Merry Electronics' move is typical of a new trend among manufacturers who are seeking to escape coastal areas such as Shenzhen, where the high cost of living is putting upward pressure on wages.

Share prices of Merry Electronics dropped 7 percent yesterday on the Taiwan Stock Exchange as workers at its mobile phone components plant in Shenzhen went on strike over a dispute about shift arrangements.

Merry announced on the afternoon of June 8 that the company had lost 10 percent of its daily production due to the stoppage and that production has recovered after negotiation with the workers.

Company spokesman Tseng Chin-tang denied a local newspaper report that workers at the mobile phone components plant in Shenzhen had gone on strike over wages and said that the company had not agreed to raise wages.

Workers at its assembly plant in Shenzhen briefly stopped work on Sunday in a dispute over shift arrangements, according to the company's announcement.

Merry Electronics, the world's largest producer of mobile phone speakers, employs around 6,000 workers in its factories in Shenzhen and over 3,000 workers in Suzhou. The average monthly wage of its workers is around 900 yuan (131.78 U.S. dollars).

As for wages, Tseng said that the company cannot follow Foxconn's lead blindly.

"Many other companies will complain if Merry, as a leading company in Shenzhen's Longhua District, raises wages," he said

He also mentioned that Merry is trying to deal with rising labor costs in the Pearl River Delta regions. The company is considering putting its production lines in inland cities in the long run, he said.

Merry and Foxconn are not the only manufacturers facing rising labor costs. Admiral Overseas Corporation, a leading LCD monitor producer which has factories on the Chinese mainland, announced recently that it will raise wages by another 15 to 20 percent after a hike of 15 percent earlier this year.

Inventec, a manufacturer of laptops and phones, is preparing to accelerate its moves to inland area. Its new factory in Southwest China's Chongqing will enter into mass production starting from November.

Delta Electronics, another major manufacturer focusing on OEM, has signed agreements with local authorities to set up a new factory in Chenzhou, Hunan Province.

Samuel Chin, Chairman of Foxconn International Holdings, Ltd., said on June 8 that it has been planning a move to inland cities over the past 18 months for lower labor costs.