Hon Hai Precision Industry

Billionaire Terry Gou says outlook for iPhone assembler Foxconn is strong at least until January

  • Foxconn won’t cut research and development spending, Gou says
PUBLISHED : Saturday, 24 November, 2018, 5:30pm
UPDATED : Saturday, 24 November, 2018, 5:30pm

Terry Gou, chairman of iPhone-assembler Foxconn Technology Group, said his company’s business will remain strong at least until January amid growing concern over cooling demand for Apple’s flagship product.

“Our business is very good up till at least January,” Gou said Saturday in an interview outside a polling station in Taipei, before voting in local elections. He didn’t elaborate on the outlook for the rest of 2019.

Bloomberg News reported Thursday that an internal Foxconn memo characterized 2019 to be a “very difficult and competitive” year. The Taipei-based company is the main assembler of iPhone XS and iPhone XS Max, and splits iPhone XR with smaller rival Pegatron.

iPhone assembler cuts costs ahead of tough times

According to the memo, the company will slash 20 billion yuan ($2.9 billion) in expenses next year from this year’s level, with 6 billion yuan coming from its iPhone unit. It also plans to cut 10 percent of its non-technical staff.

Jeff Pu, an analyst at GF Securities, said Gou’s comments don’t necessarily reflect better-than-expected iPhone demand, after four Apple suppliers on three continents lowered their outlook last week.

“Suppliers who have cut their forecasts are component makers who will be informed by Apple earlier about changes in demand than assemblers,” Pu said.

Pu said Foxconn may also get a boost to sales for the rest of this year on customer requests to expedite shipments of PC and server components before U.S. tariffs on some Chinese imports are raised further at the beginning of 2019.

Apple warns on holiday sales, sending value below US$1 trillion

Foxconn’s aim for a deep cut to expenditure was widely seen as a fresh warning sign of Apple’s woes. Some reports even suggested Foxconn could trim its research and development expenses, but Gou reiterated the company isn’t doing that.

“No matter how stupid we are, we are certainly not cutting research and development expenses,” Gou said.

Gou also dismissed speculation the company will eliminate tens of thousands of jobs.

“There has been speculation that we are cutting about 100,000 staff. We won’t,” he said.