The metal container housing the movement of the watch and protecting it from dust, moisture, jarring and other hazards Main plate Base plate on which all the other parts of a watch movement are mounted Case back The bottom of the case that can be opened to gain access to the movement Jewel Used for reducing friction. In most watches, it is made of synthetic material, except for precious stones such as ruby, sapphire and garnet that are sometimes used in luxury watches Crystal A transparent cover protecting the watch face and made of glass, plastic or synthetic sapphire. Most high-end watchmakers use a sapphire crystal because it is more resistant to scratching and shattering Dial The indicating 'face' of metal or other material that displays the hours, minutes and seconds
