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Shrinking returns hit OEMs

Tony 2015-09-07 09:30:45

                               Shrinking returns hit OEMs

Component firms are being squeezed by domestic brands and cut-throat pricing war

High-tech Chinese companies that make components for major global smartphone brands, such as Samsung, Apple and Nokia, are struggling to stay afloat.

Hit by dwindling profits, original equipment manufacturers, or OEMs, have faced a tough operating climate since the end of last year.

"Most Chinese electronics companies are now living at the very bottom of the industrial chain, despite decades of development," Liang Zhenpeng, an independent senior home appliances and IT analyst in Beijing, said. "They live on meager profits."

"What is worse, they are totally reliant on one single customer, which means they will find it very hard to carry on once the market declines," Liang added.

The depth of the downturn for OEM companies, which are mainly based in the Pearl River Delta and Suzhou in Jiangsu province, is starting to reach a critical point.