St Davids Mayor, Cllr Bethan Price, has described the news that St Davids Assemblies is likely to close next year as devastating'.
More than 70 people work there and many families in the community will be badly hit.
One employee, Jimmy Broaders, of Heol Dewi, said: "It's a shock and it's going to be tough for us and for St Davids."
He has two children at university, and his nephew Wayne who also works at the factory has two small children under three.
Chief executive Bill Preece, said: "I am personally very very sad for the people, many of whom I know personally, who have worked for the company for many years.
"I wish we would find a way to stay in business. At the moment I cannot see a way to make this happen."
The news is reminiscent of the closure of Dewhirst clothing factories in Fishguard and Cardigan four years ago when there were 200 job losses.
Cllr Price said: "St Davids relies mainly on the tourist industry and jobs are scarce during the winter months. The work at St Davids Assemblies is all year round, and many families here depend on the firm. I don't know what is going to happen to these people."
County Councillor John George said: "There is nothing else like this in St Davids. If the factory closes it will be a big shock. Some families have two or three members working there. We must do everything we can to stop the closure."
Local MP Stephen Crabb said: "In a tough global market it's vital we do not hold back Welsh businesses through unnecessary red tape and poor transport connections.
"As long as Pembrokeshire continues to have a third world road infrastructure I am concerned we will lose more high quality manufacturing jobs from our county."
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