China-based notebook component makers have temporarily stopped expansion of production capacities due to continual wage hikes and short supply of labor in China, according to Taiwan-based supply chain makers.
Most of those China-based makers produce connectors, cable harness, hinges, heat-dissipation fans or modules and chassis used in notebooks, the sources said. Due to stagnant demand for notebooks, vendors have been willing to adopt old models of notebook components instead of designing new ones to minimize production cost and therefore China-based makers have been unable to hike prices, the sources indicated.
However, prevailing wage hikes, labor shortage and China government’s strict control on workers’ overtime hours have significantly increased production cost for China-based component makers, the sources said. Gross margins of 15-20% for heat-dissipation fans, for example, have been almost eroded by 15% increase in production cost, the sources noted.
China-based notebook component makers’ suspended capacity expansion will slacken price competitive pressure on Taiwan-based fellow makers but shows that stagnant demand for notebooks may persist for 3-5 years, the sources indicated.