Foxconn Cut 50,000 Contract Workers Months Ahead of Schedule Due to Poor iPhone Demand

Apple supplier Foxconn has let go around 50,000 contract workers at its iPhone factory in Zhengzhou, China, with the first cuts happening in October 2018. As one source with knowledge of Foxconn's plans told Nikkei, the scale of the cuts is not what stands out, but the fact that it's significantly earlier than previous years.

"It's quite different this year to ask assembly line workers to leave before the year-end," the source stated. Foxconn typically renews workers' contracts every month from August until January, at which point the workforce is scaled back for slow ‌iPhone‌ production season. This year, those cuts came as much as three months early.


The same is true for other Apple suppliers according to today's report, with Pegatron canceling monthly labor contracts last November. One source said that Pegatron's cuts "happened sooner than in the past because of poor demand," referring to the ‌iPhone‌.

Even smaller companies in Apple's supply chain reportedly cut down on their workforce, with one unnamed component supplier based in Shenzhen asking 4,000 workers to take an extended vacation from October to March. On March 1, the company will decide whether or not to lay the workers off.

For Foxconn, the company is preparing for restructuring throughout the company, merging business units that make iPads and MacBooks with the division making Dell and Acer computers. This means "steep cuts" to management, human resources, administrations, accounting, and utility support jobs, totaling 100,000 jobs removed by the end of 2018 and costs cut by $2.96 billion in 2019.

Apple in late December told its suppliers to cut production on new iPhones by 10 percent over the next three months, coming on the back of reports about weak ‌iPhone‌ sales during the holiday quarter. In early January, Apple CEO Tim Cook called reports claiming the iPhone XR was a flop "bologna," stating the device has been the most popular ‌iPhone‌ "every single day" since it launched.

Amid all of this, many Apple suppliers cut their 2019 sales forecasts, including Taiwan Semiconductor Manufacturing Company and Nidec. Specifically for the China market, these suppliers noted an "extraordinary" drop in demand for high-end smartphones.

Tag: Foxconn

Top Rated Comments

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19 months ago
Expected given the price and lack of innovation
Score: 61 Votes (Like | Disagree)
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19 months ago
I can provide a solution for this, Apple: CUT the prices.
The only time prices should be this high is when there's a big leap from the previous generation.
Score: 56 Votes (Like | Disagree)
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19 months ago

Apple cannot lower the prices abruptly. It's a damaging solution when we factor in the impact it will have on the brand, long term. It will set a precedent that Apple can price their devices lower than the premiums they're asking now, leading many to expect those "low prices" going forward, making Apple lose their premium brand status. It will also make it more obvious that they're struggling and that they're overpricing.

COMPLETELY WRONG

Please watch this 2 minute explanation from Steve Jobs

Score: 53 Votes (Like | Disagree)
Avatar
19 months ago
Noticed how Phil Schiller is silent in all of this? Apple bet wrong big time and their unofficial apologist John Gruber is looking for every excuse in the book.

Jonathan Morris of TLD made a sound recommendation to Apple in an interview I watched on YouTube yesterday. Apple should have taken a good will risk, absorb the cost of the iPhone XR and sell it for $599. If they did that, I don’t think Samsung or any other brand could stand a chance with 5G in 2019.

But the greed machine took ahold because of the iPhone X success going into 2018. Consumers are not blind. I bought the iPhone X knowing I will not be buying another iPhone for a while. The older models are still doing well in addition to the battery upgrade. But I think Apple just allowed cash hoarding top get the best of them and they really need to understand this is a device that will become obsolete over time. It’s not a timepiece.

The iPhone XS should have been pushed down to $799 in its second year because the company has made enough on the first generation to see the ROI for RD. Stop with this its expensive to make theory.
Score: 36 Votes (Like | Disagree)
Avatar
19 months ago
Apple would rather bleed marketshare just so they can protect that 38% profit margin. It's a fairly mature market now, there aren't as many revolutionary features in today's phones. Hard to believe that people don't want to shell out $1500 for a phone.
Score: 24 Votes (Like | Disagree)
Avatar
19 months ago
Keep selling them good iPhones at 1k+ Tim. Keep selling that XR 720p screen tech from 2010 at $750+. Keep nickle and dimming your customers on dongles and astronomical storage upgrade prices.

What did you think was going to happen genius???
Score: 23 Votes (Like | Disagree)

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