Tens of thousands of seasonal workers in the iPhone supply chain are reportedly being let go ahead of schedule amidst Apple’s production cuts due to a slowdown in sales.
Since the start of the holiday quarter beginning in October, around 50,000 temporary employees have been cut at the Chinese factory for Foxconn, Apple’s largest iPhone manufacturer, the Nikkei Asian Review reports. A massive amount of workers are employed temporarily for the holiday season to help scale up production, but sources told Nikkei it’s unusual in that these jobs cuts were made significantly earlier than in previous years.
Apple reportedly told suppliers earlier this year to cut back iPhone production by an estimated 10%, and companies involved in the iPhone supply chain appear to be responding in kind. Nikkei reports that Apple’s second biggest manufacturer, Pegatron, also reduced its number of temporary workers by tens of thousands. Sources told Nikkei that other companies have given employees “extended vacations” to avoid laying them off.
Even Apple is reportedly cutting back on its hiring for “certain division” due to lower iPhone demand.
Reports show that Apple has asked supplier to cut production of iPhones at least twice in the last few months. In addition to January’s report of cutbacks, The Wall Street Journal reported in November that Apple had scaled back production of its three newest iPhone models: the iPhone XR, XS, and XS Max.
Apple shocked the market earlier this month when it announced its revenue from iPhone sales for its first fiscal quarter of 2019 — which includes 2018’s holiday season — would be “significantly lower than it expected.” The company’s latest estimates for revenue were revised down to around $84 billion, which was 7.6% lower than investors previously expected. Financial analyst Daniel Ives called it”Apple’s darkest day in the iPhone era.”
Apple cited numerous reasons for the revenue decrease, including the company’s popular $29 battery replacement program.
Additionally, Apple attributed issues to “supply constraints” and “economic weakness in emerging markets, especially China.” In November, when news first emerged iPhone demand was slowing, Foxconn said it was slashing almost $3 billion in expenses ahead of a “very difficult and competitive year.”
A contentious trade war between US and China has also loomed over iPhone production for Foxconn, which has 12 factories in China. Reuters reported in December that Foxconn would be shifting more of its iPhone production to its factories in India, where Foxconn is investing $356 million in an expanded manufacturing plant.