(Yicai) Dec. 1 -- Japanese camera maker Canon's printer factory in Zhongshan, China's southern Guangdong province, has ceased operations because of pressure from intensifying market competition, according to an internal letter sent to employees.

The plant halted production on Nov. 21 because of persistent and worsening operational difficulties due to the continuous narrowing of the laser beam printer market in recent years and the rapid rise of Chinese competitors, Yicai learned from an internal letter Canon Zhongshan Office Equipment, the operator of the factory, sent to employees.

The company has yet to comment on the matter.

Established in 2001, Canon Zhongshan is one of Canon's major laser printer production 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 appliance firm in Zhongshan told Yicai that Canon Zhongshan's factory had more than 10,000 workers around 2010.

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

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

After the rise in labor costs in Zhongshan, the factory's orders were gradually transferred to Canon's facilities in Vietnam and Thailand, the head of the small home appliance firm said. Canon's strategic shift to higher-margin businesses, such as medical imaging and semiconductor equipment, is another reason for the shutdown.

Zhongshan and neighboring Zhuhai have formed a mature supply chain for printing equipment and consumables, the person in charge of a plastic parts firm in Zhongshan told Yicai. Due to relatively higher production costs, the profitability of Canon Zhongshan's factory has gradually shrunk amid intensifying competition.

Canon and HP were once absolute leaders in China's printer market, Zhang Yi, chief executive and chief analyst of iiMedia Research Group, told Yicai. But in recent years, their Chinese printer market share was severely eroded by local competitors, bringing significant pressure to Canon.

"Moreover, with the rapid development of paperless offices, printing demand is in a gradual downward trend," Zhang said. The use and popularization of third-party office software platforms, such as WeChat Work, DingTalk, and Lark, have allowed most enterprises to store their approval of documents online. Paperless contracts have also become very common.

As Canon printers no longer have obvious competitive advantages in China, it is natural for the company to shift to emerging markets, Zhang believes. The degree of paperless office in emerging markets is relatively low, so there is still significant demand for paper printing. Moreover, local competitors in emerging markets have not yet emerged.

Editors: Tang Shihua, Futura Costaglione