Apple is scaling back its iPhone orders in a move that is having a major impact on its suppliers, according to The Wall Street Journal. Foxconn, one of Apple’s biggest partners, has been promised a $12 million subsidy to minimize layoffs at its plants.
“The subsidies came after Foxconn began dismissing some workers there earlier than usual for the Chinese Lunar New Year break, according to people familiar with the manufacturer,” reads The Journal’s report. Other component suppliers are now preparing for lower sales.
According to those with knowledge of Apple’s plans, the Cupertino company cut its order forecasts to iPhone suppliers in the last few months based on demand for and inventory of its devices. Given that Apple provides these projections months in advance, it suggests the company is expecting demand for iPhone to fall in the coming weeks and months.
The Journal’s report follows a similar story from Japanese news outlet Nikkei on Tuesday, which revealed Apple is to scale back iPhone 6s and iPhone 6s Plus production by as much as 30 percent in early 2016. The report added that “lackluster sales” have caused 6s and 6s Plus inventories to “pile up” at retailers in almost all markets.
After seeing record-breaking iPhone sales in 2015, analysts warned that Apple would struggle to find growth this year with smartphones that offer few noticeable changes over their predecessors.
Foxconn, which employs 200,000 workers at a plant in Zhengzhou alone, has declined to confirm if its layoffs are related to iPhone orders. Instead, it said the subsidies it received were “in recognition of our company’s contributions to maintaining our significant work force at our Zhengzhou facility throughout that year.”
Despite this, experts say that any layoffs must be related to iPhone demand in some way, because the Zhengzhou plant puts almost all of its resources into assembling Apple’s smartphone.
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