Killer competition in electronic device market claims another victim

Behind Fu Chang's sudden bankruptcy is a tale of quality issues, financial mismanagement and slowing growth of the mobile phone industry

There was a time when the basketball court for staff of a Shenzhen-based manufacturer was full of action and energy.

Now, no one is in a mood to play. Fu Chang (Fosunny) Electronic Technology Co's sudden announcement of bankruptcy has knocked the wind out of everyone's sails.

A few steps away, a five-floor factory building, home to "No 2 molding injection plant", appears barren. Its rolling door is not rolling anymore.

And workers are not working anymore either. Not very long ago, they were busy producing plastic components and accessories for some of the biggest names in China's mobile phone industry. Telecoms giants Huawei Technologies and ZTE Corporation were clients.

Fu Chang's machines and molds are gathering dust. Its employees are waiting for an opportunity to get back to their jobs. There is now unconfirmed talk of a restructuring and government intervention.

Fu Chang made headlines as thousands of workers and business partners took to streets to claim their pay and seek help from the local government.

A source said the district government, representatives of Fu Chang's employees, ZTE, Huawei, various suppliers, investors and lawyers met on Oct 16 and agreed to restructure the company.

According to Shenzhen city's market supervision administration, Fu Chang raked in 459 million yuan ($72.86 million) in sales in 2014. According to its website, it was listed as China's most promising high-tech company in 2009.

All this makes the bankruptcy and sudden shutdown mysterious to its workers, suppliers and clients, none of whom had any inkling even one week before the bankruptcy.

Huawei told China Daily that Fu Chang's troubles caused its losses and created an emergency, forcing it to switch to other suppliers, to keep up its product deliveries.

An industry insider disclosed that Huawei usually has two suppliers for its key products. As it transpires, the two suppliers this time belonged to Fu Chang, exacerbating the problem for Huawei.

Yet, being a large corporation, it could quickly move to contain the impact of FuChang shutdown. But the 100-odd small-sized suppliers of Fu Chang were not so lucky.

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