Foxconn Hiring Freeze May Be Because Of Robots, Not Slack iPhone 5 Demand

Apple’s shares were hit after investors worried that a hiring freeze at Foxconn’s China plants is related to slowing iPhone 5 sales. Foxconn suspended recruitment at its factories in Zhengzhou and Shenzhen and it also reportedly postponed the construction of a new factory. Though this may point to slackening demand for the iPhone 5, it could also mean that Foxconn is preparing to adjust its production line in order to install automated robots as a way to get around increasing wages and concerns that poor working conditions played a role in a series of worker suicides. The Taiwanese electronics manufacturer refuted reports that the hiring freeze is related to iPhone 5 production and said that it was related to a glut of employees returning after the Lunar New Year break.

Foxconn’s hiring freeze may also be related to Apple’s move toward using more assemblers. For example, Foxconn rival Pegatron assembles about 40 percent of iPad minis, which have taken market share away from the original iPad, manufactured by Foxconn.

Analysts, investors and Apple fanboys (and fangirls) have kept a close eye on demand for the iPhone 5 as the company weathers increasing competition from Samsung. In January, concerns that the smartphone is underperforming were fueled by reports that iPhone 5 component orders had been cut. Exane BNP Paribas analyst Alexander Peterc estimates that Apple will sell 38 million iPhone 5s this quarter, 20 percent less than the prior period.

On the other hand, Strategy Analytics recent published a report that said the iPhone 5 became the best-selling smartphone globally in Q4, overtaking Samsung’s flagship Galaxy SIII. The research firm estimates that 27.4 million iPhone smartphones shipped worldwide during Q4, compared to 15.4 million Galaxy SIII units. But, as Natasha Lomas noted, neither company discloses quarterly handset sales and comparing the performance of the two devices is somewhat unfair, because the iPhone 5 launched last September and the Galaxy SIII came out back in May, meaning that the newer Galaxy SIV may have eaten into some of its sales.

Either way, next time reports emerge about Foxconn’s recruitment numbers and their potential link to demand for Apple products, it’s worth keeping in mind that the manufacturer plans to take the H out of HR and replace it with R as in Robot Resources. Terry Gou, CEO of Foxconn, has said that the company’s goal is to “see the first batch of fully automated factories in five to 10 years and to eliminate simple and repetitive processes through automation in the new few years.”