Foxconn Technology Group's aim, the biggest Apple iPhones coordinator, is to reduce the cost of 20 billion yuan (US $ 2,900 million) by 2019, as it faces "a difficult and competitive year", according to the company's internal report.
The iPhone business will have to reduce the cost of 6 billion yuan next year and the company intends to eliminate around 10% of the technical staff, according to the memo that Bloomberg received. The company's spending in the past 12 months is about 206,000 million yuan (US $ 6,700 million). Foxconn refused to comment.
The Foxconn measures are likely to increase the pessimism that surround Apple and input suppliers for the iPhone, its most important product. Only last week, four suppliers on three continents reduced their revenue estimates due to the weak demand. That made a reduction in the shares of technology that has expanded to the market in general in recent days.
Goldman Sachs broke its price target for Apple for the third time this month due to the weak demand for iPhone in China and other emerging markets. Analyst Rod Hall warned the "real risk" of projections if current trends continue.
Apple went to market the market territory on Tuesday, with more than 20% lower than the top in October. In one day last week, Lumentum Holdings Inc., one of the suppliers who warned the low demand, plunged 33%, while AMS AG dropped by 22%. This week, as the concern spreads, S & P 500 lost its profit for 2018.
Foxconn, located in Taipei, collects everything from iPhones and laptops to Sony PlayStation Corp in factories in China and around the world. The slowdown in smartphone market has affected Foxconn, while commercial tensions with the US are increasing global uncertainty. Earlier this month, his leading company, Hon Hai Precision Industry Co., reported 12% earnings lower than expectations.
The company will carry out a detailed review of managers with annual compensation of more than US $ 150,000, according to the memorandum. Other cuts include a proposed 3 billion yuan discount in expenses at Foxconn Industrial Internet Co., its subsidiary listed in Shanghai.
Apple has adapted its strategy as the growth in smartphone numbers sold every year has reduced. You can raise higher prices for each phone and get more money from services, including digital videos, streaming music and data storage.
But most suppliers depend on the volume of more units to grow their businesses and do not have a profitable support plan as the industry's growth declines. That has led to financial notices in companies such as Lumentum and Japan Display Inc.
"Providers depend more on volume than Apple," said Woo Jin Ho, analyst at Bloomberg Intelligence.