The biggest iPhones assembler would contemplate a large cost cut


Foxconn Technology Group, the largest assembler of iPhones of Apple Inc., aims to reduce the cost of 20,000 million yuan (US $ 2,900 million) in 2019, since it faces a "very difficult and competitive year," according to a internal report of the company

The iPhone business will have to reduce the costs of 6,000 million yuan next year and the company plans to fade approximately 10% of non-technical personnel, according to the memorandum obtained by Bloomberg. The company's expense in the last 12 months is approximately 206.000 million yuan (US $ 6,700 million). Foxconn declined to give comments.

Foxconn's measures are likely to increase the pessimism that surrounds Apple and the suppliers of supplies for the iPhone, its most important product. Only last week, four suppliers in three continents reduced their income estimates due to the weak demand. This led to a fall on technology actions that have spread to the market in general in recent days.

Goldman Sachs reduced its target price for Apple for the third time this month due to the weak demand of the iPhone in China and other emerging markets. Analyst Rod Hall warned about "real risk" to projections if current trends continue.

Apple fell to the market of bass market on Tuesday, and closed more than 20% below its maximum of October. In a single day last week, Lumentum Holdings Inc., one of the suppliers who warned the low demand, dropped 33%, while AMS AG dropped 22%. This week, as the concern spread, the S & P 500 lost its profit for 2018.

Foxconn, based in Taipei, assembles everything from iPhones and laptops to PlayStation by Sony Corp. in factories in China and around the world. Foxconn has been affected by the slowdown of the smartphone market, while commercial tensions with the United States increase global uncertainty. Earlier this month, its insignia company, Hon Hai Precision Industry Co., reported earnings 12% below expectations.

The company will carry out an in-depth review of the managers with an annual compensation greater than US $ 150,000, according to the memorandum. Other cuts include a planned reduction of 3,000 million yuan for expenses at Foxconn Industrial Internet Co., its subsidiary listed in Shanghai.

Apple has set its strategy since the growth in the number of smartphones sold every year has been reduced. You can charge higher prices for each phone and get more money from the services, including digital videos, music streaming and data storage.

But most of its suppliers depend on a larger volume of units to grow their businesses and they do not have a cost-effective support plan as industry growth declines. This has led to financial warnings in companies such as Lumentum and Japan Display Inc.

"Providers depend more on the volume than Apple," said Woo Jin Ho, analyst of Bloomberg Intelligence.

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