Notebook supply chain players have recently started considering a return to their original production hubs in coastal cities of Southeastern China such as Kunshan since the Chongqing and Chengdu governments’ tax-free subsidies have mostly expired and the Kunshan government’s tax-cut terms have now become better than those of the inland-area governments. Serious labor shortages are another major factor prompting suppliers to leave inland China to coastal cities, according to sources from the related supply chains.
Dell has already moved its notebook production from Chengdu to Kunshan recently due to the factors above.
The sources pointed out that the Chongqing and Chengdu governments have been aggressively helping suppliers solve labor shortage issues, but the situation has not improved much. Suppliers have also seen increasing production costs because of workers’ lack of experience in working at IT assembly lines and their unwillingness to work night shifts and overtime.
Suppliers have also encountered issues concerning building up local pools of middle-level management personnel and some firms even have to relocate managers from coastal areas to help manage their in-land plants.
Since HP’s tax-free contracts with the Chongqing government will expire in 2015, the vendor may also consider moving its production back to plants in coastal areas of China.
HP signed contracts with the Chongqing government along with ODM partner Foxconn to start notebook production in the city in 2009 with Dell starting its notebook production in Chengdu in 2011.