Hon Hai Precision Industry Co (鴻海), the biggest assembler of iPhones, became the latest Apple Inc supplier to warn of anemic demand, with an internal memo suggesting that expenses would be cut by almost half next year.
The contract manufacturer aims to cut 20 billion yuan (US$2.9 billion) from expenses next year as it faces “a very difficult and competitive year,” an internal document obtained by Bloomberg showed.
The company’s spending in the past 12 months has totaled about NT$206 billion (US$6.7 billion).
Hon Hai shares rose less than 1 percent in early trading in Taipei yesterday.
“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 Technology Group (富士康), as the company is known outside Taiwan, said in an e-mailed statement in response to Bloomberg queries.
Its iPhone business would need to reduce expenses by 6 billion yuan next year and the company plans to eliminate about 10 percent of nontechnical staff, the memo said.
The moves are likely to add to the gloom enveloping Apple and suppliers for the iPhone, its most important product.
Last week, four suppliers on three continents cut their revenue estimates because of weak demand. That set off a rout in technology stocks that has spread to the broader market over the past few days.
Goldman Sachs Group Inc cut its price target for Apple for the third time this month because of weak iPhone demand in China and other emerging markets.
Analyst Rod Hall warned of “material risk” to guidance if the current trends continue.
Apple dropped into bear market territory this week, closing 24 percent below last month’s peak by Wednesday.
Hon Hai assembles everything from iPhones and laptop computers to Sony Corp PlayStations at factories in China and around the world. The company has been hit by a slowing smartphone market, while trade tensions between the US and China add to global uncertainty.
Earlier this month, Hon Hai posted earnings that were about 12 percent less than expectations.
The company is to conduct an in-depth review of managers with an annual compensation of more than US$150,000, the memo said.
Other cuts include a planned 3 billion yuan reduction in expenses at Foxconn Industrial Internet Co (富士康工業互聯網), its Shanghai-listed offshoot, the memo said.
Apple has adjusted its strategy as growth in the number of smartphones sold each year has slowed. It can charge higher prices for each handset and pull in more money from services, including digital videos, streaming music and data storage.
However, most of its suppliers rely on increased unit volumes to grow their businesses and have no profitable backup plan as industry growth slows. That has led to the financial warnings at companies such as Lumentum Holdings Inc and Japan Display Inc.
“Suppliers are more dependent on volume than Apple,” Bloomberg Intelligence analyst Woo Jin Ho said.
KEEP AWAY: People should wear a mask in places where they cannot follow social distancing rules, the CECC said, adding that it would publish detailed guidelines today The Central Epidemic Command Center (CECC) yesterday announced 16 new cases of COVID-19, including two domestic cases, as it urged people to practice social distancing in public spaces by keeping a distance of at least 1m when outdoors and 1.5m indoors. Minister of Health and Welfare Chen Shih-chung (陳時中), who heads the center, said that seven of the new cases tested positive upon their arrival at the airport, four were under home quarantine, one was under home isolation and two were under self-health management, while the two domestic cases sought treatment on their own. The domestic cases are a man in his
Taiwan will negotiate with the WHO about its participation without Beijing’s help and intervention as more countries, including Australia and Japan, are partnering with Taiwan to curb the COVID-19 pandemic, the Ministry of Foreign Affairs said yesterday. US Secretary of State Mike Pompeo in a telephonic roundtable with reporters on Monday also supported Taiwan’s role in the WHO, saying the US Department of State would do its best to assist Taiwan’s “appropriate role” in the world’s highest health policy setting body, Voice of America reported. In a Japan Business Press report published on Sunday, Chinese Ambassador to Japan Kong Xuanyou (孔鉉佑) said
Japan’s ruling party yesterday proposed the nation’s biggest-ever stimulus package of ￥60 trillion (US$554 billion) as the COVID-19 pandemic locks the economy in a recession. The sum includes ￥20 trillion in fiscal measures with private initiatives and other elements likely making up the rest, the proposal by the Liberal Democratic Party showed. More than ￥10 trillion, or the equivalent of a 5 percentage point cut in the sales tax rate, would be handed out to the public in a combination of cash, subsidies and coupons, the plan showed. The proposal puts an initial figure on a stimulus package that Japanese Prime Minister Shinzo
Malaysian authorities have advised women to wear makeup, not to nag their husbands and speak with a cartoon character’s soothing voice during the virus lockdown, sparking a flood of mockery online. Like many countries, Malaysia has ordered all citizens to stay at home to stem the spread of COVID-19, which, as of yesterday, had killed at least 39,070 people globally. In a series of online posters with the hashtag #WomenPreventCOVID19, the Malaysian Ministry of Women and Family Development issued advice on how to avoid domestic conflicts during the partial lockdown, which began on March 18. One of the campaign posters depicted