Foxconn Technology Group, Apple's largest maker of iPhone, aims to cut spending by 20 billion yuan by 2019, as it faces "a very difficult and competitive year." the company's internal report.
The iPhone business will have to cut spending by 6 billion yuan next year and the company plans to lay off about 10% of non-technical staff, according to Bloomberg. Expenditures in the past 12 months are about 206,000 million yuan ($ 6,700 million). Foxconn declined to comment.
It is likely that Foxconn measures will increase the pessimism surrounding Apple and its iPhone suppliers, its most important product. Just last week, four suppliers on three continents have lowered their revenue estimates due to weak demand. This has caused a decrease in the share of technology that has been broadly expanded in the market in recent days.
Goldman Sachs lowered Apple's price target for the third time this month, due to the weak demand for iPhone in China and other emerging markets. Analyst Rod Hall warned of "real risk" for projections if current trends continue.
Apple fell into the market territory Tuesday and closed more than 20% below the peak in October. In one day, last week, Lumentum Holdings Inc., one of the providers that warned about low demand, declined by 33%, while AMS AG declined by 22%. This week, as concerns spread, the S & P 500 wiped out its profit for 2018.
Foxconn, based in Taipei, assembles everything from iPhone devices and laptops to PlayStation Sony Corp. in factories in China and around the world. Foxconn has been affected by the slowdown in smartphone market growth, while trade concerns with the United States increase overall uncertainty. Earlier this month, its top company, Hon Hai Precision Industry Co., reported 12% gains below expectations.
The company will conduct a thorough review of managers with an annual compensation of over $ 150,000, according to the memorandum. Other cuts include a planned reduction of 3 billion yuan in spending at Foxconn Industrial Internet Co., its listed subsidiary in Shanghai.
Apple has adjusted its strategy as the increase in the number of smartphones sold each year has been reduced. You can charge higher prices for each phone and get more money from services, including digital videos, streaming music, and data storage.
But most of its suppliers depend on a larger volume of units to grow their businesses and do not have a profitable support plan as the industry's growth slows down. This has led to financial warnings at companies like Lumentum and Japan Display Inc.
"Suppliers depend more on volume than Apple," said Woo Jin Ho, an analyst at Bloomberg Intelligence.