Normally at this time of year, the manager of a speaker maker in Dongguan, China, says that he is struggling to find temporary workers for the peak production season. However, this year is far from normal. The Amazon supplier has not had to make any special efforts to recruit workers, and the hourly wage remains at the minimum rate for the area. The manager states that demand is weak this year, which is unusual.
China’s tech manufacturing industry usually hires hundreds of thousands of temporary workers in the summer to handle orders from major companies like Apple, Amazon, and HP. This hiring frenzy benefits workers who can demand higher wages and bonuses. However, suppliers incur significant costs for wages and recruitment agency fees.
The weak hiring this year is due to a decline in global electronics demand and the shift of supply chains away from China. This contrasts with the strong investment and growth in the artificial intelligence sector. An executive at an Apple supplier comments that hiring workers has been easy and inexpensive this year.
In the past, companies like Foxconn, a major Apple supplier, offered higher wages and bonuses to attract workers. However, this year the highest rate found was lower than previous years. Some smaller tech manufacturers offered even lower wages in important manufacturing hubs like Dongguan and Suzhou.
The weak hiring is a result of slow and uncertain demand in China, as well as the desire of clients from the US, Japan, and South Korea to have their products manufactured outside of China due to geopolitical risks. Major companies like Apple, Google, and Microsoft have been expanding production capacity in other countries, particularly in southeast Asia. These shifts in the supply chain could have negative effects on China’s tech manufacturing industry and jobs.
Beijing is facing additional challenges with weak hiring in the tech industry. The government has suspended publication of youth jobless data, and youth unemployment rates have been increasing. China is also dealing with debt issues in the property sector that could impact the broader economy. Foreign economists have lowered their GDP growth outlook for China.
The tech sector is also experiencing slow demand, as seen with Taiwan Semiconductor Manufacturing Co trimming its revenue guidance and Foxconn cutting its 2023 revenue forecast. The shift in the supply chain away from China is driven not only by rising costs but also by concerns about the US-China tech war and geopolitical uncertainties.
This supply shift could worsen China’s economic woes, leading to a cycle of lower demand and reduced hiring. The diversification trend away from China is expected to continue, even though suppliers face challenges in building new ecosystems in southeast Asia and India.
Moving production to other countries will result in job losses for China. The impact on China’s economic recovery will be significant, as jobs are created in countries like Vietnam, Malaysia, Thailand, and India.
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