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January 15, 2014 01:00 AM

Hong Kong plastic toy industry looks for better 2014

Steve Toloken
Assistant Managing Editor
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    Hong Kong Trade Development Council
    Buyers talking with companies at the 2014 Hong Kong Toys and Games Fair

    HONG KONG — Hong Kong's large, plastics-intensive toy manufacturing industry had a tough 2013, but executives at the Hong Kong Toys and Games Fair in early January were hoping that 2014 will bring more cheer.

    Exports for the first 10 months of 2013 for Hong Kong's toy factories, which are the second-largest exporters of kids' products globally after mainland China, were down 11 percent to US$6.68 billion, according to the Hong Kong Trade Development Council.

    One-third of Hong Kong's toy exports can come after October, so the numbers may reflect a slower start, and a late December study from the HKTDC did point to positive reports in Christmas season sales in key markets like the United States.

    But in general, executives said 2013 was not a year to find extra gifts stuffed into the Christmas stocking.

    "2013 of course is a flat year that disappointed a lot of people," said Yeung Chi Kong, chairman of the HKTDC's Toys Advisory Committee, in an interview at the fair. "But looking ahead, we foresee 2014 will be a better year with a lot of good signs now showing up."

    He said the U.S. and European economies are improving and he said emerging markets like China and India continue to show potential for Hong Kong toy makers. He predicted that "conservatively" the local industry would see exports grow five percent in 2014.

    Besides heading the HKTDC committee, Yeung is also vice chairman of Hong Kong-based toy maker Blue Box Holdings Ltd., which has 5,000 employees and 160 injection molding machine in its factories in mainland China.

    Hong Kong's toy industry, which has the vast majority of its factories in mainland China, has seen profit margins squeezed in recent years by rising labor costs in China and the strengthening Chinese currency.

    That has attracted some potential new competitors to the fair. The Indonesian Toy Association organized its first-ever pavilion at this year's show, with financial support from Indonesia's government.

    "The reason we approached the government to ask for support is, like you said, China's costs are rising up and the RMB is very strong now," said Sudarman Wijaya, vice chairman of the Jakarta-based ITA. "That would give us a competitive edge against China."

    He said Indonesian toy exports have been growing about 10 percent a year since 2009, and stand at about US$500 million. Most of the country's plastic toy industry is export-oriented, including facilities for U.S. toymaker Mattel Inc. and Chinese toy maker Lung Cheong International Holdings Ltd., he said.

    Some Hong Kong executives said the challenge posed by manufacturers from places like Indonesia could be substantial, although opinions were split on how much pressure there is on the local industry to find new, cheaper countries for their toy factories.

    Bernie Ting, director of injection molder Qualidux Industrial Co. Ltd., said it's something Hong Kong toy factories are definitely talking about more, partly because their customers, the global toy brands, are pushing it.

    "Some will stay in China, some will go other places like Southeast Asia, Africa and all the way to South America," Ting said. "It may seem far. I think the industry is kind of driving it, to keep the cost down."

    But others like Yeung downplayed that notion: he said toys are increasingly becoming more sophisticated electronic gadgets that require complex supply chains to manufacture. Unless it's a very simple product, moving to a new place without that support can easily eat up more costs than any potential savings in labor, he said.

    "We will not move, that's for sure, because we see no reason and actually no benefit to move," Yeung said. "I just look at the labor costs in Indonesia and they are catching up to what China is. And I think as always, supply chain is the key."

    The Hong Kong Fair, held Jan. 6-9, is the largest toy exhibition in Asia and the world's second largest, after the Nuremburg Fair in Germany. Organizers said that together with three related shows held at the same time on licensing, stationery and baby products, the events collectively drew 106,000 attendees.

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