China Focus: Enterprise closure amid industry slump

At a time when many Chinese workers are anticipating their year-end job bonuses, Wei Tao, a migrant worker in Suzhou, was given notice he lost his job.

Last month, the United Win Technology Co. Ltd, one of the biggest original equipment manufacturer (OEM) in Suzhou, a major city in coastal Jiangsu Province, announced a shutdown amid a severe financial crisis, leaving more than 2,000 workers like Wei with nothing to do.

Founded in Suzhou in 1999, the company was one of the major suppliers for Apple Inc.. In its heyday, the company boasted more than 20,000 employees.

The shutdown, however, is only a prelude. On Sunday, the China Times reported that Honghui Technology Co. Ltd in Suzhou, which was a supplier for Nokia and had more than 10,000 employees at its peak, had recently laid off a large number of its workers and halted parts of production due to lackluster demand.

In China, OEMs are experiencing an industry slump, as the country's labor advantages disappear and companies in the sector fail to keep up with the latest technology.

INDUSTRY SLUMP

In the industrial park of Suzhou, an imposing building stands in awkward contrast to the scattered trash in front of it. This is the former office of United Win Technology Co. Ltd, where hundreds of workers staged a strike over compensation after the company announced shutdown on Dec. 5.

"There used to be lots of cars parked near the company, but now there is nothing except piles of garbage," a local resident told Xinhua.

Similar situations can be found in Xukou Town, where Honghui Technology Co. Ltd is located. Xinhua reporters visited its factory there on Monday, and found a few scattered workers in the usually bustling area.

According to a security of Honghui, many workers have been dismissed, though some machines in the factory are still operating.

The company used to make keypads of mobile phones, but the popularity of touch-screen cellular has given it a big blow, said a local town official.

Zhang Bing, a former recruit of Honghui, said the reduction in production does not take him by surprise.

"Now that Nokia cell phone sales are on the wane, it is no surprise that Honghui would halt parts of its production," Zhang said, adding that the company has seen its output dwindle since mid-2014.

Hundreds of kilometers away, Guangdong's Dongguan City, dubbed the "Factory of the World", has seen scores of big OEMs closed down by October 2014, according to official statistics. More are expected to go out of business by this year's Spring Festival, China's lunar New Year, as the eastern area typically faces a severe labor shortage around this time.

In the latest case, the Dongguan Zhaoxin Communications Co. Ltd, an OEM specializing making mobile phone parts, had a capital chain rupture recently, putting the company in huge debt. Its president Gao Min committed suicide last week as a result.

Zhang Erzhen, director of the Research Center of International Economy under Nanjing University, said a slow in the sector is an inevitable trend.

"Most of China's OEMs still stay at the bottom of the industry chain with very few benefits, and many of them rely on a sole client, which makes them quite vulnerable to financial risks," Zhang said.

With the rising labor costs along China's eastern seaboard, more OEMs could face crisis.

Liang Zhenpeng, an expert on computer, communication and consumer electronics, said some OEMs were driven out of their business as they fail to upgrade technology, and Honghui is a good example.

"If they want to survive cutthroat competition, they need to face their problems," Zhang Erzhen said.

He suggested Chinese OEMs either divert to the middle and western areas to decrease costs or start building their own product brands instead of simply making components for others.

"Local government should also guide these companies through the difficulties and help transform them to avoid further crisis," Zhang added. Endi