Emily Cheung wears two hats.
As executive director of 33-year-old Hong Kong manufacturer Tsuen Lee Group (Holdings) Inc., she's in charge of corporate strategy, marketing, administration, finance and compliance at one of Hong Kong's biggest toy companies (current workforce: 12,000) with factories in Guangdong and Jiangxi provinces. She also serves as vice chair of trade group Hong Kong Toy Council.
She spoke with Plastics News at the Hong Kong Toys & Games show.
Q: What are the big challenges for the Hong Kong toy industry right now?
Cheung: We have two different sectors. Some are manufacturers, with factories in China. Some are trading companies. Those with factories in China are facing increasing labor costs. There are also policy changes. Guangdong [the province neighboring Hong Kong, where many Hong Kong firms operate factories] is trying to transform itself from labor-intensive manufacturing to high-tech. Some toy manufacturers are choosing to quit.
Q: What about moving to a less-expensive part of China?
Cheung: Moving is very difficult. You must invest in the land and build a factory. You must build up relationships with the local government. If [a company] can't get solid commitments from customers, how can they invest in a new place? This is a dilemma for many companies with Chinese operations.
Q: What about moving to lower-cost countries?
Cheung: [Toys] needs a lot of different components, like metal parts, plastic, screws, packaging, and printing. They're not like garments or shoes, which have relatively few components. So for toy companies, it's very difficult to move to an area or country without good supply chain support. They also need export support. A developed infrastructure for testing and shipping.
Q: What's the Hong Kong Toy Council doing to help?
Cheung: We are encouraging our members to ask their customers to provide them with designs that can be optimized for automated production. This is one way a toy company can survive in this challenging environment. What other challenges is the Hong Kong industry facing? Both trading and manufacturing companies face higher and higher costs for quality control.
We're trying hard to harmonize different standards among different countries. But before we achieve this, we need to accommodate ourselves to each country's regulations. If you want to ship one product to the U.S., Europe, the Middle East, Brazil and Russia, you need to submit samples for each different country. This drives the total product cost up.
These standards vary widely. If you want to sell your product into [a country], you need to pass their standards. To do that, you'd better use a testing lab that they recognize. Maybe some of the testing labs in the U.S. are not recognized by Brazil.
Political issues may make this more complicated, because toy safety is always a topic to talk about. In the past 10 years, for example, we've seen tightened controls on phthalates and heavy metals in paint. When standards are changed, you cannot use your old stock in the warehouse. But countries often publish regulations a year or two before making them law. They may post changes in advance, but still, you need time to adjust to them.
In the toy industry, we have a very obvious peak season and low season. We have to manage labor and production capacity. A lot of parameters keep changing. [A] customer may make changes in a design.
Also, unless it's a basic product, like a baby product, the shelf life of most products is only three to five years. And it's very difficult for the toy industry to automate.
Q: Can't safety and quality testing help your reputation and hence your brand?