Apple is scaling back its orders for iPhones, forcing its Chinese suppliers to lay off employees.
Citing three people familiar with Apple’s supply chain, the Wall Street Journal reported that the company has reduced orders to suppliers, resulting in layoffs and idle capacity at its Chinese suppliers.
The claims are supported by a $12m grant given to Foxconn Technology Group, Apple’s primary iPhone maker, by the city of Zhengzhou to minimise layoffs.
Apple provides suppliers with estimations on potential orders several months in advance, and then adjusts them over time depending on demand and inventory.
Production of Apple’s latest iPhone 6s and 6s Plus models are expected to be reduced by around 30% in the first quarter, even though the company had initially told component manufacturers to keep production of those models for the quarter at a similar level as for the previous versions iPhone 6 and 6 Plus a year earlier.
Production is anticipated to return to normal by the second quarter after the completion of inventory adjustment.
Apple shipped 38 million iPhones in the fourth quarter of last year. The company also slashed iPhone production in 2013.