Foxconn is cutting costs as Chinese smartphone market slows

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Having billionaire CEOs work on your production line is an unnecessary cost for one thing.
Photo: Apple

Apple supplier Foxconn is reportedly cutting costs and widening its margins to keep ahead of the pack as the Chinese smartphone market slows, according to a new report.

Although Foxconn’s CEO Terry Gou has been outspoken about his desire to not rely too heavily on any one company, Foxconn currently gets around half of its revenue from Apple.

Recently Apple has seen its share prices falling after missing both revenue forecasts and the expected number of iPhone sales for the June quarter — with 47.5 million sold versus 48.8 million predicted.

As a company which gets a lot of its money in dollars, and pays its employs in yuan, Foxconn has benefitted from the recent surprise devaluation of the Chinese currency. However, it is also likely affected by Apple’s recent cutting of orders for the upcoming iPhone 6s.

Despite likely being Apple’s most significant “s” release in history, a KGI analyst recently suggested that the slowing Chinese smartphone market could result in the iPhone 6s being met with zero or even negative growth.

Nonetheless, Foxconn is doing well for the time being. Taiwan’s second most valuable company has reported gross margins of 7.2 percent for the year’s second quarter — beating the 7 percent that analysts were expecting. Net income climbed 27 percent to around $798 million.

Source: Bloomberg