Chinese headphone maker in Dongguan shuts down, intensifying country's woes in manufacturing, cross-border e-commerce

Thu, July 21, 2022 

A major Bluetooth headphone maker, Dongguan Koppo Electronics Co, has decided to shut down for good and dismiss all its workers, becoming the latest casualty of the economic headwinds, supply chain disruptions and trading woes that have hit China's manufacturing heartland.

Koppo Electronics, which has operated its factory in the city of Dongguan in southern Guangdong province for 12 years, said it was ceasing operations partly because "a number of cross-border e-commerce clients have failed to make due payments", according to a notice seen by the Post.

"Since the outbreak of the Covid-19 pandemic, global economic and trade flows have seen unprecedented disruptions," the notice said. "The company has been hit by delayed payments by a number of cross-border merchants, and a huge amount of finished goods are stockpiling in the warehouse."

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Koppo Electronics is expected to lay off 100 workers, according to a report on Wednesday by Chinese digital media Jiemian News. At its peak, the company had more than 1,000 workers and produced about 400,000 headphones a month.

A production line inside the factory of Dongguan Koppo Electronics Co, a major Bluetooth headphone maker in China. 

"The company has been making losses in recent years and it's difficult to continue the operation," the notice said. "The sudden outbreak of [the Ukraine] war has dealt another heavy blow to the company's business and the market situation is just grim."

Phone calls to Koppo Electronics went unanswered on Wednesday.

Its collapse comes on the heels of a number of high-profile factory closures in the Pearl River Delta, which has raised concerns about China losing its competitive edge in manufacturing and major role in global supply chains.

Trouble in China's manufacturing heartland has the potential to ripple through the wider economy. The export sector provides jobs for 180 million people, or more than a third of the country's 530 million non-farming jobs, according to data from China's Ministry of Commerce.

The demise of Koppo Electronics also reflects more signs of trouble for the "Made in China, Sold on Amazon" community, following the US e-commerce firm's extensive crackdown that removed thousands of Chinese sellers from the platform since last year.

One of the company's biggest clients to miss payments was Shenzhen-based cross-border consumer electronics firm Sunvalley, a large seller of Chinese-made gadgets on Amazon, according to the report by Jiemian News, which cited major Koppo Electronics shareholder Wei Yongning.

That Amazon vendor's accounts were frozen last year by the US e-commerce giant for failure to comply with the online platform's rules, which led to its failure to pay Koppo Electronics for the products it ordered, the Jiemian News report said.

Sunvalley and its parent company, Guangdong SACA Precision Manufacturing Co, did not immediately respond to requests for comment.

The "Made in China, sold on Amazon" community faces a gloomy future after years of rapid growth. 

In June last year, Amazon banned the sale of three popular product lines under Sunvalley - RAVPower power banks, Taotronics earphones and VAVA cameras - for attempts made by the seller to solicit positive customer reviews. Last October, three more of the company's gadget brands - Anjou, Sable and Hootoo - were removed online by Amazon.

A total of 367 Amazon online stores operated by Sunvalley were suspended by the platform in 2021, accounting for 70 per cent of all of the Chinese firm's accounts, according to the annual report of parent SACA. It said more than 32 million yuan (US$4.74 million) of Sunvalley funds were frozen by Amazon.

Shenzhen-listed SACA's cross-border e-commerce sales for 2021 were nearly halved because of Amazon's crackdown, which led to a 1.52 billion yuan loss in the period, according to its annual report. Koppo Electronics was one of the top suppliers for Sunvalley, the company's filing showed.

When Amazon started to clamp down on fake reviews last year, the US platform shut 3,000 online merchant accounts backed by about 600 Chinese brands, damaging the operations of the "Made in China, Sold on Amazon" community.

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