Chinese PC makers face crisis as wages rise

Chinese PC component suppliers face a bankruptcy crisis after a number of provinces in the country are set to raise minimum wages in an attempt to counter domestic inflation.

The provinces of Guangdong and Qilin will increase workers' minimum wage in early 2012, while the city of Chongqing, where many manufacturers have recently relocated in an attempt to cut costs, is set to raise its minimum wage on 1st January, 2012 - prompting speculation of a wave of bankruptcies among smaller suppliers. Manufacturing in the city has also been affected by electricity shortages and a shortfall in labour of as much as 20 per cent.

Local companies are reported to be unable to raise funds from mainstream banks and are turning to other lenders charging interest of as much as 36 per cent.

Wage rises are part of the Chinese leadership's '125' policy, the 12th five-year plan, adopted in 2010. Under the policy, average incomes are set to rise above 13 per cent for each of the next five years minimum, leading to an overall rise of 84 per cent on 2010 wages. But the net effect of the policy within the IT industry could be to see business concentrated in the hands of the few biggest players. The notebook market looks set to be dominated by just three companies - Quanta Computer, Compal Electronics and Wistron, with Quanta predicting an increase in notebook shipments of 30 per cent by the end of the year.