Foxconn cuts costs for a "difficult" year is a warning sign for Apple

Foxconn manufactures the majority of iPhones – it is Apple's first industrial partner.

So, if you cut your spending by 20 billion yuan ($ 2.9 billion), an internal memo could be a "very difficult and competitive year," as reported by Bloomberg on Wednesday, this could be another bad sign for the iPhone application.

The Bloomberg report reflected a regular business planning process that the company conducts each year, said Foxconn's Louis Woo in an email to Business Insider.

"We regularly review our global operations to ensure that we are always using our resources to support our operations, our clients' requests, and critical research and development priorities, while meeting the needs of all sectors. These reviews enable us to fulfill our long-term responsibilities and commitments to our customers, our employees and business partners, as well as our shareholders, "said the Technology Group. Foxconn in a statement.

"This year's assessment by our team is no different from similar exercises in previous years to ensure we start each new year with teams and budgets aligned with the current and future needs of our customers, our global market operations and the market and the economic challenges of the next year or two, "he continued.

Foxconn is not the only provider to have reduced its forecasts

But no matter if Foxconn is going through a period of tightening the regular belt, the disclosure risks sparking speculation after recent reports have shown a major slowdown in iPhone demand.

Prior to Foxconn's warning and shortfall, several other Apple iPhone parts suppliers had warned of orders being cut. Lumentum, Skyworks and Qorvo all count Apple as one of the major customers and have slashed future estimates, each attributing the shortfall to reducing orders from a major customer. The Wall Street Journal reported Monday that Apple had reduced production orders for all iPhone models, charging a weak demand.

Wall Street analysts also fear that sales of iPhone units will start to decline in the short term. These concerns are thought to be the reason why Apple has decided to stop reporting unit sales, on which analysts have relied as a key indicator. Apple said it prefers to focus on its transition to a service company, with regular recurring revenue.

Apple's stock price has declined more than 20% and the company's market value has lost more than $ 265 billion since its peak reached in October.

Of course, Foxconn does not only manufacture Apple products. It is also the maker of other brands of computers and phones, as well as gadgets such as the Sony PlayStation and the Nintendo Switch. The tightening of Foxconn's belt could simply reflect the cooling of the global market for high-end electronics products, instead of Apple's specific weakness.

Foxconn is also spending billions of dollars building a plant in Wisconsin. It is unclear whether Foxconn's cost savings could affect this plant, which President Donald Trump has described as "incredible investment".

Anyway, all the signs of companies that consider Apple as a customer now indicate a period of impending slowdown in sales and growth.