Delta Electronics, a supplier of power components to Apple and Tesla, has reduced its workforce in China by nearly half, in the largest such move by a Taiwanese electronics firm in the country. The sudden decline comes as electronics manufacturers continue to adapt to the consequences of the US-China trade war to prevent skyrocketing manufacturing costs in the world’s second-largest economy.
“Our target in China is to reduce the direct labour force by 90 per cent. We are not quite there yet. We have reduced [it] by 40 per cent,” Yancey Hai, Delta’s chair, told the Financial Times in an interview. Taiwanese companies that produce laptops, servers, tablets, and telecom infrastructure gear for Apple, Dell, Google, and Xiaomi are expanding their operations in Southeast Asia, India, and other areas of the world.
Following a filing with the Shenzhen Stock Exchange that disclosed a notice it obtained from a specific overseas client that plans to sever its procurement relations with OFilm and its subsidiary units, shares of OFilm plunged by the 10-percent daily cap at the opening, and the plunge proceeded into the market close. OFilm announced that net profits from the outgoing partner reached 11.7 billion yuan ($1.8 billion) in 2019, accounting for 22.51 per cent of overall sales for the year. The overseas customer is thought to be Apple, and the filing seems to support industry speculation that OFilm will be dropped from Apple’s list of suppliers starting in September 2020.
The transition is being driven by US pressure to diversify supply chains away from China and increasing labour costs in the region. However, most firms, such as Foxconn, are wary of revealing the effect of the change on their China operations for fear of enraging Beijing.
Delta is also constructing four major factories in India, where it aims to manufacture photovoltaic inverters and industrial automation equipment for the domestic market as well as information technology and communications equipment for export.