Apple is scaling back its orders for iPhones, The Wall Street Journal reports, forcing its Chinese suppliers to lay off staff as they ready themselves for lower sales of Apple's flagship smartphone. People familiar with Apple's supply chain told the WSJ that the company has cut order forecasts for iPhones over the past few months. In response to decreased orders, Foxconn — Apple's main iPhone supplier — has been given $12 million of government subsidies to help it avoid mass layoffs.
Foxconn sent workers home early
Foxconn says that the money is simply an incentive provided by the city of Zhengzhou "in recognition of our company's contributions to maintaining our significant work force at our Zhengzhou facility throughout that year," but a notice on the city government's website stated that the 81.9 million yuan ($12.6 million) grant was an "unemployment-insurance work-force stabilization subsidy." Other sources also indicate that Chinese manufacturers have been dealing with a shortfall in Apple orders for a while now. In the last two months of 2015, a traditionally busy time for production, Chinese factories had some unexpected idle time, and according to the WSJ's sources, Foxconn started sending workers home early for the Chinese new year last month — two months early.
An Apple spokesperson said that the company does not comment on sales forecasts, but in October, Tim Cook said that he expected iPhone sales to increase year on year in the first fiscal quarter of 2016, after record sales of the 6S and 6S Plus. The company is also coming off a particularly successful financial quarter — one that saw what Tim Cook described as the company's strongest "absolute revenue growth ever" — driven in part by Chinese demand for the iPhone 6S. But Nikkei Asian Review says that that stock of the newest models has been piling up at retailers in various markets, and Apple — who had planned to keep to the same production schedule as with the previous year's iPhone 6 — chose to reduce orders for the 6S and 6S Plus.
But Apple stock has dipped over the last month as reports surfaced that the company intended to scale back iPhone production from its projected total. It may be a blip in Apple's projections, but Apple sneezes, its suppliers catch a cold. Those share dips were reflected in the share value of Chinese manufacturers, with companies like Foxconn and Largan Precision Co. — a Taiwanese camera supplier — seeing their shares plummet in response. While manufacturing giants like Foxconn could survive without Apple, a number of Chinese companies have built their entire businesses around making parts for Apple products. They will be pleased if — as Nikkei says — Apple brings its production demands back up again in April.