Citing a glut of product on the market and low prices, Silian Optoelectronics has laid off 38 workers at its Victoria facility, effectively shutting down its local production line.
Silian Sapphire Co., the overseas division of Chongqing, China-based Silian Optoelectronics Science and Technology, will continue to operate in Victoria, though the reduced staff of about 30 will focus on research and development, process development and sales.
“This was a big decision and there was a lot of regret in having to do it. I’ve been working with a lot of these people for a long time. This wasn’t an easy decision for any of us,” said David Reid, COO of Silian Optoelectronics. “But it’s not the first time we’ve had to restructure the business. We have probably done this a couple of other times over the last 20 to 25 years.”
Reid said over-capacity in the marketplace was simply too big a hurdle to get over for the company, which sells almost all of its product in China.
Silian makes LED lighting, LED packaging and sapphire substrates used in the manufacture of LED lighting products.
Reid said over the last four or five years there has been a massive increase in production in the industry, to the point Silian’s small Victoria facility no longer made economic sense. The Victoria plant produces about five per cent of the company’s capacity, with the rest manufactured in China.
“We are probably at 50 per cent over capacity in the industry right now,” Reid said. He noted there was a large spike in demand over the last several years, first with demand for LED back-lighting for cellphones and then with lighting for televisions and general lighting uses. “The industry satisfied that demand and it was saturated. There were 20 to 30 sapphire producers four years ago. Now there are probably more than 100.”
With an increase in production, the price has also come down and is expected to continue to do so.
While Reid said Silian pumped about $5 million into the Victoria plant over the last three years to improve efficiency and reduce costs, it couldn’t keep up. “With pricing coming down so dramatically, it has offset what we have been able to do. We’re just not able to keep that [manufacturing] business running,” Reid said. “That is a pressure across the industry. It doesn’t matter where you are, the sapphire industry is in a lot of trouble right now because there is very little market.”
As a result, the high-volume manufacturing at Silian’s Vanalman Avenue plant has been killed.
Former Silian employees who have contacted the Times Colonist since they were laid off believe it is just the start of the company pulling out of the city. However, Reid said concern over more job losses is unfounded.
“Victoria has always been the international sales group and it will stay that way,” said Reid. “It’s always been our research and development and process development group, and all our new products are done here and we will keep that.”
Reid said Silian will use Victoria as a base for its sales outside of China, Taiwan and Korea.
“This is our only site outside of China and we are using this as an international stepping stone, whether that be to Europe, South America and North America,” Reid said. “This is a good platform for that.”
Silian will also maintain a certain level of manufacturing in Victoria for specialty items and research.
That wasn’t enough to assuage the fears of one recently laid-off employee, who said they were never given answers as to why they were let go. “For the very few staff remaining with the company, they still feel their jobs are in jeopardy and believe that they are only there to de-commission and sell off whatever product we have remaining in our facility on Vanalman before completely shutting down,” said the employee, who would not give a name.
“Many lives have been affected by this seemingly cut-throat business decision, many suspect that this was maybe a pre-organized plan to cut us, the middle man, out.”
Silian Group purchased the sapphire business, including the Victoria operation, from Honeywell in June 2008 and established Silian Sapphire Co. at the Vanalman plant in August of that year.
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