‘Killing’ bad debts at electronics factories and their ripple effect on chip distributors

Against the backdrop of recent chip shortages, rising upstream raw material prices, and a sudden demand winter, delayed payments, chip frauds, and companies abruptly shutting down operations have become increasingly common—continuously spawning unexpected crises across the chip market. Profitable enterprises may still absorb some losses, but for those already struggling to stay afloat—whose closure would mean total ruin—the impact could be catastrophic. So how does the bankruptcy of an electronics factory affect upstream chip suppliers? And how should small- and medium-sized enterprises (SMEs), already operating under thin margins, respond? By reading this article, you will learn: 1. Interdependence: Cross-border e-commerce platforms, contract manufacturers, and chip distributors 2. A highly volatile electronics supply chain 3. How to resolve bad debts? 01 Interdependence: Cross-border E-commerce Platforms, Contract Manufacturers, and Chip Distributors Cooper Electronics is a 20-year-old Dongguan-based OEM audio products manufacturer, specializing in various wired and wireless headphones. Its clients include numerous well-known domestic and international brands, with markets spanning Europe, North America, and Asia. At its peak, Cooper employed around 1,000 people—including a research and development team of nearly 100—and was equipped with advanced Bluetooth headphone testing instruments and a dedicated laboratory, achieving a monthly production capacity of 600,000 units. Familiar users of true wireless stereo (TWS) earbuds may recall that, in 2019, the TWS market experienced explosive growth, driven by the rollout of Bluetooth 5.0 technology, more stable chip solutions from vendors like Qualcomm, the removal of the 3.5mm audio jack from flagship smartphones, and a return of end-product pricing to reasonable levels. However, beginning in the second half of 2020, a severe chip shortage emerged: 8-inch wafer fabrication capacity became critically constrained, affecting not only 5G smartphones and laptops but also automotive electronics—and TWS earbuds were no exception. As audio devices penetrated deeper into lower-tier markets, fierce competition intensified in the budget segment. Rising costs and chip shortages further burdened brand manufacturers, while the upstream Bluetooth chip sector grew increasingly crowded. In essence, Cooper’s trajectory mirrors the rise and fall of the entire TWS earbud industry. Its shutdown has drawn attention to another key player: Zebotech Group—one of Cooper’s major customers. Zebotech, headquartered in Shenzhen, is a leading cross-border e-commerce seller and one of China’s largest consumer electronics export brands. It commands a dominant market share on major overseas e-commerce platforms such as Amazon. Public disclosures from 2017 indicate that Cooper served as Zebotech’s primary supplier and had ranked as its second-largest supplier for several consecutive years; Zebotech mainly procured Bluetooth earbuds from Cooper. In 2017, Zebotech’s top five suppliers accounted for 40.35% of its total procurement value, with purchases from Cooper amounting to RMB 82.443 million—representing 8.96% of its total procurement. In 2018, Zebotech was acquired by Star Moon Co., Ltd., becoming its wholly owned subsidiary. Star Moon’s consumer electronics business is operated through Zebotech Technology and its subsidiaries. Amazon’s large-scale account suspensions dealt a heavy blow to both Zebotech and Star Moon. According to Star Moon’s financial report, its 2021 revenue reached RMB 2.577 billion—but following the “mass account suspension” incident, overall revenue declined by 46.02%, resulting in a net loss of approximately RMB 886 million. Among its devalued inventory, Amazon-channel stock alone amounted to roughly RMB 402 million—accounting for 96.63% of the total devalued inventory. Revenue from Bluetooth audio products stood at about RMB 344 million—13.36% of total revenue—and fell 60.02% year-on-year.

Another major electronics manufacturer announces production halt and closure! With no orders, raw material price fluctuations are irrelevant.

On July 18, another major electronics manufacturer in Dongguan—Dongguan Cooper Electronics Co., Ltd.—issued an official announcement declaring production suspension and business closure. According to the company’s official website, Cooper Electronics was an integrated enterprise engaged in the R&D, manufacturing, and sales of Bluetooth headphones. At its peak, it employed around 1,000 people—including a nearly 100-member R&D team—and achieved a monthly production capacity of 400,000 units. The sudden collapse of this once-thousand-employee factory evokes deep sighs and sorrow. While many netizens express regret, they also quietly worry whether the fate of “factory closures and worker layoffs” might soon befall themselves. 01 Cliff-like Collapse in Orders Just as ducks sense warming waters first, chemical industry traders are often the first to detect shifts in market temperature. During May and June, numerous chemical trading firm owners lamented, “Orders have suddenly vanished”—and such cases were far from isolated. ▶ Plastics Raw Material Trading: This year, plastics traders suffered severe sales declines in the first half of the year. Meanwhile, falling inventory material prices have further compounded their woes. Take Chi Mei Corporation’s Taiwan-made ABS resin grade PA-757 as an example: One trader purchased the material in late 2021 at a cost of approximately RMB 21,000 per ton. Having held onto the inventory amid continuous price declines without selling, the trader now faces an unrealized loss of RMB 6,000 per ton. Polycarbonate (PC) resin shows similar trends—prices have fallen steadily from RMB 20,000 per ton to around RMB 14,800 per ton in the East China market. ▶ Modified Plastics Manufacturing: Most modified plastics producers face sharp order declines, severely underutilized production capacity, and precipitous sales drops. A modified plastics manufacturer in Qiaotou, Dongguan, has already defaulted on two months of factory rent, hoping to secure orders in July to resume production and settle rent arrears. Low utilization rates and soaring production costs have led the company’s operator to quip, “We’re losing a BMW every month!” ▶ Domestic Petrochemical Plants: Upstream petrochemical plants, having enjoyed a bullish market in 2020, generally entered loss-making territory in 2022—with significantly reduced operating rates and output volumes. The Russia-Ukraine conflict triggered surging crude oil prices, pushing up monomer costs across the board. Under high-priced monomers such as styrene and bisphenol-A, petrochemical plants have adopted extremely cautious production strategies—because plastic products manufactured at such high input costs are rejected by downstream buyers, and weak demand coupled with poor sales prospects only worsens the situation. 02 What Exactly Is Happening in Manufacturing? The economic slowdown, first evident in the second half of 2021, had already sent faint chills through chemical raw material traders. During the extended Spring Festival holiday in 2022, most traders adopted a wait-and-see stance—refraining from bulk inventory purchases due to pessimism about future market conditions.

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