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Foxconn to shrink workforce as sales growth stalls

Shenzhen - Taiwan's Foxconn Technology Group, the world's largest contract electronics manufacturer, will cut its massive workforce, the company said, as the Apple supplier faces declining revenue growth and rising wages in China.

Under its flagship unit Hon Hai Precision Industry, the group currently employs about 1.3 million people during peak production times, making it one of the largest private employers in the world.

Special assistant to the chair and group spokesperson Louis Woo did not specify a timeframe or target for the reduction, but noted that labour costs had more than doubled since 2010, when the company faced intense media scrutiny following a spate of worker suicides.

"We've basically stabilised [our workforce] in the last three years," Woo said. When asked if the company plans to reduce overall headcount, he responded "yes".

Revenue growth at the conglomerate tumbled to 1.3% in 2013 and only partially recovered to 6.5% in 2014 after a long string of double-digit increases from 2003 to 2012.

Robots

That decade saw the firm ride an explosion of popularity in PCs, smartphones and tablets, largely driven by its main client Apple, but now it is feeling the effects of falling growth and prices in the gadget markets it supplies, a trend that is expected to continue.

Growth in smartphone sales will halve this year from 26% in 2014, according to researcher IDC, while PC sales will contract by 3%.

Similarly, the average smartphone will sell for 19% less in 2018 than last year's $297.

"Even if technology is improving, the price will still come down," Woo said. "We've come to accept that, our customers have come to accept that."

Automation will be key to keeping labour costs under control in the long-term, Woo said, as the company pushes to have robotic arms complete mundane tasks currently done by workers.

But Woo noted that company chair Terry Gou's previously stated goal of one million robots was "a generic concept" rather than a firm target.

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