Foxconn Removes 50,000 Contract Workers Months Earlier Than Usual

The slowdown in iPhone sales has led many Apple suppliers to cut thousands of seasonal jobs earlier than usual. Foxconn, Apple’s biggest supplier, has removed 50,000 contract workers from its factory in Zhengzhou since October. Usually, Foxconn hires these workers right before the launch of a new iPhone, i.e. in mid-August and renews their monthly contract until January.

However, due to the slowdown in iPhone sales, Foxconn stopped renewing the contracts of such workers from October itself. Pegatron, another key Apple supplier, has also let go of its contract workers from November itself.

A source close to the company 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.”

Another key Apple component supplier has asked 4,000 of its employees to take an “extended vacation” until March. It will decide whether to lay them off or not after March 1, 2019.

To better brace itself for the further decline in iPhone shipments in 2019, Foxconn has launched an aggressive cost-cutting program. It is internally restructuring its organization and has merged the MacBook and iPad division with another unit making laptops and PCs for Dell and Acer. The company is looking to curtail its expenses by $2.96 billion in 2019. For this, it will be reducing its employees in back-office support, human resources, administration, accounting, and more.

Our Take

The smartphone industry is slowing down and this is going to affect Apple as well. The days of iPhone sales setting a new sales record every holiday quarter has long gone. This means that it is not just Apple but other smartphone OEMs are also going to reduce their workforce to curtail their expenses.

[Via Nikkei]