(Yicai) Dec. 1 -- Canon's laser printer factory in the Chinese city of Zhongshan has closed as a result of shrinking local demand and increasing competition from Chinese brands, according to a letter sent to staff that was seen by Yicai.

The plant ceased production on Nov. 21, according to the letter from Canon Zhongshan Office Equipment, its operator. Tokyo-based Canon has not yet made a public statement on the matter.

Established in 2001, Canon Zhongshan is one of the Japanese company's major laser printer subsidiaries. As of Sept. 30, it had about 1,400 workers, compared with 3,372 in 2022, according to corporate information platform Qichacha. The head of a small home appliances firm in Zhongshan told Yicai that the factory had more than 10,000 staff around 2010.

Canon Zhongshan is still paying local suppliers in accordance with agreements, so the short-term impact of the shutdown on them is limited, a manager at one told Yicai.

Some senior executives returned to work this week to handle follow-up matters related to the closure, the supplier noted, adding that a staff compensation plan is expected to be announced soon.

After labour costs in Zhongshan rose, Canon began redirecting orders to its factories in Vietnam and Thailand, the home appliance firm’s boss said, adding that another reason for the plants closure is Canon’s strategic pivot to higher-margin businesses such as medical imaging and semiconductor equipment.

Zhongshan and neighboring Zhuhai have formed a complete supply chain for printers and their consumables, the person in charge of a Zhongshan-based plastic parts firm told Yicai. Because Canon Zhongshan’s factory had relatively higher production costs, its profitability suffered as competition intensified, he said.

Canon and California-based HP used to dominate China’s printer market, according to Zhang Yi, chief executive and chief analyst of iiMedia Research Group. But in recent years, their market shares were sharply eroded by local competitors, putting severe pressure on Canon, he said.

"Moreover, the fast adoption of paperless office practices is reducing demand for printed documents," Zhang said. The widespread use of third-party office software platforms such as WeChat Work, DingTalk, and Lark means most firms now store approvals and contracts electronically, making paperless and digital workflows the norm, he added.

Given that Canon’s printers no longer hold a clear competitive advantage in China, it is logical for the firm to shift to emerging markets, where digitalization is less advanced, demand for paper printing remains higher, and local competitors are not yet established, Zhang noted.

Editors: Tang Shihua, Futura Costaglione