The largest assembler of Apple’s (NASDAQ: AAPL) iPhone, Foxconn, plans to cut an estimated USD 2.9 billion in expenses in order to stay competitive in 2019. Though the Foxconn put out a statement saying the review which led to the cuts is routine, the news continues to add to the growing cloud hovering over the tech giant. To meet the new budget requirements, Foxconn plans to lower the number of non-technical staff by 10%. In the past year, Foxconn has spent roughly USD $6.7 billion towards iPhone production.
Due to lackluster demand for the iPhone in emerging markets and China, Goldman Sachs has lowered Apples price target again; marking the third price reduction for the month. Apple stock in the past month has been on a steady decline losing 19.79% of their value. Falling well below its peak of USD 232.07 in October, Apple on Tuesday officially entered bear market territory as it dropped 20%. Similarly, Lumentum Holdings Inc (NASDAQ: LITE) and AMS AG (OTCMKTS: AMSSY), both suppliers, experienced losses of 33% and 22% respectively.
A senior portfolio manager at Fort Pitt Capital Group, Kim Forrest, reasons that "growth-oriented holders are figuring out that growth isn’t occurring like they thought it would, especially with the new fancy phones,". She also cited Apple’s new method for reporting unit sales has contributed to the current situation; referring to this as a “huge red flag”.
The steady annual decline smartphones sales have encouraged Apple to adapt its business strategy. By slowly shifting its mainstream revenue generation from iPhone sales towards subscription-based services such as music and video streaming and data storage. Nevertheless, despite the growing concerns about global demand for the iPhone, Apple shares have made a 2.2% gain over the year.