iPhone sales slowdown hits Foxconn

Foxconn, the largest assembler of iPhone smartphones, has shed around 50,000 contract jobs since October, claims a report by Nikkei, which points the finger of blame at slowing iPhone sales. And this is not an isolated case, with Pegatron, which is the second largest iPhone assembler, also cutting seasonal contract jobs far earlier than expected. And this is also having an effect on smaller suppliers.

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The problem isn’t the size of the cuts – the report makes it clear that these seasonal employment fluctuations are quite normal – but the timing.

According to the report, the cutbacks happened far sooner than expcted at Foxconn.

Normally, the contracts of these workers would be renewed every month from August until mid- to late January, when the workforce is traditionally scaled back for the slow iPhone production season.

This is hitting Foxconn at a time when the company is already focused on consolidation and cutting it workforce. It has already combined its MacBook and iPad assembly divisions with those responsible for assembling Dell and Acer hardware, and is looking to shed 100,000 jobs out of a workforce of 1.1 million by the end of 2018 across its affiliates and subsidiaries.

The reports coming out of Pegatron tell a similar story:

A source close to the company [Pegatron] said its normal practice was to reduce the 200,000-strong head count by tens of thousands every month until reaching about 100,000 – the minimum required for daily operation, according to one source familiar with the situation. “And for [2018], it just happened sooner than in the past because of poor demand.”

It’s also bad for the smaller suppliers:

One key component supplier based in Shenzhen had asked 4,000 workers to take an extended “vacation” from October to March, a person with knowledge of the situation said. “The company has not actively laid off those workers yet. It will decide whether or not to lay them off after March 1,” the source said.

Several other companies closely related to iPhone manufacturing – such as chipmaker TSMC – have slashed forecasts for 2019 amid a sharp decline in demand for smartphones.

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