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).
Photo: AP
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.
AIR SUPPORT: The Ministry of National Defense thanked the US for the delivery, adding that it was an indicator of the White House’s commitment to the Taiwan Relations Act Deputy Minister of National Defense Po Horng-huei (柏鴻輝) and Representative to the US Alexander Yui on Friday attended a delivery ceremony for the first of Taiwan’s long-awaited 66 F-16C/D Block 70 jets at a Lockheed Martin Corp factory in Greenville, South Carolina. “We are so proud to be the global home of the F-16 and to support Taiwan’s air defense capabilities,” US Representative William Timmons wrote on X, alongside a photograph of Taiwanese and US officials at the event. The F-16C/D Block 70 jets Taiwan ordered have the same capabilities as aircraft that had been upgraded to F-16Vs. The batch of Lockheed Martin
GRIDLOCK: The National Fire Agency’s Special Search and Rescue team is on standby to travel to the countries to help out with the rescue effort A powerful earthquake rocked Myanmar and neighboring Thailand yesterday, killing at least three people in Bangkok and burying dozens when a high-rise building under construction collapsed. Footage shared on social media from Myanmar’s second-largest city showed widespread destruction, raising fears that many were trapped under the rubble or killed. The magnitude 7.7 earthquake, with an epicenter near Mandalay in Myanmar, struck at midday and was followed by a strong magnitude 6.4 aftershock. The extent of death, injury and destruction — especially in Myanmar, which is embroiled in a civil war and where information is tightly controlled at the best of times —
Taiwan was ranked the fourth-safest country in the world with a score of 82.9, trailing only Andorra, the United Arab Emirates and Qatar in Numbeo’s Safety Index by Country report. Taiwan’s score improved by 0.1 points compared with last year’s mid-year report, which had Taiwan fourth with a score of 82.8. However, both scores were lower than in last year’s first review, when Taiwan scored 83.3, and are a long way from when Taiwan was named the second-safest country in the world in 2021, scoring 84.8. Taiwan ranked higher than Singapore in ninth with a score of 77.4 and Japan in 10th with
SECURITY RISK: If there is a conflict between China and Taiwan, ‘there would likely be significant consequences to global economic and security interests,’ it said China remains the top military and cyber threat to the US and continues to make progress on capabilities to seize Taiwan, a report by US intelligence agencies said on Tuesday. The report provides an overview of the “collective insights” of top US intelligence agencies about the security threats to the US posed by foreign nations and criminal organizations. In its Annual Threat Assessment, the agencies divided threats facing the US into two broad categories, “nonstate transnational criminals and terrorists” and “major state actors,” with China, Russia, Iran and North Korea named. Of those countries, “China presents the most comprehensive and robust military threat