Foxconn's "retreat"? The market value of 340,000 layoffs fell below one trillion yuan. Hon Hai encountered the biggest variable
million employees, and how can a giant company with millions of employees rely on transformation?
Those who have seen Foxconn factory shifts will be shocked by the tide of people. Now, the tide is beginning to recede.
According to sources, following the end of June, Foxconn Technology Group laid off thousands of employees in Taiwan, China. Recently, the parent company Hon Hai Group , including Foxconn, plans to lay off a total of 340,000 employees. Foxconn explained the layoffs as a reason for "fees review".
"This group's review of expenses includes hundreds of companies under the Pan Hon Hai Foxconn Group system, and is not limited to Hon Hai Foxconn itself." In a statement to Time Finance, Foxconn explained: "The cost reduction is mainly aimed at foreign investments in the group's operating performance that fails to meet the standards and profit performance is not as expected, and involves peripheral expenses such as administration, affairs, logistics, etc., but does not include the group's R&D and new product development funds."
, as the world's largest mobile phone foundry, why did Foxconn encounter any changes this time, and how will its parent company Hon Hai Group respond?
loss Apple
"Foxconn's layoffs are inevitable and Apple's order cuts." Sun Yanbiao, director of the First Mobile Research Institute, told Time Finance. In September this year, Apple released three new products, , iPhone , with the flagship price being the highest price in the history of iPhone phones. "The entire industry and even Apple believe that 2018 is the year with the best sales of Apple."
Based on this judgment, Foxconn, Pegatron and Weiwei Venture Capital have invested greater preparations than in previous years to meet Apple's expected strong demand for Apple. In particular, Foxconn, whose Apple business accounts for 50% of its overall revenue, paid great attention to the iPhone XR, which was postponed to the end of October.
According to previous interface reports, Foxconn Zhengzhou Park has equipped iPhone XR with 27 production lines, the most of the three models. The yield of the production line is 93%, and each production line produces 590 mobile phones per hour, running for up to 19 hours a day.
Foxconn will bet on almost all production lines on the iPhone XR, and only 4 iPhone XS production lines are retained in the Zhengzhou park. Foxconn's 12 production lines in Shenzhen Guanlan Park are also ready to switch to assemble the iPhone XR at any time.
The nearly 60 production lines prepared by Foxconn for Apple have never been put into operation. In November, due to weak consumer demand, major domestic e-commerce channels have greatly reduced their confidence in the new iPhone. With less than one month of launch, the three phones even saw a price cut of more than 1,000 yuan. Apple had to adjust its orders for the fourth quarter of the iPhone XR and cut production by about 5 million units in the original plan, which is equivalent to Foxconn's full capacity for one week.
"Apple's significant production cuts on iPhone XR naturally resulted in large-scale layoffs and cost reductions." Sun Yanbiao explained, "In addition, Foxconn Petroleum and others have another conflict with Apple. Before talking about how big orders were, there would be corresponding processing prices. Now Apple's order reductions, the cost-effectiveness brought by scale is no longer there. Foxconn and Petroleum will inevitably raise prices. Apple is dissatisfied with Foxconn and Petroleum's price increase behavior, reducing orders given to them, and shifts to Flexibility and BYD ."
This is undoubtedly a worse injury for Foxconn. The vicious cycle further reduced Foxconn's orders and further expanded the layoffs.
The same thing happened not the first time. Last year, Apple initially had too optimistic about iPhone X sales forecasts, hurting many suppliers. In the first quarter of 2018, iPhone X production cut by about 20 million units.
Foxconn also made the worst plan. According to Bloomberg on the evening of November 21, an internal memorandum of Foxconn revealed that it will significantly reduce spending in 2019, with a maximum of nearly 50%, about 20 billion yuan. Among them, the iPhone business will reduce its expenditure by 6 billion yuan, and 10% of non-technical positions may be laid off.
Foxconn's pot, Hon Hai's basket
Foxconn's poor performance also affected the parent company Hon Hai Technology Group.On November 20, affected by the news of layoffs, Hon Hai Precision, the core of Hon Hai Technology Group, fell 3.3% in Taiwan, and its market value shrank to NT$987 billion (about NT$221.3 billion), the first time since November 2013 that it fell below NT$1 trillion. Since the beginning of this year, Hon Hai Precision has fallen by 40% so far.
It can be said that Foxconn's situation directly affects the stock price of Hon Hai Group, but it is not the only factor. As an affiliated company listed on the A-share market, which accounts for 35% of Hon Hai Precision's revenue, the stock price is bleak and the negative impact on Hon Hai cannot be underestimated.
On June 8 this year, FUCCI was listed on the A-share market and became the technology stock with the largest market value in the A-share market at the close. The stock price then fluctuated and fell. As of press time, the Industrial Franchise closed at 11.81 yuan, lower than the listing issue price.
Industrial Foxconn is optimistic about the founder of Foxconn Terry Gou , hoping to transform into industrial Internet and take off the hat of OEM. "I hope you don't say we are factories," Terry Gou often said on different occasions: "We are not factories, but intelligent manufacturing bases."
As Foxconn said to Time Finance, it will "with the help of big data, AI and automation development achievements, the current implementation of the industrial Internet within the group has begun to show results."
But it remains to be seen whether Foxconn can assume this important task. Some industry experts also said that Hon Hai Group did not include Apple's assembly business in Foxconn, but included 60 domestic and foreign subsidiaries in Hon Hai. This division itself makes the outside world lack confidence in the Industrial Fulian.
In fact, Hon Hai has several "baskets" in his hands to package its businesses - in addition to Industrial Fulian, it also listed in Hong Kong to establish "Fu Zhikang". As of press time, the market value was HK$7.2 billion, down 38% from its mid-year high.
Industry FULL is the most iconic industry in the industrial Internet, and the revenue share of precision tools and industrial robots is still insignificant. According to its prospectus, in the past three years, sales revenues have been 930 million yuan, 650 million yuan and 966 million yuan, respectively, accounting for less than 0.35% of its main business revenue. Industrial robot production capacity, output and sales have declined for three consecutive years. Industrial robot production fell from 6,600 to 3,500, and sales fell from 6,100 to 3,500. The performance of
is also reflected in the latest financial report. Financial data shows that in the first half of 2018, the Industrial Flexibles achieved operating income of approximately 158.99 billion yuan, a year-on-year increase of 16.3%; the corresponding attributable net profit of approximately 5.44 billion yuan, a year-on-year increase of approximately 2.2%.
On June 22 this year, Terry Gou said at the shareholders' meeting of Taipei headquarters that Hon Hai, as the world's largest electronics manufacturer, is in a critical stage of transformation and will transform from a simple manufacturing industry into an industrial Internet platform enterprise.
The current situation is not easy to break, making Hon Hai often fall into a situation of losing sight of one thing. Taking Foxconn's investment in Wisconsin, the United States, creating 13,000 jobs as an example, the cost behind it is quite heavy. Foxconn's actual investment in the local factory is an automation factory, which only requires 3,000 employees. Therefore, the state government will compensate US$220,000-1 million for each job, and it will be difficult to recover the cost by 2043.
and even Hon Hai Group are facing the fact that Foxconn, which represents the traditional manufacturing industry, has suffered a cold performance, and the stock price of Foxconn, which has high expectations, is sluggish. The outside world cannot know how long the Foxconn ebb will last. Perhaps it will have to wait for the 68-year-old Terry Gou to give the answer?
(Editor in charge: Chang Shuishu)
