Hong Kong innovators

How automation helps two Hong Kong manufacturers stay on top of their game

All is not lost for the manufacturing sector, once an economic growth driver for the city, as Biel and TAL have shown

PUBLISHED : Sunday, 13 August, 2017, 3:02pm
UPDATED : Monday, 14 August, 2017, 1:03am

At Biel Crystal Manufactory’s Huizhou plant in Guangdong province, two robotic arms work round the clock, uploading and offloading the smartphones modules.

They are part of the automation process that the world’s largest producer of cover glass has adopted to deliver 4 million pieces of products a day.

Less than 100 kilometres away in the adjacent city of Dongguan, TAL Group, one of the world’s largest dress shirt makers, has also automated its production process and capitalised on technology for product innovation.

The two are among numerous Hong Kong manufacturing pioneers that have embraced the digitalisation of manufacturing and brought the “smart factory” created under the so-called Industry 4.0 into their businesses to better compete globally.

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More importantly, their successful transformation gives the manufacturing sector, once a crucial growth driver of the city’s economy and production base to many overseas brands, a new lease of life. In so doing, the transformation mitigates the pressures of labour shortage and rising wages.

The value of Hong Kong’s value-added manufacturing halved from US$7.9 billion in 2000 to US$3.5 billion in 2015 to account for a mere 1.2 per cent of gross domestic product (GDP), according to the most recent World Bank data .

In contrast, value-added manufacturing in China surged nearly eightfold from US$384.9 billion in 2000 to US$2.9 trillion in 2013, according to the most recently available data.

“Forty per cent of our manufacturing activities are automated,” said Biel’s chairman Yeung Kin-man, whose company produces glass cover used in two of every three of Apple’s iPhones sold in the world.

Biel is also the supplier of glass screens for Samsung’s smartphones, and for devices made by Huawei Technologies, Oppo and Vivo.

It is the screen maker for Yota Phone, a Russian smartphone that boasts the world’s first dual-screen model. The phone was presented as a gift by Russian President Vladimir Putin to Chinese President Xi Jinping during their 2014 meeting at the Asia-Pacific Economic Cooperation (APEC) forum in Beijing.

“We have been investing in research and development over the past decade,” said Yeung. The company invested 800 million yuan (US$ 120 million) in research and development as of 2016.

With a double-digit gross profit margin, the company raked in a total revenue of 36 billion yuan last year. His increase in wealth prompted Yeung to pay HK$2.8 billion in January for a mansion on The Peak in Hong Kong.

Born and raised in Hong Kong, Yeung is the only manufacturer included among Hong Kong’s 10 richest people, with an estimated wealth of US$8.3 billion, according to Forbes’ 2017 annual list of individuals and families that control the most wealth in the city. Other tycoons in the list earn their wealth from property, hotels and casinos.

Yeung started producing watch crystals in Hong Kong in 1987 and opened the first mainland plant in Shenzhen in 1988.

While his big break came in 2003 when Motorola approached him to produce the glass cover for its Razr series of mobile phones, Biel’s transformative moment was in 2007 with Apple’s release of the first iPhone.

The smartphone’s arrival forced manufacturers to ditch their tiny plastic windows and the keyboard for large, glass-covered screens that were both touch sensitive and scratch resistant.

It was the turning point for Yeung.

“Since then, my company’s profits jump rapidly every year,” he said, referring to how the company has been evolving and upgrading its technology to beat rivals and become the world’s biggest player. “We not only produce glass cover but have invested in technology to develop touch screen, fingerprint module.”

Biel is spending 5 billion yuan to build its third plant with 300,000 square metres in Huizhou, equipped with technology to meet the needs of the new generation of smartphone products, including iPhone 8.

The company is now planning a Hong Kong listing to raise HK$10 billion for future expansion such as producing optical glass under its own brand.

“We are lucky as we have entered a booming industry. It’s not only my company, but also other companies like AAC Technologies and Foxconn, the world’s largest contract manufacturer for electronics, that have seen a big jump in their business scale, riding on the growth of the smart mobile devices.

“If we were in the traditional garment and textile industry, we would not have seen such business growth,” said Yeung.

TAL Group would disagree.

“It’s not a sunset industry,” said Roger Lee, chief executive of TAL, the garment and textile manufacturer that produces one of every six dress shirts sold in the US.

TAL manufactures 60 million pieces of garments in a year for well-known brands, including Brooks Brothers, J.Crew and Thomas Pink.

“How do we make ourselves competitive ? We differentiate ourselves by not being low-cost manufacturers,” said Lee. “We did two things: one is production innovation and the other is supply chain management.”

We differentiate ourselves by not beinglow-cost manufacturers
Roger Lee, TAL

The 70-year-old company boasts of the technology to produce 100 per cent cotton non-iron shirts and garments that don’t leave sweat marks. It also holds a patent for pucker free garment and has developed the water repellent technology for fabrics.

On its supply chain management, TAL has implemented an efficient vendor managed inventory (VMI) system whereby it takes full responsibility in maintaining the inventory of its customers, responsible for generating purchase orders and delivering freely to the customers.

“We have an internal R&D team that makes sure we run as efficiently as possible.” said Lee. “We can get data from each store of our customers to know what they have sold everyday, that’s all technology-related.”

But Lee said technology was not what they were proudest of, it was sustainability that came with their operations.

TAL had spent millions of Hong Kong dollars to develop a system that can recycle 100 per cent of the water the factory uses, said TAL’s chairman Harry Lee, father of Roger.

Looking ahead, the younger Lee said Hong Kong would continue to play a role as an international sourcing hub, even though most of the manufacturers have moved their operations outside the city to escape high labour costs and shortage of industrial land.

But he said many had retained their offices in Hong Kong so that a customer can meet 30 suppliers in one city without having to travel different places across China.

For Hong Kong to stay competitive, Yeung of Biel suggested that the government could focus on the medical and healthcare equipment industry.

“We are still ahead of mainland probably by 10 years. If the government does not put resources in the sector from now, we will be replaced by China.”