Foxconn offered $12.6M government subsidy to stem layoffs linked to iPhone 6s order reduction, report saysPiling on to reports of slowing iPhone 6s demand, a report on Tuesday claims the city of Zhengzhou is offering Apple supplier Foxconn a $12.6 million subsidy to keep workers in its plant, a facility thought to be dedicated in large part to iPhone production.
Citing sources with knowledge of Foxconn's operations, The Wall Street Journal links the incentive offer to Apple's supposed decision to cut iPhone 6s orders, saying the Asian manufacturer dismissed workers at its Zhengzhou factory two months early for the Chinese Lunar New Year holiday. Further, the publication said other Chinese iPhone factories were not as busy leading into the 2015 holiday season, normally a time of "rush quantity" production for Apple suppliers.
Apple declined to comment, while Foxconn would not confirm that Zengzhou's offer —81.9 million yuan ($12.6 million) earmarked for "unemployment-insurance work-force stabilization subsidy" —was associated with iPhone production.
"The incentives were provided to Foxconn in recognition of our company's contributions to maintaining our significant work force at our Zhengzhou facility throughout that year," the company said.
Aside from supply chain rumor, hearsay and "best-guess" estimates from analysts, there is little hard evidence to prove iPhone demand is slowing, but investors are skittish that Apple's most important product has peaked. On hearing reports from Apple suppliers, like today's Nikkei report, investment firms like FBR & Co., RBC Capital Markets, J.P. Morgan and Morgan Stanley cut sales estimates for the current March quarter, with some on Wall Street projecting zero or negative year-on-year growth.
Earlier today, PiperJaffray analyst Gene Munster suggested Apple's own guidance was the best barometer for reading iPhone sales estimates going into the new year, adding that production estimates do not always mirror actual results.
Investors will get a better sense of iPhone growth, or lack thereof, when Apple reveals quarterly results for the first fiscal quarter of 2016 on Jan. 26. The company is expected to offer guidance for the coming March quarter at that time.