Mid-level and lower-end cellphone original equipment manufacturers (OEMs) in south China’s Pearl River Delta have been struggling to keep up after being left behind by the changing environment of the manufacturing industry, the Beijing Times reported.
According to the report, the electronic industry is facing a challenge to keep abreast of the changes in the industry and OEM factories. The middle level and low-end ones, especially, struggle to survive.
Yuan Mingren, a business consultant, told the China Business News that manufacturers also find it difficult to recruit workers in the face of dwindling commercial orders.
The report said that in Dongguan, a known manufacturing hub, the population of migrant workers has fallen to around four million, nearly two-thirds of the number five years ago.
The rise of new smartphone companies has driven OEM factories to the point of closure, while production rates increased by about 40 percent due to automatic production lines, thereby reducing labor expenses by about 50 percent, the report added.
Further, some factories are fortunate enough to get 30 percent of a full payment for an order, and if they do not receive payment, they loan money from banks to get the needed financial flexibility. Without this, a factory may have to close down.
The report said that the problem of the industry was further complicated by the rising labor prices, which forced some OEMs to do business abroad. Some have allegedly gone to Vietnam where hundreds of industries are drawn to its favorable tax policies and cheap labor. But factory owners are concerned that Vietnam's poor infrastructure may be unable to sustain business.
Chen Zhilong, a researcher from Nanjing University of Finance and Economics, said that the country's manufacturing industry is seriously facing a crisis and only in-depth and integrated reforms can help improve the situation and turn things around.