Bad News for iPhone Sales Just Keeps Piling On

Posted on November 21, 2018 by Paul Thurrott in Apple, iOS with 88 Comments

From space, Apple Park kind of looks like a giant zero.

In what is now a rolling tsunami of bad news for the latest iPhones, Apple’s biggest manufacturer is trimming $3 billion in expenses related to diminished Apple sales.

Foxconn faces “a very difficult and competitive year,” an internal memo obtained by Bloomberg reads. As a result, it will trim almost $3 billion in expenses in 2019 as Apple’s orders continue to fall precipitously. It will also eliminate about 10 percent of its non-technical staff.

Apprised of the Bloomberg report, Foxconn provided the following face-saving statement.

“The review being carried out by our team this year is no different than similar exercises carried out in past years to ensure that we enter into each new year with teams and budgets that are aligned with the current and anticipated needs of our customers, our global operations and the market and economic challenges of the next year or two.”

Of course, there is one difference: In previous years, Foxconn needed to raise or maintain capacity to meet the needs of Apple, its biggest customer. This year, it is making dramatic cuts to meet the reality of Apple’s diminished orders.

Apple’s woes aren’t necessarily unique in the industry: Smartphone sales have slowed dramatically in recent years, and Samsung, the market leader, has also experienced a downturn. But with Apple now expected to sell 30 percent fewer new iPhones than originally expected, it seems that its price-hike strategy, called Apple Jacked, won’t make up the difference.

This shortfall also explains the real reason Apple continues to use Google Search as its default search engine: It needs the $9 billion dollars that Google pays it annually for this situation not to turn into an outright fiasco. Apple CEO Tim Cook falsely claimed this week that Google’s search engine was “the best,” despite the privacy concerns he continually raises publicly.

And Apple is already feeling the pinch: The consumer electronics giant’s market capitalization has fallen by over 20 percent since its October peak, putting Apple firmly in bear market territory. With Goldman Sachs warning of a “material risk” to Apple’s stock price target after three straight downward corrections, it could fall even further.

 

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