A factory building was put on rent at a industrial park in Dongguan (Photo: Beijing News/Tu Zhonghang)
(ENCS) -- A year after the closure of his factory in Dongguan, Guangdong Province, Ren Yuan finally decided to quit the cell phone-making industry. Closing another factory in Shenzhen, the debt-laden 37-year-old waved goodbye to the business to which he had been devoted for 10 years.
In the recent wave of contraction, more than 4,000 enterprises like Ren's in Dongguan were shut down. The rise of labor costs and fall in lower-end manufacturing are depriving China's leading hubs of past glories. However, a local official has told another side of the story regarding a painful rebirth.
The glorious past
During his glamorous past, Ren moved from assembly line worker to being the owner of a factory that made 200 million yuan ($31.3 million) a year and hired thousands of workers.
"In 2003, it was easy to start a factory. Just assemble some molding machines and you were ready to go," Ren said. Back then, he was sensitive enough to catch on to the booming cell phone sector and became the first in Dongguan to produce cellphone screens for Samsung, Nokia and Kyocera. Ren said their major job was to weld glass cut by other factories into phone screens. The simple process was the only technique that led to Ren opening his second factory in Shenzhen during 2009.
However, business started to chill in 2012 when his profit margin shrunk to only 10 percent, mainly due to a price war among competitors. Business at other levels of the production chain was also affected. Fuchang Technology, a Shenzhen-based cell phone shell producer, fell victim to similar vicious competition and finally collapsed in October.
The rising cost
As an alternative to closure, other enterprises are remapping their development and moving their assembly lines from Dongguan to other areas like China's hinterland area, Southeast Asia or Africa to cut costs.
Workers at a factory for Taiwan-based Kinpo Electronics have been on paid leave since October. Liu Qiang, a worker, said the company was moving its production line to Thailand and that workers would either be transferred to other factories or dismissed. Kinpo denied such claims, but admitted that it was replacing its old assembly line due to a drop in orders.
Liu, an assembly line supervisor, is caught in a dilemma - to accept lower payment at another Kinpo factory or go back to Henan for new opportunities. With his only feat being making printers, Liu is afraid of the future.
