Apple’s primary iPhone supplier Foxconn will cut billions in costs and reduce staff numbers by thousands as the global technology slowdown continues.
Following recent reports claiming Apple had slashed iPhone XR production after demand failed to meet expectations, the Wall Street Journal recently revealed this was an issue with all three new iPhones, which has “created turmoil along its supply chain.” Many iPhone suppliers have since cut their quarterly profit estimates, and it was reported that Foxconn had reduced its overtime hours, but we now know it’s taking more extreme measures.
The Taiwan-based producer said in a statement it was conducting a regular annual review to budget effectively for 2019, but it was also the latest to point to concerns over demand for Apple’s flagship devices.
According to a new Bloomberg report, Foxconn, Apple’s largest iPhone assembler, wants to cut $2.9 billion USD in expenses next year — including cutting costs and shrinking “non-technical staff” by 10% within its iPhone business — citing a “very difficult and competitive year.”
According to the memo Bloomberg obtained, 6 billion yuan ($865 million USD) of the cuts will come to the Foxconn iPhone division. The report didn’t specify where the remaining expense cuts will occur. Additionally, Foxconn said in the memo that it plans to cut 10% of its “non-technical” employees. It’s unclear how much that will save the company.
“The review being carried out by our team this year is no different than similar exercises carried out in past years to ensure that we enter into each new year with teams and budgets that are aligned with the current and anticipated needs of our customers, our global operations and the market and economic challenges of the next year or two,” Foxconn said in an emailed statement to Bloomberg.
Foxconn did not specify exactly why it’s anticipating a difficult 2019. Cut to the company’s iPhone division suggest potential weakness in that area, but it is currently unknown whether it’s because the iPhone is expected to have a difficult year, whether Apple is turning to other manufacturers for its assembly needs, or some other unknown reason.
Foxconn doesn’t just manufacture Apple products, however. It’s also the manufacturer for other computer and phone brands as well as gadgets like Sony’s PlayStation and Nintendo’s Switch. Foxconn’s latest announcement may reflect a cooling global market for premium electronics rather than weakness specific to Apple.
As of now, all signs from companies that count Apple as a customer are now pointing to an impending slow period for sales and growth.