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Marvin Hsu carefully removed a World War II combat helmet out of a display case and placed it on the table in front of me with a clunk. "This is one of the first models we made under the British Pattern 1937," he enthused, reaching back into the cabinet. "And this is one of the U.S. models. Here, try it."

The steel helmet was surprisingly heavy, weighing around three pounds. The outside had a rough, sandpapery texture, like someone had painted it after throwing a handful of sand into a pot of olive green paint. A sturdy wire frame was welded to the inside of the helmet and a padded, black leather loop tried to lessen the discomfort of wearing it.

"You had to be tough in those days to wear something like this," he said. "Nowadays they are much more high tech, comfortable and light."

Mr Hsu isn't a World War II buff. His company, Diaward Steel Works, is one of the few (if not the only Asian) non-government factories that were allowed to produce non-combative equipment and uniforms for the armed forces after the Second World War.

Mr Hsu's grandfather, C.L. Hsu, founded the business after moving from Zhejiang Province to Hong Kong in 1937. In the same year, he set up a factory in Western to manufacture aluminum and enamel wares for household use.

By the turn of 1960, however, scores of factories in Hong Kong were churning out enamelware. With manufacturers undercutting one another to win orders, Diaward decided to withdraw from the household enamelware battle in the late 1950s. Instead, it switched its focus to producing combat helmets, webbing equipment, ceremonial uniforms and tentage.

"It just happened that we spotted some potential business for this line of supplies," Mr Hsu said. "So in 1966 my uncle, Keith Hsu opened our London office, which acted as our sales office while my other uncle, L.F. Hsu, and my father, S.F. Hsu, fitted out a huge factory in Aberdeen to produce our new lines. Through the rest of the 1960s and '70s the business just took off and we operated two more factories in Singapore and Taiwan."

To further enhance the growth in the ceremonial military uniform business, the company acquired the royal button makers, Firmin & Sons PLC, in Birmingham, England in 1983. Established in 1677, Firmin specializes in ceremonial and dress uniforms and accoutrements.

"It made sense for us to take over the company, because their expertise and reputation is unsurpassed," he said. "Firmin's craftsmen still employ the traditional techniques for beating metal that they have been using for hundreds of years," Mr Hsu said. "To further enhance our retail and corporate businesses, we acquired another British firm, Stratton, in 2000, which has been producing cufflinks and gentlemen's accessories since 1860."

The firm has a steady stream of orders from armed forces in Britain, the Middle East and Africa, but as governments around the world are downsizing their armed forces and cutting budgets, demand for ceremonial uniforms has been on the decline in recent years, says Mr Hsu.

New directions
But Diaward had already been stoking other irons to offset any downturn in the uniform and equipment business. In the early 1980s, a retired American general with whom the Hsus had built up good relations, was showing off some electronic security tags that he had made in his garage. His passion for electronics was contagious and after explaining their possible applications, Diaward suggested that they go into business together to produce the tags, and so Diaward Electronic Security Systems was born.

"We worked together to develop a commercially viable technology security system (EAS: electronic article surveillance) and the idea just flew. At that time, these products were not used in Hong Kong, but were huge business in the United States and in Europe," Mr Hsu said. "I guess you could say we are a very typical Hong Kong SME, in that we started off mass producing these tags for export, and as we grew we started to do more ODM work. We then did research and developed our own systems offering a complete line of EAS solution for use in China under our brand, eGuard."

In Hong Kong today, most anti-shoplifting devices used in shops are sold by two main U.S. competitors who have dominated the market here for about 18 years. But now, Mr Hsu says he is now looking to capture a piece of the Hong Kong market.

eGuard systems have been in use in the Mainland since 1998, and the company has built up an extensive network of sales offices to service its customers, currently about 80% of which are hyper-markets with the rest in apparel industries. It is also forming distributors and agents not only across Asia and Australia but also in Europe and the U.S. where demand is taking off with cost-effective systems.

But with increasing demand and popularity of EAS usage, it has opened the door to pirates. "Our R&D has to remain a few steps ahead all the time," he says. In the last couple of years, companies have been springing up across the Mainland copying system designs but most recently, Mr Hsu says they have even found companies producing counterfeit eGuard systems.

The development of radio frequency identification tags (RFID) is the next logical development of anti-shoplifting tags, but Mr Hsu says the price of the technology and teething problems means it is still some time before they will replace current tags.

"This will be exciting, and we are already working on developing this new generation of systems and tags for EAS usage," he says. "At the same time, we realize that some customers may want simple, anti-theft solutions as a deterrent. Others may want to use RFID also as a way to track inventory, so those additional options will help us kill two birds with one stone. Overall, I think demand will take off and when it does the sky will be the limit."


Company: Diaward Steel Works Ltd
Established: 1937
Year joined HKGCC: 1970
Web site: www.diaward-eas.com.hk
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