Due to the drastic contraction of digital camera sales resulting from consumers' changing habits, leading Japanese digital camera maker Nikon announced on Monday it was shutting down its plant in Wuxi, East China's Jiangsu province.
Nikon Imaging (China) Co Ltd (NIC) was established in Wuxi in 2002 and was responsible for the manufacturing of digital cameras and lens units. The Japanese camera maker has two other digital camera production bases in Japan and Thailand.
According to the company's announcement, the Wuxi plant stopped operation mainly due to the rise of smartphones.
"The compact camera market has been shrinking rapidly, leading to a significant decrease in the operating rate at NIC and creating a difficult business environment," the announcement said.
Public information shows that NIC reported a loss of 31.97 million yuan (S$6.6 million) in 2015. Although it managed to register an operating profit of 24.39 million yuan in 2016, profit is expected to contract to 15.76 million yuan in 2017.
The shutdown of the Wuxi plant is based on Nikon's global restructuring plan, announced in November 2016. Upon this, Nikon will focus more on high value-added products, such as optical glass and medical optical instruments.
Nikon's sales subsidiary in Shanghai continues in full operation. Meanwhile, China's position as one of the most important markets in the world will remain unchanged, according to the announcement.
As Nikon has estimated, expenses related to the discontinued operations will be around 7 billion yen (S$84.1 million).
A total of 2,268 employees working at NIC will be affected by this shutdown, according to Luan Xiaofei, media specialist at Nikon China. Since Nikon has been undergoing a company-wide manufacturing restructuring, there will be no possible internal transfers and all the related employees will be laid off.
"The procedures of dissolution of labour contracts started on Monday," she said.
"Nikon will strictly abide by local laws and regulations. We will also provide the best compensation plans to employees based on our current fiscal situation. So far everything has been going on smoothly."
A 40-year-old, on-site production supervisor surnamed Zhang said that employees have had concerns over the possible shutdown of the plant since months ago. It was not until Monday morning that they were all officially informed of the shutdown by the chairman through a company broadcast.
"I feel quite sorry for the shutdown since I have been working here for 10 years. But I am quite content with the company's compensation, which is said to be paid within a month's time," he said.
Headhunters from insurance companies and real estate agencies were outside NIC on Monday to look for sales candidates.
The operational difficulty that Nikon has confronted is mainly due to the decline of compact digital cameras. According to the Camera & Imaging Products Association in Japan, more than 100 million compact digital cameras were shipped every year globally during the peak, from 2008 to 2011. However, shipments have been cut to less than one-tenth of that number right now.
Meanwhile, the iPhone was chosen as the most favoured photographic equipment last year, according to photo-sharing site Flickr. Digital cameras from Canon and Nikon were only the second and the third choices.
As a result, Nikon announced it would lay off 1,000 employees in the Japanese market late last year, which was about 10 per cent of the company's total headcount in Japan. Canon reported a 10.5 per cent decline in its turnover for the 2016 fiscal year. Another Japanese camera maker, Ricoh, said in April that it might close its consumer digital camera business.