According to industry sources, several small and medium-sized businesses involved in the local supply chain for electronics components and other devices have seen closures of facilities and layoffs in southern and eastern China.
Numerous small and medium-sized companies in southern China that are a part of the local supply chain for electronics accessories, parts, and other products have relocated or closed due to a bleak outlook for the Chinese consumer electronics market. In response to declining orders, the factories still operating have also imposed layoffs, salary cutbacks, and unpaid leave, the sources reported.
According to the sources, the southern region of China, where manufacturing is the primary industry, is in a severe economic scenario despite the country’s gradual easing of COVID lockdowns and restrictions. Domestic demand in China is cautious, and intense market competition drives up the cost of raw materials. According to the sources, more Southern Chinese electronics manufacturing enterprises may shut down.
For example, Shenzhen’s industrial supply chain focuses mostly on the toy and electronics industries. The sources indicated that the global economic downturn and declining market demand have already impacted the local manufacturing operations in Shenzhen.
Since 2022, there has been an increase in the number of industrial closures in southern China, according to the sources, with huge electronics plants that have been in existence for more than 30 years announcing their closure one after the other. During the city’s lockdown, some factories in Shenzhen were shut down. The inability to begin work was caused by issues with production, orders being received, and delivery needs not being met.
Consumption hasn’t recovered even though the epidemic has subsided. Although the present surviving factories avoided bankruptcy, the electronics supply chain’s orders continue to be poor. According to the sources, industrial employment is still subject to rigorous regulations to reduce costs, leading to a labor shortage in southern and eastern China.
According to the sources, one reason why the layoff phenomena may continue is that most businesses are pursuing industrial transformation, upgrading technology and equipment, and ultimately replacing labor with artificial intelligence (AI) and automation equipment.
Additionally, rising geopolitical tensions force companies to diversify their manufacturing bases. The sources said that the strategy for using China as a manufacturing base has changed, impacting the electronics sectors in southern and eastern China.