Foxconn seeing 'difficult and competitive' 2019, slashing $2.9 billion in expenses

Posted:
in AAPL Investors edited November 21
Foxconn is circulating a memo internally that says that it will be implementing a series of cost-cutting moves soon, to combat the effects of what it sees as being an difficult year for the company to continue to grow.

Tim Cook visiting Foxconn
Tim Cook visiting Foxconn


Amidst multiple reports of iPhone component cuts, Foxconn appears to be readying a 20 billion yuan reduction in expenses in 2019. The note is citing a "very difficult and competitive year."

Expected cuts are 10 percent of the non-technical staff, and other expense reductions of 6 billion yuan. The 6 billion yuan cuts in total are about 13 percent of the 46.3 billion yuan spending budget, according to Bloomberg.

Foxconn is the world's largest contract electronics manufacturer, and the largest private employer in Taiwan. It produces hardware for not just Apple, with Amazon, Acer, Dell, Google, Huawei, Intel, Microsoft, Nintendo, Xiaomi, and others all using the company's services. Additionally, iPhone manufacturing duties are shared with Wistron -- but it is unclear what percentage of the devices are made by either manufacturer.

Apple accounts for about 45 percent of Foxconn's overall business. While Apple's reported reduction in iPhone orders may have something to do with Foxconn's contraction, the overall smartphone and PC market weakness has a large part to do with it as well. According to data collated by sales chain monitors in October, the iPhone and the Mac were holding relatively steady in a market shrinking year-over-year.

In August, Foxconn saw a contraction in earnings year-over-year in a quarter that Apple shipped more phones than the year-ago quarter.

Comments

  • Reply 1 of 9
    Yes!  Yes!  More uncertainty!  Punish the stock price some more!

    What is going to be the news article that throttles all of the FUD and starts pushing the price back up?  Obviously DED’s article was lost amongst the noise. Something from Buffet and Berkshire?  Or simply, Apple’s next quarterly report?
    SpamSandwichwatto_cobra
  • Reply 2 of 9
    And this is in spite of WI Gov Walker and the Republicans giving Foxconn $4B in tax payer money, eliminating all environmental regulations, violating the Great Lakes water compact, etc. 

    Addendum:
    But isn't it the case in all instances that Apple suppliers noting cuts or softness in their outlooks are at best merely reflections of Apple's soft outlook for the next quarter? That is, Apple's stock price and doom reporting is the result of double, triple, quadruple counting of Apple's previous announcement of a soft Q2, not even taking into account Apple's supply chain complexity. 
    edited November 21 cornchipmagman1979
  • Reply 3 of 9
    Let's mention the elephant in the room. The US-China trade war. A good deal of the projected softness in sales must be related to the tariffs  imposed on goods going back and forth. Increased costs and increased prices for the consumer.
    magman1979ksecwatto_cobrajony0
  • Reply 4 of 9
    DAalseth said:
    Let's mention the elephant in the room. The US-China trade war. A good deal of the projected softness in sales must be related to the tariffs  imposed on goods going back and forth. Increased costs and increased prices for the consumer.
    If that was the case iPhones would be more expansive in the US than in Europe not vice versa as iPhones ship directly from chinese factories to Europe or any other place on the planet. The truth is that tariffs on electronics are not even in effect yet and may likely increase prices in the US even further.
  • Reply 5 of 9
    DAalseth said:
    Let's mention the elephant in the room. The US-China trade war. A good deal of the projected softness in sales must be related to the tariffs  imposed on goods going back and forth. Increased costs and increased prices for the consumer.
    If that was the case iPhones would be more expansive in the US than in Europe not vice versa as iPhones ship directly from chinese factories to Europe or any other place on the planet. The truth is that tariffs on electronics are not even in effect yet and may likely increase prices in the US even further.
    As I said the PROJECTED softness in sales.
    That's what's hammering the tech stocks. That's why companies like Foxconn are looking at tightening their belts in the next few months.The expected impact of the trade war.
    magman1979Rayz2016watto_cobrajony0
  • Reply 6 of 9
    DAalseth said:
    Let's mention the elephant in the room. The US-China trade war. A good deal of the projected softness in sales must be related to the tariffs  imposed on goods going back and forth. Increased costs and increased prices for the consumer.
    If that was the case iPhones would be more expansive in the US than in Europe not vice versa as iPhones ship directly from chinese factories to Europe or any other place on the planet. The truth is that tariffs on electronics are not even in effect yet and may likely increase prices in the US even further.
    Tariffs are a negotiating tactic, not a goal. Get it straight.
    magman1979yojimbo007Rayz2016
  • Reply 7 of 9
    ksecksec Posts: 1,512member
    If they have kept the spending, their original plan were to expand on India and Vietnam production centre. Now they are making the cuts, part of me think this is Foxconn giving pressure to CCP, open up the market and sort this US-China mess out, or we will further cut down head counts. ( Foxconn being one of the largest private employers in China ) 

    Another Data point worth mentioning, excluding Samsung who assemble their own mobile, the top 5 in the world, which also happens to be the top 5 in China, all assemble their phones with Foxconn. And this isn't the first time we have data showing the Chinese are slowing their upgrade cycle. Assuming a 10% reduction in work forces translate to 10% reduction in Foxconn output of phones, we are looking at roughly ~4% drop in 2019 world wide smartphones projected unit shipment.

    Which should also have a nice lock on effect in NAND and DRAM as we have already seen since the start of 2018. We also have roughy ~10 % worldwide capacity increase in 2019, should make things exciting.
    edited November 21 yojimbo007
  • Reply 8 of 9
    It's not that uncertainty of Wisconsin or nothing, right?
  • Reply 9 of 9
    This is FANTASTIC news for American workers!  Looks like Foxconn is expecting their American plant to take up 10% of the load!  I had no idea it would be so much!
Sign In or Register to comment.