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Apple stock drops after reports of Foxconn hiring freeze

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Apple’s(s AAPL) most biggest and important manufacturing partner, Foxconn, is instituting a hiring freeze in its China factories until the end of March, but there are two different explanations for the move being offered. The Financial Times said it heard from unnamed Foxconn HR officials, recruiters and local government officials that it’s ceasing hiring “in response to reduced orders for the iPhone 5.” However, Foxconn told Bloomberg, in a separate interview, that the hiring freeze on new recruits has to do with the fact that more workers are returning.

The FT quotes an external recruiter for Foxconn’s factories who said hiring had stopped because of “fewer orders for the Apple products” and another who said “Foxconn’s demand for workers this year was as low as that in 2009.” A Foxconn spokesman only confirmed to the FT that the hiring freeze is on; he does not mention why.

Bloomberg got a different Foxconn spokesman to explain the reason for the freeze. He offered some more detail, saying: “Foxconn halted recruitment until the end of March after more employees returned from the Chinese New Year break than a year earlier.”

Apple’s investors either aren’t buying that explanation or are put off by the confusion surrounding the halt in hiring — Apple shares were down 1.61 percent to $452.60 on the news as of this posting.

This drop in need for more workers echoes reports published in January that demand for the iPhone 5 in the first three months of 2013 had dipped, causing Apple to cut its parts orders from suppliers in China.

It’s true that Apple has typically sold fewer iPhones in the quarter directly following the holiday season. Apple got the iPhone ready for sale in 100 markets between September and December, its fastest rollout ever, so the hiring halt could simply be a seasonal response.

Apple CEO Tim Cook last week at an investor conference said he sees plenty of growth left in the iPhone: “Frankly speaking, I see a wide open field. It may surprise you, but iPhone is only available to about 50 percent of the subscribers in the world.”

One Response to “Apple stock drops after reports of Foxconn hiring freeze”

  1. Matt Eagar

    Both stories are probably true.

    Chinese New Year is a huge variable for manufacturing companies. Large employers can lose significant portions of their staff (sometimes even 20-30%) because they go back to the countryside for the holiday and then quit. However, smaller companies – especially those that employ more people that live right around the factories, and those that offer good benefits and an actual career path – tend to see less turnover. I wonder whether Foxconn’s new programs to improve working conditions have changed their turnover rate.

    And yes, it’s also quite possible that Apple’s forecasting for the iPhone 5 was too high – particularly coming off a strong Q4.