Japanese optical product maker Canon will close part of its Zhuhai factory in southern China, with a full shutdown of the 32-year plant being considered, due to shrinking demand in the digital camera market and continued fallout from the coronavirus.

Rumours about the closure of the entire facility in Guangdong province started on Thursday with an internal company letter circulating online

The announcement, which was issued on Wednesday, said that “the operation of the company is facing unprecedented difficulties. Despite the joint efforts of the company and all employees, it has failed to reverse the situation.

“The headquarters has to adjust the overall operation structure of the group. After careful consideration, a difficult decision has to be made: to terminate the company’s production.”

It is not clear how many employees at the Zhuhai facility will be affected, and the company has yet to decide whether the relevant production line will be relocated, said Canon China public relations department representative Shen Yue.

As of the end of 2020, the Zhuhai factory had 1,317 employees, according to the company’s website.

“Part of Canon Zhuhai’s production line is preparing to cease operation. There is not yet a specific timeline, like when it will be cut, and how to do it,” said Shen.

“Because of the development of the smartphone, the market for compact digital cameras has been shrinking. Other shocks include the pandemic and the [shortage of] chips.”

Canon’s looming departure from Zhuhai follows several other multinational enterprises relocating their production bases in China to Southeast Asia or back to their home countries in recent years due to rising labour costs and concerns over supply chain security.

In September, Japanese electronic giant Toshiba ceased production at its Dalian facility, ending its 30-year presence as an economic force in the city in the northeastern province of Liaoning.

In the same month, South Korean manufacturing conglomerate Samsung announced the closure of its shipbuilding plant in Ningbo in the eastern Chinese province of Zhejiang.

The company closed its last Chinese mobile phone factory in 2019 amid growing global focus on diversification of supply chains.

The exodus has sparked fears that large foreign investors and employers could be looking to depart the world’s second largest economy.

According to a survey published in 2021 by Japan Bank for International Cooperation, an increasing number of Japanese firms in China are considering relocating or changing to suppliers in Southeast Asia or Mexico. They cited lower labour costs, ongoing tensions between China and the US and the protracted coronavirus pandemic.

“In the past, we manufactured in China and supplied products to the US, but after [former president Donald] Trump was inaugurated, we changed the business like ‘In China for China’ and ‘In Mexico/US for US’,” said one car parts company surveyed.

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