Category Manufacturing & Industry

Production to slow down: HSBC

Workers assemble heavy equipment at a factory in Qingzhou, Shandong province. A preliminary reading of the Purchasing Managers’ Index for the manufacturing industry edged down to 50.5 in December from 50.8 in November, the lowest level since October, HSBC Holdings Plc said in a report.

Preliminary manufacturing PMI shows weaker growth in December

China’s manufacturing sector will likely see the slowest expansion in three months in December because of lower output growth, HSBC Holdings Plc said on Monday.

A preliminary reading of the Purchasing Managers’ Index for the manufacturing industry edged down to 50.5 in December from 50.8 in November, the lowest level since October, the bank said in a report.

The production output sub-index slipped to 51.8 in December from 52.2 in November, pressuring the index.

Meanwhile, the new orders sub-index hit a nine-month high of 51.8 in December, compared with 51.7 in November, while the new export orders sub-index rose to 50.3 from 50.2 last month, suggesting stable market demand.

A reading above 50 indicates expansion, while one below that level signals contraction.

The official PMI data for December will be released on Jan 1 by the National Bureau of Statistics and the China Federation of Logistics and Purchasing. HSBC will release its final PMI data on Jan 2.

Qu Hongbin, chief economist in China at HSBC, said that although December’s preliminary manufacturing PMI reading slowed marginally from November’s final reading, it still stands above the third quarter’s average reading of 49.7.

The latest reading implies that the manufacturing sector’s recovery, which started in July, is still holding up, Qu said.

He believes that China’s GDP growth will stabilize at about 7.8 percent year-on-year in the fourth quarter.

Zhang Zhiwei, chief economist in China at Nomura Securities Co Ltd, said that the slowdown in the PMI data “suggests that growth momentum has started to weaken”.

“This trend is likely to continue in the first half of 2014, as market interest rates keep rising and pushing up financing costs for enterprises,” said Zhang.

Figures from the central bank showed that new loans came in at 625 billion yuan ($103 billion) in November due to stronger retail and short-term corporate loans, rebounding from 506 billion yuan in October. Off-balance sheet lending saw a broad-based recovery to 377.9 billion yuan in November from 184 billion yuan in October but was still below the August-September levels.

A report from Barclays Capital said that short-term bill issuance has increased, as rising funding costs have probably led companies to rely more on short-term financing.

According to the NBS, industrial output growth in November slowed to 10 percent year-on-year from 10.3 percent in October, which may indicate that the GDP growth rate in the last quarter may be at 7.6 to 7.8 percent, compared with 7.8 percent in the third quarter and 7.5 percent in the second, analysts said.

College ordered to revise student internships at Foxconn factory

The education authority in Shaanxi province has ordered a college that sent student interns to Foxconn to revise its cooperation agreement with the company to better protect students.

Hui Chaoyang, director of the provincial education department, said the department has found problems with the management of the work experience activities of Xi’an Technological University’s North Institute of Information Engineering.

They alleged the college forced students to take internships in one of the Taiwan-based electronics giant’s factories in Yantai, Shandong province. Some interns were made to work overtime on the assembly line.

Hui said the college did not offer other work experience options for students.

Some of the work was not in line with the objectives of the students’ professional training, Hui said. For instance, students majoring in finance and accounting were also put to work on assembly lines.

The official added that some students were also required to work much harder than expected.

The college decided on Sunday to suspend its cooperation agreement with Foxconn and around 1,000 students working for the factory will return to school by Wednesday, said Zhang Jun’an, president of the college.

Zhang said the school started cooperating with Foxconn’s Yantai plant in 2010 and has sent students there every summer vacation.

Zhang acknowledged the school received 100 yuan ($16) per student from Foxconn as a management fee if the student worked in the factory for two months.

“The amount of the management fee in 2012 was some 70,000 to 80,000 yuan and in 2013 reached more than 100,000 yuan. Our school used the money for student activities such as teaching contests and sports games,” Zhang said.

Students also earned some wages for their work.

In the past three years of cooperation with Foxconn, the school also received financial support from the company to establish scholarships and teaching awards to encourage excellent students and teachers, and for the construction of a laboratory. The financial support totaled more than 300,000 yuan, Zhang said.

This summer vacation, more than 5,000 students from the institute were sent to Foxconn’s Yantai factory from late July to late September.

A student surnamed Li told China Daily she had to work more than 10 hours a day on the assembly line pasting labels on recording pens.

“The work was hard and boring, and we do not think such so-called work experience made any sense,” the student said.

Another student surnamed Wang said they were required to take part in the work experience activities as this gained them six academic credits toward their diplomas.

Foxconn admitted last week that its Yantai factory forced the students to work overtime and on night shift, which broke the company’s rules, and vowed to resolve the problem.

From 2009, cases of students from Chongqing and Jiangsu, Shanxi and Shaanxi forced to work in Foxconn have been reported regularly and people suspected the students are used to tackle the company’s labor shortage.

Shi Ying, deputy director of Shaanxi provincial academy of social sciences, said such work experience for students was justified and essential but arranging overtime for the students broke Chinese labor law.

China’s output growth eases in both manufacturing and service sectors: HSBC

The HSBC China Composite PMI data, which covers both manufacturing and service sectors in the country, signaled a further expansion of output in September, and the rate of expansion remained modest, with the index posting at 51.2 in September, easing from 51.8 in August, HSBC said in an emailed press release here on Tuesday.

Manufacturers reported a further increase in order book volumes last month, however, the rate of increase was unchanged from August’s marginal pace, the report said. Meanwhile, at service providers, new order growth slowed from August, but was nonetheless marked.

Employment levels at Chinese manufacturers declined for the sixth month in a row in September, and the rate of job shedding was moderate and broadly unchanged from August. In contrast, staffing levels increased at service providers, following a reduction one month previously.

The input costs faced by manufacturers increased at the fastest rate since February. Service providers also reported higher input costs, though the rate of inflation was modest and below-trend. Both manufacturers and service providers passed on higher input costs to clients by raising their output prices in September. The rates of increase were modest across both sectors.

Service sector firms operating in China expected activity levels to be higher in one year’s time. However, the degree of positive sentiment was the second-weakest in the series history.

Qu Hongbin, Chief Economist, China and Co-Head of Asian Economic Research at HSBC said China’s services activity growth appears to be stabilizing at a faster pace than in the second quarter and this led to a renewed expansion of employment from the contraction in August.

“Combined with the gradual improvement of the manufacturing PMI, the Chinese economy is still on the way to a modest recovery. But a more consolidated and sustainable recovery requires structural reforms,” he said.

Innolux hopes to boost touch screen use

Innolux Corp aims to increase the penetration rate of its touch panels used in notebooks and all-in-one PCs to 50 percent next year, a company executive said yesterday.

Only a very small portion of PCs worldwide are currently equipped with touch panels because of their high price and unattractive Windows 8 operating system, Innolux said.

It believes about 10 percent to 15 percent of notebook computers around the world will have touch screens at the end of this year, Innolux said.

To boost the penetration rate, the world’s No.4 LCD panel maker has developed low-cost touch screens by integrating touch sensors and LCD glasses, Jeffrey Yang, an associate vice president, told reporters during a touch screen trade show in Taipei.

Innolux plans to begin shipping the new low-cost touch screens later this quarter and expand its monthly output to around 200,000 units next quarter, Yang said. The low-cost screens are made on one-glass-solution technology, he said.

Innolux installed a new production line in a Chinese factory to produce the screens and is working to overcome a labor shortage problem to increase the factory’s output, Yang said. The company plans to recruit 3,000 workers, he said.

However, Harris Po, an analyst with local research firm Topology Research Institute, is less optimistic, saying Innolux’s target was “too aggressive.”

“It could only be reached after touch screens become standard products, which can help drive the cost of touch screens to an affordable level,” Po said.

Local rival AU Optronics Corp, which is showcasing 19.5 inch and 21.5 inch touch screens at the touch screen show, has predicted that about 20 percent of its notebook computer panels will be touch screens at the end of this year.

Yang said the company is also set to ship new energy-saving touch screens using Indium Gallium Zinc Oxide (IGZO) technology by the end of this year.

As an IGZO screen only consumes one-third the power that average LCD screens consume, an “IGZO [panel] is important for tablets,” he said.

IGZO panels have been under the spotlight amid growing speculation that Apple Inc will have its new-generation iPhone, iPad and Macbook laptops equipped with the screens.

Japan’s Sharp Corp is the major IGZO panel manufacturer.

Innolux, which holds a 70 percent global share of the 4K2K TV panel market, expected 50 percent of its TV panels would be such ultra-high-definition panels next year, up from 10 percent estimated for this quarter, Yang said.

The company plans to more than double its output of 4K2K TV panels to 500,000 units a month by the end of this year, from 200,000 units currently.

Separately, Innolux and AUO yesterday said they did not plan to lower factory utilization because they expected demand to return soon, driven by the holiday shopping season in October in China, shopping for Christmas shopping in the US and Europe and then the Lunar New Year demand from Asia.

Innolux has seen demand recover this month and expects customers’ inventories to return to normal next month.

“We hope to keep our equipment loading rate at a stable and reasonable level,” Innolux spokesman Lin Chen-hui said. “The fourth quarter will be a better period than the third quarter.”

The company plans to maintain a factory utilization rate of more than 90 percent this quarter and next quarter, Lin said.

A bosses’ ploy to hold down wages, unions say

The plan to import 330 labourers for the Mai Po railway tunnel has come under fire by the unions who charge that the move would help bosses suppress the wages of local workers.

The Labour Department recently approved an application by the contractors of the high-speed rail link between West Kowloon and Shenzhen to bring in 330 people who have been working on the mainland section of the line to fill the job vacancies.

The chief executive of the Confederation of Trade Unions Mung Siu-tat said the “so-called” vacancies were created by the contractors suppressing the wages for the jobs.

“The job vacancy was such a lie,” said Mung, adding that data from the Census and Statistics Department showed the unemployment rate in the construction industry was 6 per cent in the first quarter of 2013, which was almost double the city’s overall unemployment rate of 3.4 per cent.

A department spokesman said the government would consult relevant unions before it decided whether or not to approve the import of non-local workers.

But Mung said his union was not consulted or informed until the authority officially approved the plan earlier this month.

Another unionist said the contractors had failed to recruit local workers for the project because they were offering a salary much lower than the average rate in Hong Kong.

Wong Wai-man, chairman of the Bar-bending Industry Workers Solidarity Union said employers were offering bar benders and steel fixers HK$1,076 a day, which is about 30 per cent less than the average of HK$1,514.

Wong said he was worried that importing the non-local workers would create a vicious cycle in the industry.

“The wages will stay low. Young people will then be reluctant to become a construction worker. In the end there will seem to be more job vacancies, and the employers will have more excuses to import workers.”

Foxconn on mass recruitment in China, puts ‘robot’ plan in question

Foxconn reportedly is looking to recruit more than 90,000 workers for its Shenzhen factory, putting more question marks on the company’s previous plan to deploy 1 million robots by 2014.

According to a Yi Cai report Friday, the Taiwanese electronics manufacturer is beefing up its pool of skilled workers. It cited a staff at Foxconn’s Shenzhen recruitment center who declined to be named: “We are keeping things very low-key during this recruitment drive.”

The latest development follows another massive recruitment exercise for its inland factory in Zhengzhou earlier this year, which seems to contradict Foxconn CEO Guo Taiming’s plan to replace manpower by installing 1 million robots across its factories.

“There are huge hurdles if Foxconn wants to push forward its 1 million robot plan,” a robotics technology provider for Foxconn noted in the Yi Cai report. He estimated Foxconn probably installed fewer than 100,000 robotic pieces since Guo shared his vision for factory automation in 2011, with plans to increase the company’s robot count by 100-fold from 10,000 to 1 million by 2014.

The source from Foxconn said the company needed more time to push forward the automation process and, for the time being, would choose the comparatively cheap labor in mainland China as its first choice.

China manufacturing weak in July – surveys

Chinese manufacturing remained weak last month with SME businesses suffering a bigger share of the pain, two surveys showed today.

The official China Federation of Logistics and Purchasing’s manufacturing index strengthened slightly to 50.3 from June’s 50.1.

Separately, the private HSBC purchasing managers’ index fell to an 11-month low of 47.7 from 48.2 in June.

Any reading over 50 signals expansion in a sector, while a figure under 50 signals contraction.

The unexpected rebound in the official survey offered a glimmer of hope that China’s slowdown is stabilising. But analysts warned that it was still too early to conclude a decisive growth rebound because the pickup “is still far too modest.

The results also reflect how China’s small and medium-sized private enterprises, which analysts say make up a bigger share of HSBC’s survey, are more vulnerable to efforts to tighten up lending as well as to slumping global export demand for toys, clothing, electronics and other manufactured goods.

China’s big state-owned companies have easier access to bank loans and hardly compete in export markets.

The HSBC report, covering 420 companies, said output at Chinese manufacturers fell as total new orders dropped at the sharpest rate in 11 months because of a decline in new business in both China and overseas. Export orders fell for the fourth month in a row, though at a slower pace.

Exporters said that new sales to Europe, Southeast Asia and the US fell from June. Chinese manufacturers also shed jobs at the fastest pace in four years.

The federation’s survey of 3,000 businesses, meanwhile, found production, new orders and most other sub-indicators moved higher. New export orders improved but remained below an index reading of 50 last month.

Fallout from China’s manufacturing slump may be felt globally, as declining orders result in less demand for commodities from countries such as Australia and Brazil and for industrial components from Southeast Asia, Taiwan and South Korea.

China has recorded five quarters of growth below 8% in a row – a substantial economic cooling for a country that previously grew at double-digit rates. Analysts said the survey results indicate smaller private companies may still be feeling the effects of a credit shortage that began in June as Chinese regulators try to rein in a lending boom over fears it could race out of control.

The credit crunch caused interest rates on loans between banks to spike to a record high. China’s central bank wants to tighten lending standards, which should reduce risk but is likely to reduce financing for private businesses that generate China’s new jobs and wealth.

GM investing billions in China to tap lucrative luxury car market

General Motors has chosen the world’s second-largest luxury car market — China — to pit itself against automakers from Japan and Germany, despite the industry’s lagging fortunes there.

The US-based carmaker said on Wednesday that it would invest $11 billion in the country in hopes of grabbing a larger share of the lucrative sector as it broke ground on new facilities.

“We are also sending a strong message about the important role of Shanghai and China in GM’s global operations,” GM chairman and CEO Dan Akerson said in a news release.

The Detroit manufacturer made the announcement as it broke ground on a new Cadillac plant and a new research facility. The structures represent a total investment of $1.3 billion and will occupy a total area of about 8 million square feet.

More from GlobalPost: Why China will implode

Cadillac has set goals of tripling its annual sales in China to 100,000 units by 2015 and increasing its share of China’s luxury car market to 10 percent by 2020.

To achieve its goals, it will introduce new models every year until 2016. GM now has about 2.5 percent of luxury sales in China.

GM sold about 30,000 Cadillac vehicles in China last year, but that’s still a small number compared to brands like BMW and Audi, Agence France-Presse noted.

“There are generous profits in the luxury car market,” industry analyst Cui Dongshu told AFP.

“GM has to make an investment targeted at the segment and build this plant in Shanghai to localize its products, in order to effectively seize a place in the high-end segment.”

China’s market will continue to grow, with AFP reporting it will climb about 2.5 percent annually to 30 million vehicle sales by 2020.

Only Americans buy more luxury cars and SUVs than the Chinese.

GM’s projections come despite slower growth in the luxury segment, the Wall Street Journal reported.

Audi, for example, enjoyed 41 percent growth during the first quarter of last year, but just 14 percent this year.

“The luxury market right now looks like it’s going to grow at about 4 percent this year. At the beginning of the year, I think it was much higher,” GM China president Bob Socia told The Journal.

Foxconn adds 10,000 Chinese assembly-line workers a week to meet new iPhone demand

Taiwan technology giant Foxconn has been increasing its assembly-line workforce in central China in preparation for the manufacture of a new iPhone, the company and media said Tuesday.

Foxconn has been hiring workers in its Zhengzhou plant and will continue to do so to “meet operational demands”, spokesman Simon Hsing said, without elaborating.

The Taiwanese company said Monday that it has added about 10,000 assembly-line workers a week in Zhengzhou, its major production facility for iPhones, since the last week of March.

A spokesman for Foxconn declined to elaborate about production plans, saying only that the company would continue to expand its workforce in Zhengzhou, where it currently employs some 300,000 people, to meet seasonal demand from clients.

The Wall Street Journal said the resumption of hiring in Zhengzhou, the company’s major production facility for iPhones, indicated that Apple is gearing up for production of a new device.

The newspaper quoted unnamed Foxconn executives as saying the company had increased workforce numbers at the plant to cater for a new iPhone launch.

Foxconn, the trade name for Taiwan-based Hon Hai Precision Industry Co., is the world’s largest contract electronics maker and assembles products for Apple, Sony and Nokia, among others, in huge plants in China where it employs more than one million workers.

In February, Foxconn said it had decided to temporarily slow down the recruitment process due to an unprecedented rate of returning employees following the Chinese New Year holiday compared to previous years.

The Financial Times newspaper reported at the time that Foxconn had frozen hiring in China due to reduced orders for Apple’s iPhone 5, although the company denied such decisions were made based on any one customer.

China’s migrant workers go home for the annual Lunar New Year holiday and immediately after the long break companies typically report labour shortages as employees delay their return or fail to go back to their previous jobs.

Report: Foxconn Worker Jumps From Factory Roof Amidst Job Cuts

At least one employee at Foxconn, the manufacturing giant best known for making Apple products, has reportedly jumped from a factory roof in Shenzhen, China due to concerns over job security.

According to AppleInsider, which cited reports from Chinese micro-blogging website Sina Weibo, a female worker jumped from the roof at Foxconn’s Shenzhen factory this past Friday at 9 a.m. local time but survived. By noon, three other employees had also climbed to the roof of the building and were threatening to jump, the blog said.

According to other reports, a second person jumped off the roof, though there is no word about their condition.

In a statement to PCMag on Monday, Foxconn confirmed that a worker dispute occurred, but did not address whether anyone had jumped from the building.

“We can confirm that on March 29, three employees at our campus in Longhua, Shenzhen were involved in a workplace dispute over the company’s decision to offer them an opportunity to relocate to another Foxconn China facility as part of a shift in production linked to their business group,” the statement reads. “As a result of that dispute, the employees in question gathered at the top of a campus building and stayed there until local law enforcement authorities arrived at the scene. The dispute was resolved peacefully and no one was injured. Any reports to the contrary are totally inaccurate.”

Unfortunately, suicide at Foxconn is not a new phenomenon. At least 14 Foxconn workers in Shenzen and Chengdu have taken their own lives in a string of worker suicides since early 2010. Foxconn has since forced employees to sign a pledge promising that they won’t commit suicide and installed nets outside factory dormitories to deter potential jumpers.

The most recent wave of employee discontent reportedly stems from recent job cuts, lowered wages, and the end of some free amenities. Foxconn is said to have been encouraging some employees to leave the company as part of an effort to cut employee costs.

The electronics maker last month suspended recruitment of new hires, but denied that the hiring freeze was related to slowing iPhone 5 demand.

As of December, working conditions seemed to be improving at Foxconn’s mainland China factories. A New York Times article detailed positive changes at Foxconn’s China-based plants, which have been criticized by global labor rights groups and were audited last year by the Fair Labor Association (FLA), at Apple’s behest.

Editor’s Note: This story was updated on Monday at 4:00 p.m. Eastern with comment from Foxconn.