THE trend for Swiss watch companies to use Hong Kong-produced parts is increasing. Stan S. C. Lee, director of City Chain, said more than 60 per cent of Swiss watch companies bought parts from the territory last year. ''The trend is for most large Swiss companies to buy parts that take a lot of time and labour to make from Hong Kong and China,'' he said. ''Some watch brands and parts rely on intensive labour as polishing of small metal links is done by hand. ''Because Switzerland has a shortage of skilled labour and labour costs are high, it is cheaper to buy and import parts from Hong Kong and China.'' Besides metal links for watch bands, Swiss manufacturers also bought watch faces, casing, dials and hands. City Chain's holding company, Stelux, established as a watch wholesaler in 1974, was a supplier of parts. ''Stelux makes parts for the bands and bracelets for the top watch brands in the world,'' Mr Lee said. ''Watches like Rolex would cost a lot more money if parts made in Hong Kong were not used in bands and bracelets.'' Stelux, in 1981, moved its watch component manufacturing to Guangdong, where 2,000 employees operate three factories. Mr Lee said Swiss watches maintained their reputation for quality, but Hong Kong's lower-to middle-class range of watches was taking the world by storm. Some firms had opened factories here to take advantage of the pool of skilled labour. ''Hong Kong is more competitive than Switzerland because the territory has an expanding labour supply which guarantees that any order from an international watch manufacturer will be filled,'' Mr Lee said. ''Our components have to be of the highest quality or else Swiss companies would not buy them. ''These days, if you buy a watch, no matter what kind or brand, Japanese or Swiss made, it is more than likely that part of it will be from Hong Kong-based companies.'' Omega placed orders with Stelux's head office here and components were shipped from Guangdong before being re-exported. Mr Lee said in terms of quality, brand names and technology, Switzerland still had a firm grip on the market. In line with forecasts from the Swiss Consulate General and the Hong Kong Trade Development Council, Mr Lee said bilateral trade was expected to increase this year. But selling watches and high-quality components and breaking into the Swiss watch market did not happen overnight, he said. ''Through our mother company, Stelux, we have had a long history in watch manufacturing, retail, wholesale, marketing and design trade,'' he said. Before Stelux launched its City Chain outlets, it bought its own Swiss brand name, Titlus. ''We still had to handle the brand name through the retailer and had to play a passive role in the marketing,'' Mr Lee said. ''When we first started with Titlus, buyers went to traditional jewellers and bought watches by the brand name. ''We decided to start our own chain stores so we did not have to rely on retailers and we could sell up-dated versions of watches to keep pace with trends.'' City Chain now owns Universal Geneve and Cyma watches, made in Switzerland, and was annexed to the Stelux Group in 1989. ''They are both Swiss brand names and we do not want our customer to think they are just Swiss brands assembled and made locally. We do not want people to think they are fake,'' Mr Lee. said. ''Any Universal watch sold in Hong Kong which has Geneve inscribed on the face has been made in Switzerland.'' Stelux also owns the distribution and wholesale rights of Candino and M-Watch. It has licensing agreements with Adidas and Ellesse. ''Universal and Cyma are well-known Swiss brand names and we decided to buy them after we realised they were selling well,'' Mr Lee said. ''It was a revolution when a Hong Kong company bought a Swiss brand name. ''It sent shock waves through the Swiss watch industry because, traditionally, the Swiss believe the watch market is their property.'' Another reason for buying the Swiss brand name was to bring more high-quality goods into Asia, Mr Lee said. ''Switzerland has been selling more watches in Europe and 10 years ago it did not have great experience in Asian markets,'' he said. ''Our research showed Swiss manufacturers only knew Western tastes, culture and styles and we had the know-how in Asia and the Far East. ''When we bought the company, we kept the existing management, which meant we had a guaranteed slice of the European market and also the opportunity to move into Asia.''