THE strengthening of the yen has caused watch manufacturers to suffer a squeeze in profit margins due to the higher costs of buying watch components from Japan.
The chairman of the Trade Development Council's watch council, Bob Chong, said the cost of watch movements from Japan had increased significantly, cutting into watch manufacturers' profit margins.
He could not give any specific figure on the reduction in profit margins because it was difficult to estimate losses incurred by manufacturers as a result of the strong yen.
Mr Chong also told reporters yesterday the high cost of production in Europe and Japan had caused Hong Kong businessmen to be increasingly sought by companies in those places to set up joint ventures to manufacture watches in China to take advantage of the lower cost of production on the mainland.
Earlier, Financial Secretary Sir Hamish Macleod said the territory's watch manufacturing industry was thriving despite the shift in the economy from a manufacturing base to a service base.
He said watch manufacturers had continued to thrive through innovations.
He said industrialists in the territory had responded to growing competition from manufacturers in Singapore, Thailand and Malaysia by increasing their investment in technology to upgrade product designs and more value-added production.