Suppliers Hit with a “Downfall of Orders” by Apple Inc. (AAPL)

Apple New York Store

A recent report in Wall Street Journal came as a surprise. Apple Inc. (NASDAQ:AAPL) is scaling down the order forecast for its flagship model. Their decision is hitting the supplier chain quite badly. The experts who follow the supply chain of Apple told WSJ that the company has made some major changes in their sale forecast. So much so that, Foxconn, one of the major suppliers of iPhones is forced to let off a huge number of workers from the factory.

As per the official statement of Foxconn, they have recently received a huge incentive (reportedly of 81.9 million Yuan or 12.6 million dollars) from the city of Zhengzhou for their contribution towards the workforce in the city. But the statement on the government’s website is telling a whole different story. As per the website, the grant was given as an “unemployment-insurance” that is promised by the Chinese government. This subsidy is a part of Chinese policy to make sure unexpected layoffs do not happen.

According to WSJ’s sources, Foxconn is sending its employees on early leave for the Chinese New Year that too two months early from the expected holiday. The company has noticed a lot of idle time in last two months which, in general, is the busiest time of the year.

There was no official statement from Apple on sales forecast. Tim Cook, CEO of Apple Inc. (NASDAQ:AAPL) though gave a statement last year in which he mentioned that the company is expecting year-on-year growth with the launch of new models but as the year passed by, there was a dip in the sales of previous models and the stock started to pile up at retailers in different regions. Apple, who gave high production targets, decided to reduce the orders for iPhone 6 and 6S.

As the reports surfaced that Apple has decided to cut down their production targets, the shares also took the dip. As expected, this sudden dip in Apple’s also affected the share price of the manufacturers. Though manufacturer giants like Foxconn will survive this hit, small manufacturers who have built their whole empire around the manufacturing of parts for Apple are very close to shutting down. The whole manufacturing chain is hoping that Apple will raise the production demands again in April.