Sudden factory closures raise fears for Pearl River Delta's electronics manufacturing sector

Sudden shutdowns follow drop in demand and company relocations

PUBLISHED : Tuesday, 13 October, 2015, 11:41pm
UPDATED : Wednesday, 14 October, 2015, 2:12am

The sudden closures of several factories in the Pearl River Delta after the "golden week" national holiday have fuelled concerns the region's electronics manufacturers are losing out to foreign rivals.

The shutdowns come amid a drop in foreign demand for electronic information products. In addition to the slump in exports, rising costs at factories in Guangdong are prompting companies from Hong Kong, Taiwan and overseas to withdraw from the province and relocate their operations to neighbouring countries.

READ MORE: Manufacturers step up search for low cost alternative to China

A mobile phone factory belonging to Jingchi Plastics in the Fenggang township of Dongguan appears to be the latest victim. On Saturday it announced it was shutting down, leaving debts of 30 million yuan (HK$37 million) to hundreds of suppliers and 80 workers, the Southern Metropolitan Daily reported.

The owner said he first set up business in Guanlan in Shenzhen before expanding to a factory in Dongguan in 2013 with more than 1,000 workers. "Orders have suddenly gone because of the worsening economic situation. Medium and small enterprises of our kind are finding it very hard to survive," he said.

That closure came just a day after more than 4,000 workers and suppliers turned out in front of the Longgang district government building in Shenzhen to protest against the abrupt closure of Fu Chang Electronic Technology, an electronic parts supplier to domestic telecommunication giants such as Huawei and ZTE.

Founded in 1997, Fu Chang had once been promoted by the local government as an environmentally friendly and innovative factory for precision plastic moulds and injection products.

On October 5, hundreds of workers at Kinpo Electronics, a Taiwanese-invested factory producing printers, clashed with police in the Changan township of Dongguan when their public protest blocked the main road in front of the factory.

Last month, another plastic hardware supplier in Shenzhen - Hongkaixing - also went out of business.

Orders have suddenly gone because of the worsening economic situation
Jingchi Plastics factory owner

Wu Jenn Chang, the chairman of the Enterprises Association of Guangzhou, said at least 30 per cent of Taiwan-invested companies had left Guangdong and moved to neighbouring countries in the past couple of years. The trend was likely to accelerate in the next two years, he warned.

In December, Taiwanese touch screen maker Wintek closed its factories in Dongguan and laid off 7,000 employees.

In February, Japan's Citizen closed its watch parts factory in Guangzhou and let go more than 1,000 workers. Microsoft is to shut its Nokia mobile phone factories in Beijing and Dongguan by the end of the month, laying off about 9,000 employees as it switches its phone manufacturing base to Hanoi, Vietnam.