Korea's timepiece exports have increased dramatically this year to reach $108 million in the first quarter, up 35 percent from the corresponding period of last year. This stunning performance is the result mainly of promotional efforts to increase shipments as means to cope with depressed domestic consumption since the International Monetary Fund's austerity program began late last year. Fifteen Korean watch markers including Romanson, A-Dong Industrial, and Orient Co., signed export contracts worth a total of $7.75 million in April this year at the world's largest exhibition of its kind, the Basel (Switzerland) Watch, Clock, and Jewelry Fair, a 50 percent increase from last year when they participated for the first time. Both buyers and sellers concur the surge in orders is due to a combination of world-class quality and design offered by Korean manufacturers at reasonable prices. In addition, new products based on state-of-the-art technology, incorporating unique designs and new materials such as ceramic, tungsten and zirconium have continually gained popularity among overseas consumers. In addition, the steady depreciation of Korean won against the U.S. dollar has helped the timepiece industry strengthen its price competitiveness. Twenty-three manufacturers will participate in the Hong Kong Watch and Clock Fair in
September as part of a Korean pavilion. The participants anticipate landing export
contracts in excess of $20 million in the course of the exhibition. Industry sources
foresee exports of watches and other timepieces exceeding $410 million by the end of
this year. Rapid Growth The rapid pace of export growth means Korean watches have firmly established themselves in the world market in the face of tough competition across the product spectrum, from deluxe Swiss-made watches to those aimed at the low end of the market made in Hong Kong and China. Watch-making began in Korea in 1961 with an industry based mainly on assembling imported components. The first Korean exports of wall clocks were to Iran in 1966. The following year, Orient Co. began the mass-production of clocks and watches under an original equipment manufacturing (OEM) agreement with a Japanese manufacturer using technology from the same source. The company subsequently developed its own brand, focusing on the internal development of components and new designs to eventually become the progenitor of the Korean timepiece industry. Many Orient employees went on later to found other watch companies. Fuelled by a plentiful supply of cheap but educated labor, the Korean watch industry realized rapid growth from the mid-1970s onwards, a trend which continued in the1980s due to the development of related industries such as precision machinery and electronics. Boosted by the development of high-quality components and designs, timepiece exports under the OEM system reached $250 million by 1988.
The Impact of Liberalization However, the industry was thrown into crisis the same year when the domestic market for end-use products was opened to international competition. Swiss-made goods suddenly became a force to be reckoned with in the high-quality end of the market, while the lower-priced end was flooded by Hong Kong and Chinese products. The future growth and development of the industry was placed in immediate jeopardy. Whereas the industry had registered an annual 30 percent growth rate since 1980, sales have grown by only five percent on average in the 1990s. "While Korean products took a 90 percent share of the domestic market until 1990, cheaper-priced imports from Hong Kong and China take 60 to 100 billion won of the 350 billion won market currently, while Swiss-made products account for 60 billion won," said Kim Young-ho, president of Korea Watch and Clock Industry Cooperative. "In other words, imports take 40 percent of the domestic market," The share of imported watches and clocks in domestic consumption peaked at 45 percent in 1995 but subsequently decreased to 40 percent in 1997, amply demonstrating Korean watch makers have responded effectively to the liberalization of the market. Liberalization had a negative impact on exports, but despite earlier concerns over the possible collapse of the industry as a result of the reduction in tariff barriers, exports have increased through the continual development of new technology and the introduction of unique designs. Presently, it is the large-scale watch makers that appear to be taking the brunt of depressed market conditions at home and abroad. Small and medium-sized manufacturers, by contrast, have responded by taking the initiative in developing fresh ideas and cutting-edge technology. The industry's small and medium-sized enterprises are also forecast to be the future market leaders since it is they who have shown they are more able to adapt to the changes in market conditions and the needs of consumers. Market watchers cite the need for the industry to develop more own-brands, for parts-manufacturing subsidiaries to specialize, and for individual manufacturers to acquire the ISO9000 certification and develop designs embodying new concepts. They also underline the need for the industry to expand its international information network especially through the use of the cyber market and electronic commerce, as well as increase substantially its level of cooperation and exchange with other Asian countries. Coming of Age Due to the industry's relatively high labor and production costs compared to those in other regions of Asia, Korean companies are focusing on developing higher value-added products. Korean firm are considered superior to their Asian rivals in regard to quality, design, resource development, and continued investment in research and development, and are expected to enhance the overall value-added of their product by 52 percent by 2000. The 1990s can be described as a "coming of age" period for the watch industry, with players like Romanson having experienced a surge in business in global markets based on the expertise the company has accumulated over the past four decades achieved through the development of its own brands. However, the financial crisis and the austerities of the IMF restructuring program have severely impacted the watch market. Production has slowed down in the face of sluggish demand and major manufacturers have been striving to restructure corporately. In the process they are attempting to upgrade their competitiveness by introducing new models to appeal to consumers under the IMF era. The decrease in domestic consumption has inevitably prompted the industry to look to survival through export promotion, the results of which are evidenced by the 33 percent increase in this respect in the first half of this year. Paradigm Shifts The watch industry is expected to undergo a rapid paradigm shift in the 21st century in terms of organization, marketing and technology. Industry players are forecast to focus on individual employee creativeness, while niche markets will replace the mass consumption as the driving force of the industry. Instantly available information will impact market trends and product life-cycles will shorten further. Manufacturers were able to build on and exploit the manufacturing technology and design capability they acquired under the original equipment manufacturing (OEM) system from early 1970s through to the early 1990s in relatively a short period. Now Korean watch and clock makers face the dire need to undergo a transformation in order to cope with the rapidly changing business climate. Firstly, they need to develop products of distinctive character, designed to appeal to particular classes of consumer. Exploration of new markets has become inevitable for the industry to survive the harsher-than-ever competition it must now contend with. Adroit marketing and advertising tactics along with an exact grasp of the market situation are vital to this end. Another challenge to the domestic industry concerns the protection of intellectual property rights. There has been an upsurge in fake Korean products appearing in southern Europe, the Middle East and Australia, prompting the need for measures to be taken at the governmental level to ensure compliance by offending, signatory countries to the Treaty for Intellectual Property Rights (TRIPs). To this end, the industry has been heavily engaged in behind-the-scenes activities, mobilizing its trade committee, and registering Korean brands with the relevant overseas organizations. Besides the quality of components and assembly technology, design is also a major factor determining watch value. Cognizant of this fact, watch makers have become committed to developing new, relevant and innovative designs to maintain product appeal. Domestic watch manufacturers have performed well in global markets with their own brands. The challenge now before them is to maintain this advantage in the face of the greatest technological and competitive changes yet to confront the industry.
Industry Outlook The leaders of Korea's leading timepiece Peter Cho of Romanson Watch Co. "The company plans to expand the scope of its business into fashion accessories such as eyewear and leather goods in addition to watches, building on the worldwide recognition of the company's brand. A key strategy toward achieving this goal is our plan to progressively open more Romanson-owned shops around the world." Lee Kang-chan, president of Raucci Watch Co. "We have no choice but to focus on the development of technology to outperform Swiss makers marketing under world-class brands. End-user makers need to focus on design development while manufacturers of parts and material need to work continually on upgrading their technology and the quality of out-sourced material." Lee Kyong-sun, president of Hyuksan Development Co. "I believe Korea's watch industry will register more than 30 percent growth in the next two years given the committed effort to develop its own brands, while the level of technological capability has improved remarkably. The development of high-quality parts and end-use products has gained momentum. In addition, the Korean industry has great potential in the precision watch market." Huh Myoung-yoon, director of Kaiser Watch Co. "The company plans to focus on its main item, the cuckoo clock, on account of its high
value-added, while stepping-up efforts to improve product quality generally." Romanson Ltd. Romanson is one of the biggest timepiece exporters in Korea and the Romanson brand enjoys recognition worldwide. The company's major focus is on overseas markets, and for this purpose the name "Romanson" is registered as a trademark in more than 60 countries. The company was established in 1988 to manufacture under OEM agreements with Japanese companies in order for them to export back into their home market. However, low profit margins because of a fall in the yen prompted the Japanese companies to switch their manufacturing base from Korea to Hong Kong. This shocked Romanson into realizing the importance of own-branding. The company subsequently began manufacturing and marketing its own models under its "Romanson" label. The company has since produced and exported watches in the middle- and high-priced range worldwide. Having developed a design competency from scratch, the company now manufactures and markets more than 200 models, giving them the ability to match products according to the different tastes of each market. By utilizing a "one country, one buyer" strategy, they can best control and service their export lines. Romanson exported $18 million worth of product in 1997 and this year expects its exports to top $22 million. Romanson Watch president Kim Ki-moon spends up to half a year abroad researching suitable designs for each country, monitoring and training distributors, and generally promoting the brand. It is through such careful attention to detail in each market that Mr. Kim is able to successfully administer the company's export lines and the "Romanson" brand internationally.
Orient Watch Co. With overseas sales anticipated to reach $22 million, Orient is one of the biggest watch exporters in Korea and an acknowledged industry leader. Orient Company models accounted for 40 percent of the domestic market until the import liberalization program cut their share and forced a change in strategy. Orient, in a word, went global. The company registered its "Chagall" brand in 60 countries and established a factory in Switzerland to make and assemble watches. Orient's "Galaxy" brand has become well-established in the Korean wedding watch market over the past 15 years. For the future, Orient is gearing up to compete against the major international brands with advanced Swiss watch-making technology in both the domestic and overseas market.
A-Dong Watch Co.
Anam Instrument Co.
Anam also produces watch cases. The company decided to focus on this particular line
because of its importance in watch manufacture and in determining product image. The
company holds a Korean patent for a titanium coating procedure. Using the inherent
technology, the company is preparing to set up processing lines in conjunction with
both an existing molding line which employs CAD/CAM to mass produce automatically;
and a CNC cutting process line to meet small-run orders. The company's goal is for its
components to be used eventually in every watch in the world. Tel : 82-2-460-5581
Samil Co.
Yu-Woan P.I.C. Yu-Woan P.I.C. has specialized in the manufacture of parts since its inception. The company produces mainly tungsten cases and bands, and also makes finished watches on both an OEM basis and under its "Brilrand" brand. Yu-Woan manufactures on a large scale compared to others in the industry. Productivity has suffered as of late since the company uses a molding process designed to handle quite large quantities of various designs, whereas the market trend is for shorter runs. The company will adhere to this process for the time being since it doesn't want to incur the cost of purchasing and maintaining new machinery. Tel : 82-2-903-7182
Bora Precision Co. Bora was the first in the industry to produce synthetic sapphire for watch crystals. "Our products were rejected at first by the engineer at one of our client companies in Japan, simply because no one had heard of synthetic sapphire coming from Korea before," said company president Choi An-mook. "However, we eventually got permission to deliver our sapphire glass because of its high quality." The company is committed to improving quality and is now exporting to Japan and Southeast Asia as well as having a significant presence in the local market Tel : 82-2-865-7722
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with many forms in which to market both analogue
and digital models. Composed of the words "alpha"
and "excellent," the Alpex brand name has survived
and flourished through pursuing the highest
standards of quality and design innovation. In 1987
Anam introduced its "Caritas" brand to capitalize on
the domestic wedding present market. The company
established an industry first by using zirconium in
watch manufacture. Every producer now uses
zirconium, and 80 percent of Korean watches are
made using this material for either main components
or as ornamentation. Zirconium is being increasingly
used in the watch industries of Southeast Asia and
Japan, where the process of its incorporation in
timepiece manufacture was devised but not
previously employed.
Sam-il Corporation president Park Kwun-ki also
knows the value of a good brand name. "Since branding
is so important, it is gratifying when consumers
develop a recognition of my brand, no matter how," he
said. "Though our exports depend mostly on OEM
production now, we also export under our own brand
name." He said Sam-il has had a registered brand in
Japan since the company began exporting there.
"Imitations of our models from Hong Kong are now
showing up on the market, which is more pleasant than
unpleasant because the fame of brand enables us to
ride out the competition anyway," Mr. Park said.
Sam-il has taken direct aim at the Japanese wholesale
and retail market for the past seven years by
marketing under its own brand, "Royal Montres," and
by taking small quantity orders made up of various
designs. While the company still exports mainly on an OEM basis, Sam-il strategically
uses its 10 own-brands to meet changing consumer demand with differentiated prices
and watch designs.