The debt insolvency crisis of China's real-estate conglomerates is becoming contagious. Weak demand from customers has deteriorated the business operations of electronic appliance manufacturing contractors in southern China.
Simatelex, a Hong Kong-based electrical appliance contract manufacturer, has decided to disband its Shenzhen subsidiary Xinan Electrical Appliance recently. Simatelex has been in business for at least 38 years, has four factories in Guangdong Province, and employs more than 20,000 workers. It is the largest appliance manufacturer in southern China, mainly producing household appliances for a series of international brands such as Philips, Keurig and Cuisinart.
Xinan Electrical Appliance, which had 4,000 employees at its peak, now hires about 900 employees. It is only the tip of the iceberg. As consumer demand remains lackluster due to macroeconomic stagnation, electronic manufacturing companies are laying off workers and even shutting down or declaring bankruptcy. This is likely to indirectly impact orders for micro-controller units (MCU).
Xinan is not the first home appliance EMS provider forced out of business in recent years. Since 2022, Shenzhen-based electronics manufacturers such as Weilima Electric Appliance, Fulong Electric Appliance, and ALCO Electronics, have announced their closures one after another. They all had been in business for more than 30 years.
MCU industry experts who monitor China and Taiwan markets, which are the main sources of MCU demand, observed that since the beginning of 2023, China's housing market has been sluggish. They warned that the market weakness will in turn affect consumers' willingness to buy home appliances, and then will further affect the MCU chip order.
MCU company executives pointed out that originally the industry expects the end of the pandemic can drive a wave of consumer spending. But the June 18 shopping festival did not spur strong purchasing power like before, and they fear the November 11 shopping event scheduled in the second half of the year may not turn out as robust as expected.
In order to stimulate economic growth, the Chinese government promulgated the "Measures on Restoring and Expanding Consumption" on July 31, 2023, which covers 20 measures including those stimulating domestic demand and service consumption, automobile consumption, and implementation of paid vacation, etc.
MCU industry insiders have observed that customer shipments in Q2 have already grown slightly compared to Q1, but it remains to be seen whether the economic stimulus measures offered by Beijing will be reflected in the consumer market.
UBS China chief economist Wang Tao lowered its China 2023 real GDP growth forecast to 4.8% from 5.2%, as well as the 2024 real GDP growth forecast from 5.2% to 4.2%. "This is mainly due to the intensification of the downturn in real estate activity, further weakening of external demand and weaker-than-expected policy support," said Wang in her latest report.
Article translated by Judy Lin
