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.

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