Taiwanese group Wintek, formerly a major supplier of touchscreens for Apple's iPhone and iPad, has shuttered two plants in southern China and axed 7,000 jobs, leaving unpaid suppliers to chase debts of Rmb230m ($37m).
Armed police surrounded the plants in the city of Dongguan as workers collected their final pay this week, while suppliers demonstrated in front of the factories.
Wintek declined to comment.
The company sought insolvency protection in October, filing in Taiwan for a restructuring of more than NT30bn ($961m) in debts owed to both local and mainland lenders and suppliers.
Wintek reported a loss of NT$10bn ($320m) for 2013 and a NT$3bn loss in the first half of this year.
The Taipei-listed company was once one the main suppliers for Apple, but placed a bet that failed after the Cupertino-based group selected a rival touchscreen technology in late 2012.
The episode represents a cautionary tale for high-tech manufacturers in southern China who aspire to the coveted ranks of being an official Apple supplier.
While Wintek was the largest supplier of touchscreens for the iPhone 4, Apple switched to a different technology in 2012 for its iPhone 5, eliminating much of Apple's need for Wintek's technology.
In 2013, Apple then opted for film touch panels in its iPads, rather than the glass touch panels made by Wintek.
Apple still lists a Wintek facility in Suzhou, near Shanghai, as a supplier, but not any of its Dongguan plants.
Jerry Chen from Shenzhen Laibao High-tech, another touchscreen maker, said, such incidents are common in the industry, "although it did come a bit suddenly in Wintek's case".
"It mostly has to do with the growing competition and lower margins. Before there used to be two to three companies sharing a single order and now there may be as many as 10," he said of the sector's fierce competition.
But he said that the plant closures did not necessarily mean that Wintek was obsolete, as it still made the leading technology in "on glass solution" (OGS) touchscreens.
"The situation in the industry is not as bleak as it may seem, there is still high demand for touchscreens," he said.
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