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Trade war tariff threat, rising costs drives Hong Kong manufacturer to automate Chinese factory to survive

A factory in the southern Guangdong province, just over the border from the casino hub of Macau, offers a new face of “Made in China”. Gone are the army of uniformed Chinese migrant workers manning manual production lines, in their place an automated intelligent production centre equipped with 50 robotic arms that rarely take breaks or make mistakes.



The new factory, belonging to Hong Kong-based toymaker Eastcolight in the town of Shenwan, which is part of the city of Zhongshan, has been in operation since early last year. Its newly installed solar panels are likely to generate a tenth of the plant’s electricity, while dormitories with private amenities and exercise equipment are provided for employees.



The labour force has been trimmed to 300 from a peak of 2,000, significantly reducing production costs to remain competitive, even though the capacity is set to increase by 25 per cent to 600,000 units per month this year.



Faced with the developing tradewar between China and the United States, it was the final push Johnny Sze Chun-hong, Eastcolight’s director and vice general manager who inherited the factory’s management from his parents, needed to make the one-off investment of 70 million yuan (US$10 million).



The trade war got our customers worrying, and that forced us towards automation



Johnny Sze Chun-hong



Sze still needed to keep a close eye on the plans by US President Donald Trump to levy additional tariffs on Chinese imports before Christmas over fears the duties, which were eventually halted as part of the phase one deal discussions, would raise the retail price of his toy microscopes and telescopes.



“We thought it was pure luck that allowed us to continue a manufacturing model from 30 years ago,” the 28-year-old Sze said. “Then the trade war got our customers worrying, and that forced us towards automation.”



The choice of the Sze family and Eastcolight, having opened their first factory in China in the sleepy town best known for its pineapple farms in 2000, sheds light on how Trump’s trade war is transforming the manufacturing sector in China.



There are, like Trump claimed in the summer of 2019, manufacturers who have been seeking to move oroursource part of their production into other markets such as Vietnam and Bangladesh over the past years due to rising labour and land costs in China. And while Trump’s tariffs have accelerated the process in some cases, there are other manufacturers who have decided to hold onto their access to China’s advanced production systems and vast domestic market.



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Trade war tariff threat, rising costs drives Hong Kong manufacturer to automate Chinese factory to survive

09/01/2020

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