Foxconn Technology Group, Apple's biggest supplier for its iPhone parts, decided to slash $2.9 billion from its 2019 budget as it grapples with a challenging and competitive year, Bloomberg reported citing an internal memo obtained from the company.
Foxconn spent approximately $6.7 billion in the past months before it decided to cut its budget.
The Taiwanese multinational electronics company was the latest among a number of Apple suppliers that were obliged to take drastic steps as the Cupertino-based tech giant reported a lackluster result for its most recent quarter ended on Sept 30. Apple also projected less than exciting revenue results for its December quarter. The company has been grappling with slowing demand from China and other emerging markets.
Aside from the budget cut, Foxconn will also have to let go 10 percent of its non-technical staff and will be reviewing managers with an annual salary of $150,000. Part of the planned cut is an estimated 3 billion yuan from the budget at Foxconn Industrial Internet Co. which is listed in Shanghai.
In a statement, Foxconn explained that the steps being made this year is similar to other decisions made by the company in the previous years, adding that such steps are necessary to adjust with the needs of customers, the need of the global production, and the anticipated economic challenges for the next one to two years.
Foxconn may not have mentioned the impact of Apple on its decision, but developments in the past weeks suggest that the Cupertino-based tech giant is affecting some of its supply chains.
Last week, Austria's AMS, one of Apple's suppliers for facial recognition technology, cut its fourth-quarter revenue forecast by 15 percent due to demand changes from a major customer which it did not specify. Reuters reported that Apple accounted for as much as 40 percent of AMS group's sales.
Qorvo, a supplier for Apple's Radio Frequency solutions, had also cut its third-quarter target range between $800 million and $840 million during its reporting last week. The company said the decision was made due to a drop in demand for flagship smartphones.
Qorvo listed Apple as its largest client, accounting to as much as 36 percent of its revenue in 2018. Huawei is also one of its big clients but Qorvo said during its forecast that demand from customers in China remains unchanged.
In the same week, Lumentum, one of Apple's facial-recognition suppliers, also cut its outlook for its next quarter due to a decrease in orders from one of its largest clients. Similar moves were done by Apple suppliers British chipmaker IQE and screen maker Japan Display.
