Hon Hai Precision Industry Co (鴻海) chairman Terry Gou (郭台銘) yesterday said the biggest assembler of iPhones is not cutting research and development (R&D) spending as demand for the smartphones cools.
“No matter how stupid we are, we are certainly not cutting research and development expenses,” Gou said in an interview outside a polling station in Taiwan, where people were voting in the nine-in-one elections. “Our business is very good up till at least January.”
An internal memo obtained by Bloomberg News earlier this week said that the contract manufacturer aims to cut 20 billion yuan (US$2.88 billion) from expenses next year, as it faces “a very difficult and competitive year.”
Hon Hai’s iPhone business would need to reduce expenses by 6 billion yuan next year and the company plans to eliminate about 10 percent of non-technical staff, the memo said.
The moves are likely to add to the gloom enveloping Apple Inc and suppliers for the iPhone, its most important product. Four suppliers on three continents last week cut their revenue estimates because of weak demand.
Gou also said that his company has no plans for massive layoffs after a Nikkei Asian Review report on Friday said that Hon Hai is cutting tens of thousands of jobs.
“There has been speculation that we are cutting about 100,000 staff. We won’t,” he said.
“Hon Hai is reviewing its expenses plan and such a review is a regular annual move,” Gou told reporters after he cast his votes.
Gou said the latest expense review would be a comprehensive one, aimed at helping Hon Hai facilitate its business restructuring.
“But Hon Hai has no plans for massive layoffs,” he said.
A European brokerage on Friday said in a research note that it has cut its forecast for the number of iPhones assembled by Hon Hai in the fourth quarter of this year from 61 million units to 50.5 million.
In its forecast for next year, the brokerage also lowered the number, from 148 million units to 142 million.
It lowered its forecast for Hon Hai’s earnings per share by 8.8 percent for this year to NT$7.8, and by 8.2 percent for next year to NT$8.39, compared with NT$8.01 last year.
Additional reporting by CNA
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