Employees work at an OEM factory. (Photo/China Business News)
(ECNS) -- Cellphone original equipment manufacturers (OEMs) in the Pearl River Delta of south China, especially those at middle and lower ends of the market, are being left stranded by the manufacturing industry's changing, harsh environment, China Business News reported on Thursday.
It is challenging for the electronic industry to keep up with the changing industry. Mid-level or low-end OEM factories are struggling to survive.
Recruiting workers is also difficult as commercial orders dwindle, according to Yuan Mingren, a business consultant. The migrant worker population in Dongguan, a traditional manufacturing hub, has dropped to around 4 million, about two-thirds that of five years ago.
The emergence of new smart phone companies has squeezed OEM factories to closing point as automatic production lines have raised production rates by 40 percent and cut labor expenses by half.
If lucky, a factory may receive 30 percent of a full payment when an order arrives. If not, bank loans are needed to offer more financial flexibility. With neither, a factory may find itself in trouble.
To make matters worse, labor prices, which for years have been low in China, have also risen, forcing OEMs to look abroad. Vietnam has already used its cheap labor and favorable tax policies to draw hundreds of industries. However, hesitation still lingers among factory owners due to concerns regarding Vietnam's poor infrastructure.
Chen Zhilong, a researcher from Nanjing University of Finance and Economics, says it is no exaggeration that China's manufacturing industry is facing a crisis and in-depth and integrated reform remains the key to turning things around.
