Japanese electronics company Epson confirms it will shut its watch manufacturing factory in Shenzhen in March 2021 without elaborating the reasons for the action.

The factory has stopped hiring new workers and laid off 1,700 staff, the Securities Times reported, citing unnamed sources.

In an later statement, Epson clarified that it is closing watch manufacturing unit EPSON Precision Work Shenzhen, however its other units in China are operating “normally.”

The company didn’t give specific reason for the closing of the factory, but industry insiders speculated that it may be due to increasing costs and shrinking sales.

China’s tightening of environmental protection rules have also pushed some manufacturers away, the report added.

Several big Japanese and Korean firms, including Samsung and Olympus, have closed their factories in Shenzhen since 2018, the report said.

However, an increasing number of multi-national companies have established innovation and R&D centres in Shenzhen, marking a major change of industry in the city.