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Electronics dominates merchandise export
Telecommunications equipment, semiconductors, and computer items largely contributed to the total electronics exports.
Hong Kong’s electronics industry is the territory’s largest merchandise export earner, accounting for 72.6% of total exports in 2021. A substantial portion of these exports is regarded as high‑tech products, especially those related to semiconductors, telecommunications equipment, and computer items. Mainland China is both the major source of and the major destination for Hong Kong’s electronic products trade.
According to the latest available statistics, Hong Kong was the world’s largest exporter of electronic integrated circuits; the second largest exporter of mobile phones, computer parts/accessories, and video cameras; and the world’s third largest exporter of video recording apparatus in value terms in 2020. This is thanks to the huge re‑export business handled through the territory, as Hong Kong is amongst the major global trading hubs.
Parts and components constitute about three‑quarters of Hong Kong’s electronics exports, of which the majority are re‑exported to mainland China for outward processing production. Finished goods constitute about one‑quarter of the exports, of which the majority are consumer electronics for domestic use, including a wide range of audio‑visual equipment, computer products, and telecommunications equipment.
Most Hong Kong manufacturers have relocated their production facilities to mainland China to reduce costs. Their Hong Kong offices now focus mainly on R&D activities, product design and development, management, logistic support, marketing, etc. Their setups in Hong Kong are largely classified as non‑manufacturing establishments statistically, despite the fact that they have manufacturing activities across the border.
Against fast‑changing markets and advancing technology, Hong Kong companies emphasise quick response to ensure effective services to their customers. Also, many Hong Kong companies have further strengthened their quality assurance and environmental management systems, and are accredited with ISO 9000 – an internationally recognised standard for a quality management system, ISO 14000 – a standard for an environmental management system, etc.
The 14th Five‑Year Plan indicated clear support from the Central Government to Hong Kong for the development of an international innovation and technology hub. Hong Kong Science and Technology Parks Corporation (HKSTP) set up the Data Technology Hub (DT Hub) and Advanced Manufacturing Centre (AMC) in Tseung Kwan O, assisting companies to speed up digitalisation, and offering flexible and intelligent production lines for manufacturing. HKSTP also set up the Microelectronics Centre (MEC) in Yuen Long, offering dedicated cleanroom and special chemical handling facilities to support the development of new generation microelectronics products and their pilot production.
Hong Kong’s exports of electronics
Hong Kong’s electronics exports significantly increased by 27.7% in 2021. The major export markets were mainland China (accounting for 65.1% of the total exports in 2021), the EU (6.8%), the ASEAN (6.1%), and the US (4.6%). Exports to mainland China greatly increased by 28.6% in tandem with the sustained revival of the global economy.
Distribution channels
Hong Kong companies engaging in the parts and components business are capable of producing on a custom‑made basis and offering total solutions for famous US, European and Japanese companies, e.g. parts and accessories of computers, RF modules for telecommunication purposes, chipsets for LCD modules, etc. Meanwhile, standard components are usually exported directly to distributors and manufacturers in overseas markets, whilst some Hong Kong companies also have their own sales offices and/or representative offices in mainland China and other overseas markets.
Notably, Hong Kong is an important trading hub for electronic parts and components in Asia‑Pacific. Many items from the US, Europe, Japan, Taiwan, and South Korea are re‑exported via Hong Kong to the mainland, and vice versa. A number of multinational parts and components manufacturers have set up offices in Hong Kong, engaging in sales, distribution, and sourcing activities in the region.
Regarding finished items, Hong Kong companies mostly produce on an ODM basis for reputable brand names in overseas markets. Some of these major buyers have set up offices in Hong Kong for direct sourcing.
Mainland China is both the major source of and the major destination for Hong Kong’s electronic products trade “Against fast-changing markets and advancing tech, Hong Kong companies emphasise quick response.”
Performance of Hong Kong’s Exports of Electronics
Domestic Exports Re-exports of Chinese Mainland Origin Total Exports
SOURCE: Hong Kong Census and Statistics Department 2020 2021 Jan-May 2022
HK$ bn Growth% HK$ bn Growth% HK$ bn Growth% 2.6 +25.3 2.4 -6.1 0.6 -44.7 2,817.2 +3.4 3,599 +27.1 1,393.9 +3.4 1,582 -1.1 1,951.5 +23.4 719.1 -1.8 2,819.8 +3.4 3,601.4 +27.7 1,394.6 +3.3
Hong Kong companies also sell to specialised importers and traders in North America and Europe, who distribute the merchandise under their own channels or re‑sell to their clients for further distribution.
There are also a number of Hong Kong companies marketing electronic products under their own brand names, including Truly, V‑Tech, Group Sense, Venturer, GP, and ACL. Their sales network covers not only advanced countries but also economies like Latin America, Eastern Europe, and various parts of Asia.
Promotion via participation in trade fairs is an effective way for Hong Kong’s electronics companies to explore market opportunities. Important trade fairs include the CES Show held in the US, Electronica in Germany, Taipei International Electronics Show in Taiwan, CommunicAsia in Singapore, and the Hong Kong Electronics Fair organised by the Hong Kong Trade Development Council (HKTDC). Business missions organised by the HKTDC to the mainland and other emerging markets also provide opportunities for Hong Kong companies to establish connections with potential buyers.
Product trends
On the back of technological advancement and falling prices amidst keen competition, conventional IT products like notebook computers have become mass products. Now, the industry is focusing on further technological enhancement to sustain the business. Notably, mobile devices with enhanced smart features are in demand around the globe.
Meanwhile, mobile communication has become part of the daily lives of consumers in most countries. In particular, sales of high‑end smartphones are rising at a rapid rate. Many models are now compatible with certain wearable electronics and other smart devices. This has attracted demand, especially from youngsters and high‑income consumers.
Digital technologies
In consumer electronics, one key development is digital imaging, in particular, large‑screen digital TVs with connectivity. This enables internet surfing with the so‑called “smart TV” features and the ability to communicate with mobile devices, as well as ultra‑high definition TVs (UHDTVs) with a display resolution of 4K or higher.
In addition, some players are keen to promote 3D printers in view of the falling printing and other material costs. Also, the industry is keeping an eye on the development of certain niche items, such as action camcorders and drones, as well as products related to the Internet of Things (IoT), which are taken by some players as means to inspire the market and create new business. Smart homes will be one of the major IoT application areas that could elicit huge demand for related IT systems, hardware, and devices.
The COVID‑19 pandemic has affected daily life in unprecedented ways. The rising awareness on personal hygiene and health has driven strong demand for health‑related electronic products, such as air purifiers and infrared thermometers. As for businesses, the pandemic has accelerated the adoption of digital technologies. Many enterprises have introduced smart devices to their offices, such as interactive whiteboards and smart meeting rooms to make remote conferences more productive and engaging for employees, thereby driving the demand for electronic products.
CEPA provisions
Since the implementation of the third phase of the Mainland and Hong Kong Closer Economic Partnership Arrangement (CEPA III) in January 2006, all products of Hong Kong origin can be imported into the mainland at zero tariffs.
In December 2018, the mainland and Hong Kong signed the Agreement on Trade in Goods, which further enhanced the arrangement for rules of origin (ROOs). Starting from 1 January 2019, goods of Hong Kong origin fully enjoy zero tariffs when imported into the mainland. In addition to the product‑specific ROOs (PSRs), Hong Kong and the mainland introduced a general rule of origin (General Rule) based on a calculation of the value added to the products in Hong Kong. Products without PSRs would instantly enjoy zero tariffs upon importation into the mainland, subject to the fulfilment of General Rule.
