Chinese companies that manufacture iPhones for Apple are cutting back hours and have laid off some workers, the Financial Times reports.
Multiple workers told the FT that manufacturing giant Foxconn has paused hiring at its massive plant in Zhengzhou, Henan province. According to the paper, Foxconn “has also begun to cut some of the temporary workers it hired in large numbers in February as it ramped up production after a long pause.”
Foxconn has limited overtime hours and encouraged workers to take time off, the FT says.
Another major Apple manufacturer, Pegatron, is also reportedly cutting workers at a factory in Shanghai. “About a thousand temporary and third-party dispatched workers were fired,” an employee told the FT.
A demand shortfall
The shrinking workforce reflects declining global demand for smartphones. Apple closed all of its retail stores “outside of Greater China” last month. US stores are not expected to re-open until next month at the earliest—and could remain closed even longer.
You can still buy iPhones and other Apple products online, but the financial uncertainties of the coronavirus seem to be leading many consumers to delay replacement of their smartphones. Last week a Goldman Sachs analyst predicted that iPhone sales would fall by 36 percent in the current quarter.
In February, Apple warned investors that the Chinese coronavirus epidemic had hampered the supply of iPhones. At the time, the company was hoping to increase production as China got its coronavirus outbreak under control.
Over the last two months, of course, the virus has spread rapidly outside of China, creating a totally different economic situation. Now demand, not supply, is Apple’s main problem. The company is likely to provide more information about its financial situation when it reports quarterly earnings later this month.
Apple had more than $200 billion in cash on hand in January—plenty to weather any problems created by the coronavirus crisis.