Apple iPhone Supplier Foxconn Planning Deep Cost Cuts (bloomberg.com)

Foxconn, Apple's biggest assembler of iPhones, is planning to cut $2.9 billion from expenses in 2019 as it faces "a very difficult and competitive year." According to Bloomberg, citing an internal company memo, "The iPhone business will need to reduce expenses by [about $900 million] next year and the company plans to eliminate about 10 percent of non-technical staff." For reference, Foxconn's spending in the past 12 months is about $6.7 billion. From the report: Foxconn assembles everything from iPhones and laptop computers to Sony PlayStations at factories in China and around the world. Foxconn has been hit by a slowing smartphone market, while trade tensions with the U.S. add to global uncertainty. The company will conduct an in-depth review of managers with an annual compensation of more than $150,000, according to the memo. Other cuts include a planned [$433 million] reduction in expenses at Foxconn Industrial Internet Co., its Shanghai-listed offshoot. "The review being carried out by our team this year is no different than similar exercises carried out in past years to ensure that we enter into each new year with teams and budgets that are aligned with the current and anticipated needs of our customers, our global operations and the market and economic challenges of the next year or two," Foxconn said in a statement to Bloomberg.

Comments

half of a statement

[sheramil]

"The iPhone business will need to reduce expenses by [about $900 million] next year ..."

... in order to achieve what? The level of profit desired by the investors? Will something bad happen if they don't get their fix?

Re:half of a statement

[LynnwoodRooster]

To continue making a profit, since iPhone demand is falling. Considering that iPhone sales are estimated to fall 20% to 30%, it's time to slash quite a bit of that work force - or lose a lot of money.

Re:half of a statement

[youngone]

... in order to achieve what?...

In my experience it is usually some board directive that the company "must" do some stupid thing or other.
Yes, it is often to make more money for the shareholders.
A couple of times during my career an announcement like this has made me go and look for another job.

Re:half of a statement

[ShanghaiBill]

iPhone demand is falling. Considering that iPhone sales are estimated to fall 20% to 30% ...

Just to be clear: iPhone UNIT sales are falling, but Apple is still making record profits because the cost-per-phone is going up. But this doesn't help Foxconn because their revenue for assembly is not going up (the newer phones are easier to assemble) while their costs, especially labor, are climbing.

An assembly line worker in Shenzhen makes about $3 per hour, vs less than $1 per hour for making the first iPhone in 2007.

Re:half of a statement

[ShanghaiBill]

iPhone users are not moving to Android. They are just upgrading less often.

I have a 4 year old iPhone 6. It works fine. I have no plans to replace it.

Sounds like what every company should do

[SuperKendall]

the company plans to eliminate about 10 percent of non-technical staff.

This sounds exactly like what I would say almost every large company that I've ever worked for needed to do very badly.

Not only do you get rid of the salary and benefit costs from these people, you also can reduce a lot of pointless process overhead and focus on what is more important, delivery of the end result.

Could this be a sign of Apple moving production?

[melted]

Could this be a sign of Apple moving production to the US I wonder? It'd make sense for them: the production is mostly automated anyway, and manual labor is a minuscule fraction of the overall cost. In fact, humans wouldn't be able to work on much of this stuff even if they wanted to: there are thousands of parts inside the phone, and they are 0.2mm across, hard to see with the naked eye. If it's just screwing the boards into pre-milled chassis, attaching the flexes, and slapping the screen on top, I don't see why it can't be done right here in the US, in e.g. Texas or another business-friendly state.

Competing with who?

[rsilvergun]

They make damn near everything electronic.

Re:So what's up in Milwaukee?

[fustakrakich]

Monorail!

Re:Could this be a sign of Apple moving production

[ShanghaiBill]

Could this be a sign of Apple moving production to the US I wonder? It'd make sense for them

It actually makes little sense. Most of the components are made in China, and many right in Shenzhen. If you run out of 0.2mm screws in Wisconsin, you shut down the assembly line. If run out in Shenzhen you send a guy on a bicycle over to the screw factory and he is back in 20 minutes.

Also, US tariffs on components are often higher than on finished products, and the paperwork and delay will be way worse on 100 components than on one phone.

robot worklines are comeing and china is going to

[Joe_Dragon]

robot work lines are coming and china is going to have to deal with it.

Foxconn the iPhone Supplier

[quenda]

We make Blackberries - do they call us the Blackberry maker? No.
We make Nokia phones - do they call us the Nokia supplier? No.
We make Nintendos, Xboxes and Playstations, but do they call us the console supplier? No.
But you build one fucking iPhone ...

Re:Could this be a sign of Apple moving production

[DNS-and-BIND]

But if demand rises in America due to production lines opening...you'll be able to send someone out for screws. Capitalism is like that. There's no reason why we have to waste tons of CO2 on dirty cargo vessels to ship parts from one end of the world to another. To say nothing of Foxconn's slave labor issues. Why did we ever let China into the WTO?

Evers will git 'em

[AndyKron]

Thank God Scooter Walker gave them billions of our tax dollars to burn through here in WI. I voted for Tony Evers. Don't let the door hit you on the way out Walker!