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.
The Legislative Yuan’s Finance Committee yesterday approved proposed amendments to the Amusement Tax Act (娛樂稅法) that would abolish taxes on films, cultural activities and competitive sporting events, retaining the fee only for dance halls and golf courses. The proposed changes would set the maximum tax rate for dance halls and golf courses at 50 and 20 percent respectively, with local governments authorized to suspend the levies. Article 2 of the act says that “amusement tax shall be levied on tickets sold or fees charged by amusement places, facilities or activities” in six categories: “Cinema; professional singing, story-telling, dancing, circus, magic show, acrobatics
Tainan, Taipei and New Taipei City recorded the highest fines nationwide for illegal accommodations in the first quarter of this year, with fines issued in the three cities each exceeding NT$7 million (US$220,639), Tourism Administration data showed. Among them, Taipei had the highest number of illegal short-term rental units, with 410. There were 3,280 legally registered hotels nationwide in the first quarter, down by 14 properties, or 0.43 percent, from a year earlier, likely indicating operators exiting the market, the agency said. However, the number of unregistered properties rose to 1,174, including 314 illegal hotels and 860 illegal short-term rental
INFLATION UP? The IMF said CPI would increase to 1.5 percent this year, while the DGBAS projected it would rise to 1.68 percent, with GDP per capita of US$44,181 The IMF projected Taiwan’s real GDP would grow 5.2 percent this year, up from its 2.1 percent outlook in January, despite fears of global economic disruptions sparked by the US-Iran conflict. Taiwan’s consumer price index (CPI) is projected to increase to 1.5 percent, while unemployment would be 3.4 percent, roughly in line with estimates for Asia as a whole, the international body wrote in its Global Economic Outlook Report published in the US on Monday. The figures are comparatively better than the IMF outlook for the rest of the world, which pegged real GDP growth at 3.1 percent, down from 3.3 percent
ECONOMIC COERCION: Such actions are often inconsistently applied, sometimes resumed, and sometimes just halted, the Presidential Office spokeswoman said The government backs healthy and orderly cross-strait exchanges, but such arrangements should not be made with political conditions attached and never be used as leverage for political maneuvering or partisan agendas, Presidential Office spokeswoman Karen Kuo (郭雅慧) said yesterday. Kuo made the remarks after China earlier in the day announced 10 new “incentive measures” for Taiwan, following a landmark meeting between Chinese President Xi Jinping (習近平) and Chinese Nationalist Party (KMT) Chairwoman Cheng Li-wun (鄭麗文) in Beijing on Friday. The measures, unveiled by China’s Xinhua news agency, include plans to resume individual travel by residents of Shanghai and China’s Fujian
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