Watches Report — Industry Overview — Sample Pages: Sourcing Watches from China

Industry Overview: Watches

Intense competition in China's watch industry, especially at the low end, is prompting more makers to shift to midrange and even high-end production, and more companies are developing or strengthening in-house brands to distinguish themselves from rivals in an industry saturated with similar-looking products. Watchmakers have been slower than suppliers in other segments of China's fashion industry to move upmarket, mainly because of a shortage of skilled R&D technicians and designers, so most suppliers still focus on low-end OEM production. Global consumption of fashion watches — the largest product line at most factories — grew 4.5 percent in each of two years, yet overall watch exports from China have started to decline: exports in the first seven months of the year totalled US$460.9 million, down 7.7 percent on the same period in 2004, with pieces shipped down 13.7 percent to 418.6 million. In 2004 China exported 956.9 million watches worth US$977.4 million.

The industry composition behind those figures: China is the world's largest export manufacturer of watches, producing almost the entire global output of low-end watches. Among an estimated 1,000 registered makers, more than 70 percent export directly or through traders, makers export about 65 percent of output on average — mostly to the US, Europe and Asia — and about 60 percent of watchmakers are locally owned, one-fifth Hong Kong-owned or invested, with several Taiwan-owned or invested makers as well. Most fashion watch designs have a one-year shelf life, and production of tech watches and high-end sports watches requires technology most China makers do not yet have. Some companies offer skilled technicians and designers salaries up to 30 percent higher than assemblers to attract them, and the larger companies with established local brands have developed tourbillon watches — until very recently made only in Switzerland — while smaller companies offer high-end watches only on a limited scale. Even so, low price remains China's main competitive advantage, and the country stays a top choice for buyers, particularly for low-end and midrange designs.

How to Read This Overview as a Buyer

Read the overview for decisions, not background. The cost figures tell you how much room a supplier has to negotiate: a maker absorbing most of a cost increase will either raise prices soon or cut somewhere you cannot see, and both possibilities belong in your order planning. The competition analysis tells you where your enquiry has leverage — crowded, standardised segments compete on price, while design-led segments compete on capability — and the supplier survey turns the industry's own expectations about prices, sales, research focus and capacity into a planning horizon for the year ahead. In this report, Shenzhen is profiled as the production hub, and a Hong Kong industry overview places the mainland supply base in regional context, a fact the full overview develops with production and survey detail.

The overview also frames the 67 profiles that follow it. A profile's prices mean little until they are set against the overview's price trends; a factory's expansion plan means more when two-thirds of its competitors are expanding too. Buyers who read the overview first consistently shortlist better, because they know which claims to test when they reach the profiles and the product gallery.

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