Disguised layoffs? Dongguan's big factories forced to take six-month holiday

Factories may be the most direct ones to feel whether the overseas environment is changing or not. With large-scale shrinking demand and unsaturated orders, for some large factories, long vacations have become tacit layoffs. Recently, two large factories have started long vacations for up to half a year, and the salary reduction seems to be a disguised layoff.

Dongguan factory workers forced to take 6-month leave

After the company's order volume dropped sharply in 2023, allowing some employees to take three-month rotation breaks, Dongguan's well-known manufacturer Jierong Technology (hereinafter referred to as "Jierong Technology") was once again exposed to plans for a long holiday.

According to the documents sent by the whistleblower, Jierong Technology released the plan on January 15. The plan mentioned that due to manpower adjustments, the company will implement rotating holidays for employees around the world in batches, starting on January 16, 2024 and ending on July 15, 2024.

During this period, the company will pay one month's working wages (including performance and related subsidies) as normal. Starting from the second month, the company will pay the living expenses of employees on vacation at 80% of the local minimum salary standard until the end of the vacation.

Industry insiders reported that due to insufficient orders and poor factory performance, the employees of Jierong Technology were given a "long vacation". This involved technicians and team leaders from multiple departments, totaling more than 100 people, many of whom were old employees who had worked in the factory for nearly ten years, and their access rights had been suspended.

In response to this, some media sought confirmation from Jierong Technology, and Jierong Technology said it was not clear yet and needed further verification.

Soon after the document was released, many employees in blue shirts hung banners at the entrance of the park, which read "Jierong forced us to take a six-month vacation, blocked our cards and access control and refused to let us enter the factory to work. They wanted to buy out our years of service for 0 yuan, which is a disguised dismissal." They protested against the company. These employees said that the company was forcibly laying off employees and forcing them to leave.

It is reported that Jierong Technology and these employees have negotiated many times, but they have not reached an agreement on the amount of compensation. The employees insisted that the company compensate them according to the labor law, but it seems that they were given a discount, and the two sides have been deadlocked. However, outside the recruitment room of Jierong Technology Park, general workers are still being recruited.

Jierong Technology, founded in 2007, was successfully listed in 2017. It is a well-known large manufacturer in Dongguan. It mainly provides precision molds, precision structural parts and hardware components with high appearance requirements for customers in the 3C industry. Its products are mostly used in smartphones, smart watches, tablets, wearable products, etc. Samsung and Huawei are its main customers.

However , since 2021, the global consumer electronics market has declined overall, and Jierong Technology's performance has also begun to change, with losses. The financial report shows that in 2021 and 2022, Jierong Technology's net profit losses were 245 million yuan and 126 million yuan respectively, and the net profit in the first three quarters of 2023 was -53.6033 million yuan.

After years of profit losses, Jierong Technology may be trying to turn things around by reducing its staff. Since 2019, the number of employees of Jierong Technology has been declining, from 7,636 in that year to 5,073 in 2022, a drop of 34%.

One fact that cannot be ignored is that with overseas consumer demand plummeting and the market sluggish, many large cross-border manufacturers are on holiday.

Annual revenue plummeted, and many cross-border factories stopped work and went on holiday

In recent times, the cross-border e-commerce market remains turbulent, with sellers' orders falling again and again. Many large cross-border manufacturers have also been seriously injured, with annual revenues plummeting and orders shrinking. Some large manufacturers have even started to take long holidays, which is unusual in the entire manufacturing industry.

Recently, Fugang Electronics (Kunshan), a subsidiary of the Zhengwei Group, released a related document. The document mentioned that due to the decline in the European and American market environment and the weakening of customer demand, the company's annual revenue will drop by 52% in 2023 and is expected to drop by another 34% in 2024. Therefore, the company decided to suspend work and take holidays.

The period will last for six months, from January 19 to July 31. In terms of salary, the company will pay full salary in January, and from February onwards, the company will pay a minimum living allowance of 80% of the minimum wage of 2,280 yuan in Jiangsu Province, which is 1,824 yuan.

It is understood that Fugang Electronics (Kunshan) mainly produces gaming accessories, integrated circuits, circuit boards, cameras and other electronic communication equipment. Its customers mainly include world-class corporate customers such as Apple, Microsoft, HP, and Huawei. Its revenue reached more than 4.6 billion yuan at its peak .

The end of the year should be the busiest time for traditional manufacturing factories, as many workers need to work overtime to meet their sales targets. However, this year, as the year draws to a close, many factories not only did not work overtime, but instead started their holidays early.

Tongning Industry, which has been deeply rooted in Dongguan for 15 years, mainly produces hardware products such as bare copper wire, enameled wire, tinned copper, etc., and has already announced a three-month holiday. Tongning Industry mentioned that due to factors such as customers running away and a sharp drop in orders, the orders received are no longer sufficient to support the company's daily operations. Starting on November 15, 2023 and ending in 2023, the Spring Festival holiday is as long as 3 months.

Looking back from Tongning Industrial, 2023 seems to be a year when Dongguan's hardware industry was hit hard. In July, Zhengguang Precision went bankrupt; in September, Jinan Hardware announced its dissolution; in October, Hubang Hardware Factory went bankrupt. The closure of many companies has made the situation in this industry particularly serious.

Another 15-year-old plastic factory in Foshan also started its holiday early, from December 28 to February 28, a total of two months. During the holiday, the factory also stopped all production.

The main reason for factories to start taking long holidays is insufficient orders. However, if we look deeper into insufficient orders, we will find that there are many aspects to it.

The economy is in a downturn, demand is weak, and supply exceeds demand. In the past three years, the world has been deeply affected by the epidemic, and the economy has also been hit, especially in the European and American markets where most cross-border sellers have been deeply involved. Inflation has intensified and the economy is in a downturn. Some factories that rely on the European and American markets have no choice but to take measures such as layoffs, holidays and suspension of production to actively match market demand.

Order transfer is also a very important factor. Affected by multiple factors such as cost, profit, and trade war, the production links of some companies are shifting to Southeast Asia, such as Adidas, Nike, and Samsung. It is understandable that companies pursue profit maximization and migrate to Southeast Asia, but the impact on Chinese factories is huge, and some orders will be lost.

Lack of product competitiveness. Big sellers such as Anker often increase their R&D and improve their product innovation capabilities to occupy more markets abroad. However, if some factories stick to the old ways and lack innovation, the products they produce are not enough to meet people's needs, coupled with the increasing number of competitors, orders will gradually decrease.

In the future, if factories want to get rid of the dilemma of insufficient orders, it will be particularly urgent to improve product quality, expand emerging markets, and carry out industrial transformation and upgrading.

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