Shrinking returns hit OEMs

"The slowdown of the smart device market and decreasing prices of smart equipment are the main reasons behind the decision," Woo said. "Even though technology has advanced, prices are going down. We have to accept this. So should our customers."

A key issue fueling the slump is that the Chinese mobile phone sector is starting to shrink. Numbers released by market consultancy IDC showed that a total of 98.8 million smartphones were sold in the first quarter of this year, a fall of 4 percent compared to the same period in 2014, and 8 percent on a quarterly basis. This was the first time the sector had contracted in six years.

Overall, sales of smart devices, which include mobile phones, tablets and PCs, have slowed in 2015. IDC reported that a a total of 514 million units were sold so far this year, up 1.3 percent. Last year's growth rate was 15.2 percent.

"This year we will witness the Chinese smart devices market entering its 'new normal', which means it will grow at a much slower pace," Mu Chen, senior market analyst at IDC, said.

Unfortunately, that could mean the "best years for Chinese OEMs are over", according to Zhang Yansheng, secretary-general of the academic committee of National Development and Reform Commission.

"China will hardly become a world's leading manufacturing country if it still relies on OEMs to handle one production procedure or one part of the device," Zhang said at a forum in Nanjing in Jiangsu province earlier this year.

"The time when China was simply about low prices has gone. Simple imitation, or copying, will not survive, especially under the 'new normal'. Companies that fail to innovate are sure to die."