Mike Wuerthele
Foxconn is circulating a memo internally that says that it will be implementing a series of cost-cutting moves soon, to combat the effects of what it sees as being an difficult year for the company to continue to grow.
Amidst multiple reports of iPhone component cuts, Foxconn appears to be readying a 20 billion yuan reduction in expenses in 2019. The note is citing a "very difficult and competitive year."
Expected cuts are 10 percent of the non-technical staff, and other expense reductions of 6 billion yuan. The 6 billion yuan cuts in total are about 13 percent of the 46.3 billion yuan spending budget, according to Bloomberg.
Foxconn is the world's largest contract electronics manufacturer, and the largest private employer in Taiwan. It produces hardware for not just Apple, with Amazon, Acer, Dell, Google, Huawei, Intel, Microsoft, Nintendo, Xiaomi, and others all using the company's services. Additionally, iPhone manufacturing duties are shared with Wistron — but it is unclear what percentage of the devices are made by either manufacturer.
Apple accounts for about 45 percent of Foxconn's overall business. While Apple's reported reduction in iPhone orders may have something to do with Foxconn's contraction, the overall smartphone and PC market weakness has a large part to do with it as well. According to data collated by sales chain monitors in October, the iPhone and the Mac were holding relatively steady in a market shrinking year-over-year.
In August, Foxconn saw a contraction in earnings year-over-year in a quarter that Apple shipped more phones than the year-ago quarter.
Wesley Hilliard
Marko Zivkovic
William Gallagher
Malcolm Owen
Mike Wuerthele and Malcolm Owen
Andrew O'Hara
Amber Neely
Andrew Orr
9 Comments
Yes! Yes! More uncertainty! Punish the stock price some more!
What is going to be the news article that throttles all of the FUD and starts pushing the price back up? Obviously DED’s article was lost amongst the noise. Something from Buffet and Berkshire? Or simply, Apple’s next quarterly report?
And this is in spite of WI Gov Walker and the Republicans giving Foxconn $4B in tax payer money, eliminating all environmental regulations, violating the Great Lakes water compact, etc.
Addendum:
But isn't it the case in all instances that Apple suppliers noting cuts or softness in their outlooks are at best merely reflections of Apple's soft outlook for the next quarter? That is, Apple's stock price and doom reporting is the result of double, triple, quadruple counting of Apple's previous announcement of a soft Q2, not even taking into account Apple's supply chain complexity.
Let's mention the elephant in the room. The US-China trade war. A good deal of the projected softness in sales must be related to the tariffs imposed on goods going back and forth. Increased costs and increased prices for the consumer.