Marking time

Shenzhen, provider of timepieces to the world, wants to go further

No matter in which corner of the globe you stand, the chances are that not far away will be a watch shop, and that many of its watches, expensive or not, will have come from one place: Shenzhen. Over the past 20 years the city in southern Guangdong province that was once a fishing village and is now a metropolis has become the world's largest outsourcing base for timepieces.

The watchmaking business in Shenzhen began to bloom when the industry in neighboring Hong Kong started to migrate northward into the mainland in the 1980s. About 1,100 watch companies now call Shenzhen home, and they produced 800 million watches in 2010, accounting for more than 43 percent of world production, the Shenzhen Watch and Clock Association says. More than 80 percent were exported, particularly to Europe and the US.

But watchmakers in Shenzhen are no longer content to remain a manufacturing center for overseas watch brands. They are trying to reshape the old business models by investing heavily in branding their own independently designed products, aspiring to upgrade Shenzhen from the world's watch OEM hub to a place that produces its own top brands.

"Making our own branded items will not only help us reduce our dependence on overseas orders but, more importantly, will ensure Shenzhen's watch industry develops sustainably," says Zhu Shunhua, secretary general with the association.

Zhu says the world financial crisis has led to a sharp drop in orders from Europe and the US, where most of the outsourcers are, forcing a rethink about Shenzhen's watch industry.

"Enhancing innovation, research and development capabilities as well as strengthening brand building efforts, are vital for Shenzhen watchmakers to survive the increasingly intense market competition both at home and abroad," Zhu says.

Zhu says that by the end of last year more than 150 watch companies in Shenzhen had set up their own brands, 37 percent of them having developed about 600 intellectual property rights and patents.

As the world's largest watch outsourcing base, Zhu says the quality of Shenzhen-made watches is guaranteed, but the city's watchmakers have their work cut out to step into the high-end market because of a lack of brand awareness.

"The high prices of Swiss-made watches are a result not only of their quality, but also of brand awareness," Zhu says.

"Shenzhen watch manufacturers should learn from their Swiss competitors to persuade more people to see 'Made in Shenzhen' as a quality seal."

In the race to upgrade, some watchmakers in Shenzhen have already made big strides.

The Hong Kong-listed Ebohr Luxuries International is one of a few pioneering enterprises that has dedicated itself to creating Chinese watch brands that will be recognized by all.

Ebohr, set up in Shenzhen about 20 years ago, started as a processing and assembly factory making watches on order from Europe and the US, but as a result of the slim profit margins, Tao Li, the founder and managing director, decided to build his own watch empire.

"We could only earn HK$8 ($1.03, 0.8 euros) for each watch we made at that time," Tao says. He realized the labor-intensive outsourcing business relied heavily on overseas orders, resulting in very restricted room for development in the long run.

Over two decades, Ebohr has risen to become one of China's best-selling watch brands in the domestic market.

"Brand should be the core competence of Ebohr now and in the future," Tao says.

Ebohr's rising popularity has driven up its brand value, which was put at about 1.8 billion yuan ($285 million, 224 million euros) by the World Brand Lab in 2010.

But Tao wants more: he would like Ebohr to rank among the world's top watch brands.

As part of the effort to realize that ambition, Ebohr has become the first watch business in Shenzhen to start using Dassault Systemes of France, advanced 3D design software, to optimize its design process.

It also works with Swarovski Crystal of Austria, using its gemstones in its latest watch for women.