Yue Yuen Industrial (Holdings) Ltd (裕元工業), a Hong Kong-listed footwear maker, yesterday said its board had agreed to adjust employee benefits for Chinese workers in Dongguan City, Guangdong Province, as a strike continues.
The company, which counts major brands such as Nike, Adidas, Reebok, New Balance, Timberland and Rockport among its clients, said the adjustment is being made in accordance with relevant local government policies that will take effect from May 1.
The move came as work stoppage at the company’s Gaobu factory in Dongguan continued for a fourth day, with workers demanding better social insurance benefits and housing subsidies.
More than 30,000 workers were on strike yesterday, making it one of the largest-ever at a private business in China, the Associated Press reported, citing US-based China Labor Watch.
The Gaobu factory employs between 40,000 and 50,000 workers.
“The company will continue to review its employee benefits policy,” Yue Yuen said in a filing with the Hong Kong Stock Exchange. “Adjustment to the employee benefit payments may have a material adverse effect on the financial performance of the group.”
The company did not provide more details.
Yue Yuen is the world’s largest branded footwear manufacturer, with approximately a 17 percent market share of all branded athletic and casual footwear.
The company was founded in 1988 and 49.98-percent owned by Taiwan’s Pou Chen Corp (寶成). It has factories in China, Vietnam, Indonesia, Mexico and the US, according to the company’s Web site.
Revenue last year was US$7.58 billion, down 8.97 from US$9.19 billion in 2012, while net profit was US$440 million, 29 percent lower compared with the previous year. Gross profit margin fell to 21.7 percent from 22.8 percent during the period, company data showed.
The last time such a large-scale strike happened in Yue Yuen’s factories in China was in November 2011, according to a note to clients yesterday by UBS AG analysts Spencer Leung (梁裕昌), Chen Siguo (陳思果) and Erica Poon Werkun.
The analysts said their recent conversations with company management suggest that Yue Yuen plans to close down higher-cost production lines in Guangdong, but hopes to maintain its overall production capacity by ramping up production in Indonesia and Vietnam.
“However, the process of such production relocation could be less smooth than what management expected, as the workers in Guangdong are becoming more conscious and are demanding more employees’ rights, which is a different case compared with a few years ago,” they said.
Yue Yuen is following a trend among foreign manufacturers in China that are relocating their production lines from coastal regions to inland areas or even to other lower-cost countries in the face of increasing wages.
UBS expects Yue Yuen’s short-term profitability to be relatively stable thanks to its cost-control measures, but the firm could still face margin pressure in the long term because of a structural decline in average selling prices (ASPs) amid production location shifts.
The ASP for its China products is US$20 a pair, while those from Indonesia and Vietnam sell for US$13 to US$15 a pair, UBS said.
UBS retained its “sell” rating on Yue Yuen shares, with a target price of HK$22.00. The stock closed 0.97 percent higher at HK$26.10 yesterday.
Stephen Garrett, a 27-year-old graduate student, always thought he would study in China, but first the country’s restrictive COVID-19 policies made it nearly impossible and now he has other concerns. The cost is one deterrent, but Garrett is more worried about restrictions on academic freedom and the personal risk of being stranded in China. He is not alone. Only about 700 American students are studying at Chinese universities, down from a peak of nearly 25,000 a decade ago, while there are nearly 300,000 Chinese students at US schools. Some young Americans are discouraged from investing their time in China by what they see
MAJOR DROP: CEO Tim Cook, who is visiting Hanoi, pledged the firm was committed to Vietnam after its smartphone shipments declined 9.6% annually in the first quarter Apple Inc yesterday said it would increase spending on suppliers in Vietnam, a key production hub, as CEO Tim Cook arrived in the country for a two-day visit. The iPhone maker announced the news in a statement on its Web site, but gave no details of how much it would spend or where the money would go. Cook is expected to meet programmers, content creators and students during his visit, online newspaper VnExpress reported. The visit comes as US President Joe Biden’s administration seeks to ramp up Vietnam’s role in the global tech supply chain to reduce the US’ dependence on China. Images on
New apartments in Taiwan’s major cities are getting smaller, while old apartments are increasingly occupied by older people, many of whom live alone, government data showed. The phenomenon has to do with sharpening unaffordable property prices and an aging population, property brokers said. Apartments with one bedroom that are two years old or older have gained a noticeable presence in the nation’s six special municipalities as well as Hsinchu county and city in the past five years, Evertrust Rehouse Co (永慶房產集團) found, citing data from the government’s real-price transaction platform. In Taipei, apartments with one bedroom accounted for 19 percent of deals last
US CONSCULTANT: The US Department of Commerce’s Ursula Burns is a rarely seen US government consultant to be put forward to sit on the board, nominated as an independent director Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), the world’s largest contract chipmaker, yesterday nominated 10 candidates for its new board of directors, including Ursula Burns from the US Department of Commerce. It is rare that TSMC has nominated a US government consultant to sit on its board. Burns was nominated as one of seven independent directors. She is vice chair of the department’s Advisory Council on Supply Chain Competitiveness. Burns is to stand for election at TSMC’s annual shareholders’ meeting on June 4 along with the rest of the candidates. TSMC chairman Mark Liu (劉德音) was not on the list after in December last