Foxconn Technology Group, the major supplier to Apple Inc. (AAPL), is planning to cut down costs significantly in preparation for a tough and competitive year in 2019, according to a report by Bloomberg. This cost reduction plan will include the elimination of jobs.
Foxconn is looking to cut around $3 billion in expenses in 2019 and these include cost cuts at its iPhone assembly division as well. The company is also planning to cut jobs and this is currently estimated to comprise 10% of its non-technical team.
While Foxconn has attributed these actions to a business planning process that it undertakes every year, the fact that the company is Apple’s top supplier has sparked concerns over slow iPhone sales. Apple recently disclosed that it will not report unit sales hereafter and analysts suspect this could signal weakness in iPhone unit sales in the near term.
Goldman Sachs lowered its price target on Apple citing weak demand for iPhones in China and other emerging markets. Foxconn is also struggling with weakness in the smartphone market as well as trade concerns between the US and China.
Apart from Foxconn, other Apple suppliers have also lowered their revenue outlooks due to reductions in orders. While Apple has shifted its strategy to focus more on services, its suppliers are still dependent on volume.
These lowered outlooks and reductions on the part of suppliers have led to a drop in Apple’s stock. Over the past two days, the company has been in a bear market, which refers to a drop of 20% or more from its 52-week high. Apple’s shares saw a slight recovery on Wednesday and as of 2:35 pm ET, the stock was up 0.58%.