A large number of industrial plants in Dongguan are now available for rent

Dongguan has always been known as the "world factory". There are 50,000 to 60,000 manufacturing and processing companies in an area of only 2,500 square kilometers. The former human resource advantage has enabled processing trade to be carried out in full swing in this land. However, since 2014, various news about Dongguan's OEM companies have continued, and China's OEM industry is facing a transformation dilemma. In December 2015, reporters from "Economic Half Hour" came to Dongguan and conducted an investigation on the manufacturing industry here.

With fewer orders and rising labor costs, Dongguan's OEM industry is experiencing a cold snap

On December 6, 2015, a Sunday afternoon, Lao Liu sat in front of the small store he opened and was in a daze. In the past, at this time, a large number of workers would take a break and go out to buy things, but now there are very few people.

Lao Liu was in a daze at the door of the small store he opened. In the past, a large number of workers would go out to buy things, but now there are very few people.

Lao Liu was in a daze at the door of the small store he opened. In the past, a large number of workers would go out to buy things, but now there are very few people.

Shop owner Lao Liu: In the past, there were crowds of people after get off work. There were all kinds of stalls on the roadside, selling vegetables, steamed buns, and doing small businesses. Now, there is basically no one, and there are few people working.

Speaking of the changes in the past two years, he has been working in Dongguan for seven or eight years. He has worked as a worker and a taxi driver. Now he uses his savings to open this small shop.

Two years ago, Lao Liu spent 130,000 yuan in transfer fees to buy this small shop at the entrance of the industrial zone. He also specially placed a billiard table and TV in front of the door to attract customers, hoping that more people will do better business.

Lao Liu: Mainly in the evening, I sit here, watch TV, smoke, chat, and play.

But Lao Liu's business was booming for less than half a year. Since 2014, with the closure of factories and the reduction of workers, Lao Liu's small shop has also been unsustainable. The rental houses that were once difficult to rent are now quite empty.

Around Lao Liu's store, there are several OEM industrial parks. Now, you can see the words "factory for rent" posted at the factory gates everywhere. Many of the shops on both sides of the road have also pulled up their shutters.

You can see "factory for rent" posted at the factory gates of several OEM industrial parks everywhere.

Chen Yanping is one of the first people to set up factories in Dongguan and knows the industry situation of OEM factories very well.

Chen Yanping, chairman of Dongguan Topless Optoelectronic Technology Co., Ltd.: Because for OEM, its threshold is very low, as long as you have a certain amount of working capital and find a certain source of customers, you can start working.

With low thresholds, no innovation, no independently developed products, and the rising labor costs year by year, OEM factories that lack core technologies have gradually lost their space to survive in the market. In Chen Yanping's view, this is a very normal thing.

OEM enterprises have had a glorious past. They once accounted for more than 50% of China's foreign trade and became the most important contributor to the trade surplus. Chen Yanping is an OEM enterprise in the TV manufacturing industry with more than 400 employees. Taking 2013 as an example, in just two years, the input cost of a worker doubled.

Chen Yanping: In the past, if we were an ordinary worker, he could get a job for about 2,000 yuan if he was a front-line worker. This year, it will be at least 4,500 yuan.

In the past, a front-line worker could get a job for about 2,000 yuan, but this year, it will be at least 4,500 yuan.

In addition to the increase in labor costs, the decrease in order volume caused by the economic downturn in Europe and the United States, and the price war of Chinese electronic products on e-commerce sales platforms are all direct reasons for the blow to Dongguan's OEM industry. Take a 32-inch LCD TV as an example. The sales price of e-commerce is very different from that of dealers.

Chen Yanping: In 2010, it could be sold for nearly 3,000 yuan. As of today, you can check on Taobao and JD.com, and the cheapest one may be sold for 799 yuan.

Chen Yanping, who has worked in the TV manufacturing industry for more than ten years, has witnessed the changes in Dongguan over the years, with declining profits and rising costs. Under such pressure, many colleagues like Chen Yanping who are engaged in OEM have switched to other industries.

The boss of the OEM factory is worried, but the workers in the OEM factory are not like this. Lao Zhang is a worker in a shoe factory. Now Lao Zhang and his family live in a 70-square-meter dormitory allocated by the factory. Both their income and environment have changed a lot over the years.

"Economic Half Hour" reporter: Did you install the air conditioner in the house yourself?

Zhang Ziwei, an employee of Dongguan Lijixing Shoe Factory: The air conditioner was installed by the company.

Although the whole room looks very simple, it is clean and tidy. At present, Zhang and his wife both work in the shoe factory, and their children were brought from their hometown. Last year, they saw that their mother was in poor health, so they simply brought her to Dongguan. The family of four lives in a dormitory, and the two biggest expenses of food and accommodation have been saved.

Zhang Ziwei: In 2010, it was more than 3,000 yuan. Because we two have very strong skills, we can now receive more than 5,000 yuan per month.

It often takes several months for a shoe factory to train a skilled worker. In order to retain workers, showers and toilets are standard in every room. The boss Lai Chaoyang specially installed air conditioners and even WI-FI to enhance his sincerity in recruiting workers.

In order to retain workers, showers and toilets are standard in every room. The boss also specially installed air conditioners and WI-FI to enhance his sincerity in recruiting workers.

Lai Chaoyang, chairman of Dongguan Lijixing Shoe Factory: In order to retain these employees from all over the country, you must have a good environment. In addition, all your dormitories must have a suite with supporting living and sanitation facilities, so that they are very convenient, and you can retain them.

Dongguan's minimum wage standard has also been raised from 1,310 yuan to 1,510 yuan.

Machines replace people, create their own brands, and OEM companies seek transformation and upgrading; good quality and low price, ushering in business opportunities, the robot industry is rising rapidly

Chen Yanping: After the business environment deteriorated, we have been considering product upgrades, including equipment upgrades, and have been considering them. Because if we don't upgrade, we basically can't survive in the market.

On December 1, Chen Yanping drove to a robot manufacturing company in Dalang Town, Dongguan City. Entering the exhibition hall, several fully automatic robot arms are working efficiently according to the prescribed tracks. Chen Yanping carefully observed each machine.

Mechanical equipment salesperson: It is equivalent to an arm of a human hand. You can do different things with this tool.

The sales staff of the manufacturer answered a series of questions about price, function, efficiency, etc. for Chen Yanping, and they could measure the factory and tailor the robot needed for robot manufacturing according to the actual situation. After hearing this, Chen Yanping showed an unconcealable joy on his face.

After listening to the information about the price, function, efficiency and customization of the robot, Chen Yanping showed an unconcealable joy on his face.

Chen Yanping: I feel that we should upgrade as soon as possible. If we use these equipment as soon as possible, we can improve our competitiveness and reduce our labor costs.

Chen Yanping calculated an account for the reporter. Originally, his workshop needed 300 workers. If this kind of robot is used, the number of people in the workshop can be reduced to 150, and the savings in one year alone can reach more than 9 million yuan. In 2016, Chen Yanping plans to invest more than 10 million yuan to upgrade the production line in the factory and improve the level of automation. However, he also believes that it is far from enough for enterprises to achieve transformation and upgrading by simply improving the level of automation in production.

By using robots, the number of workers can be reduced by half, and the annual savings can reach more than 9 million yuan.

Chen Yanping, who experienced the global financial crisis in 2008, felt the helplessness of an OEM factory. There is no way out for traditional OEM. He is not satisfied with processing products according to other people's designs, but has the ability to design products for customers. He wants to be an upgraded version of OEM enterprises. To this end, Chen Yanping established his own R&D team. First, he started with the simplest TV appearance.

After accumulating a certain amount of experience, he began to design the internal hardware and optical components of the TV, so that the added value of the product increased immediately.

Chen Yanping: For example, like this one, you see that this product is our second generation. We mean that all the hardware and structural parts inside are included. After including these products, our space and profit margin are further expanded, and we can also provide more services to customers.

After the TV accessories designed by Chen Yanping are selected by customers, the added value can be increased several times. Nowadays, he has long stopped doing traditional OEM products that are just stupid and hard work. At present, OEM manufacturing based on design accounts for 70% of the total production of the entire factory, but if it continues to develop like this, Chen Yanping is still unsure.

Chen Yanping: Many brands are already very strong. You say we want to come out and make a new brand of TV sets, but in fact, this is very, very difficult.

At present, the competition in the TV market outside China has reached a white-hot level. Building a brand requires huge capital investment, and Chen Yanping knows that he does not have this condition. The only way is to take a different approach and use the advantages of his small and easy transformation to find a market gap.

The competition in the TV market has become white-hot, and Chen Yanping uses the advantages of his small and easy transformation to find a market gap.

Chen Yanping: We call it a special-shaped platform. What is special-shaped? You see, its length and width are different from what we usually see. Its function is to be placed in some more specific occasions, such as buses, subway stations or some specific occasions for some display and some announcements. This is also what we have just developed. The feedback from the market, including some orders we have received from abroad, is good and the effect is also very good.

Chen Yanping: This is developed by ourselves, so if customers need it, they will definitely find us. We will not be replaced by others like before. Now if they use our products, they will have some dependence on us.

Special-shaped screens are mainly exported to the European and American markets, bringing profits nearly twenty times more than OEM.

This type of special-shaped screen developed by Chen Yanping is mainly exported to the European and American markets. Not only has it received a large number of orders, it has brought profits nearly twenty times more than OEM, and he will continue to expand the Chinese market. But compared with Chen Yanping, there are still many people who are running faster on the road of industrial transformation in Dongguan.

Yin Rongzao, Chairman of Guangdong Bolant Intelligent Equipment Co., Ltd.: Our revenue target growth this year is 60%, and in fact it is 45% from January to September. Our goal next year is to achieve a revenue of 300 million yuan, all in order to release this basic production capacity.

Yin Rongzao, who produces and develops intelligent robot equipment, has ushered in business opportunities this winter. Production orders have been scheduled until next year. In the factory yard, rows of manufactured and packaged robotic arms are ready to be loaded and set off at any time. In the production workshop, workers are working overtime to produce and debug equipment, and it is a busy scene.

Yin Rongzao: Next to it, 21 acres of land, the village committee helped me to customize it, and I am going through the formalities. Now, the Land and Resources Bureau and the Planning Bureau have come to speed up the formalities.

The production and development of intelligent robot equipment companies have ushered in business opportunities, and the market is booming.

Yin Rongzao introduced to us that the current booming scene of the company is first of all due to the transformation and upgrading of the entire Dongguan manufacturing industry. Now many are reducing production costs by upgrading the level of automation. Take a six-axis manipulator as an example. It can move in multiple directions and is as flexible as a human arm. It can basically replace the manual links in ordinary manufacturing.

A six-axis manipulator can move in multiple directions and is as flexible as a human arm.

Yin Rongzao: From here one joint, two joints, three joints, four joints, five joints, six joints, that is, six axes, it completely imitates the movements of human hands.

In fact, what really makes Yin Rongzao's robot sales soar is the low price. With independent research and development and the localization of several core components, the price of a six-axis robot arm is only 60,000 to 80,000 yuan, which is half the price of imported equipment. At present, many small and medium-sized enterprises are eager to transform, but they are suffering from tight funds and are short of money. This kind of inexpensive robot is naturally welcomed.

Yin Rongzao: One is the servo motor, one is the controller, and the other is the reducer connected to the servo motor. Well, at present, our reducer is also localized, and our servo motor and our control system are derived from the localization of our injection molding manipulator, extended, upgraded and applied.

Independent research and development and the localization of several core components make the price of a six-axis robot arm only 60,000 to 80,000 yuan, which is half the price of imported equipment.

The Dongguan Municipal Government has also provided a lot of financial support and subsidy policies for the transformation and upgrading of enterprises to replace workers with machines. Lei Huiming, deputy researcher of the Dongguan Municipal Bureau of Commerce, believes that it is the reduction of workers after the replacement of workers with machines that makes Dongguan look a bit depressed to the outside world.

Lei Huiming, deputy researcher of the Dongguan Municipal Bureau of Commerce, Guangdong Province: First of all, the demographic dividend is slowly declining. Many factories have adopted more advanced technology and equipment to replace the past labor-intensive production, so the number of workers is decreasing.

As of November 2015, a total of 759 projects applying for special funds for "machine replacement" have been applied, with a total investment of 6.228 billion yuan and 25,999 new equipment and instruments. After the implementation of the project, 45,117 workers can be reduced, and labor productivity will increase by 65.25%. From the perspective of enterprise output value, the GDP of Dongguan in the first three quarters was 456.38 billion yuan, an increase of 7.9% over the same period last year. Dongguan's pace is still not slow.

After the implementation of the "machine replacement" project, 45,117 workers can be reduced, and labor productivity will increase by 65.25%.

Half-hour observation: OEM transformation, independent brands are king

"Dongguan traffic jams, global shortages" was once used to describe the former prosperity of Dongguan's manufacturing industry, the "world factory", and this round of crisis has just exposed the shortcomings of OEM companies without brands and technology. Not only Dongguan, but many OEM companies in China have suffered the same fate. Under the superposition of many unfavorable factors such as rising labor costs and insufficient overseas demand, it is a general trend for traditional "Made in China" to move towards a low-profit era. To get rid of this predicament, OEM companies must transform from both the industrial structure and the labor structure, and enhance the core competitiveness of the company through innovation.

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