Apple iPhone-Maker Cuts iPhone 5 Production; Sets Hiring Freeze

Foxconn, the biggest assembler of Apple products, has suspended hiring across almost all of its factories in China as it slows production of Apple’s iPhone 5, according to the Financial Times.

The hiring freeze by China’s largest private sector employer is the first countrywide move since 2009 and underscores weakening demand for some Apple products.

Human resources officials at Foxconn’s largest factories and other officials  said there had been internal notices on Tuesday and Wednesday to halt hiring until at least the end of March, in response to reduced orders for the iPhone 5, the Financial Times reported.

The iPhone 5 may be experiencing a slowdown as it sees less new customers and relies on upgrades by existing customers, which vary depending on a carrier’s upgrade cycle.  Apple experienced a surge in demand early in the fourth quarter, reporting orders of 2 million iPhone 5 preorders in 24 hours.  But that demand is likely slowing as the upgrade cycle hits the mid-way point.  Here’s a look at a Q&A in the analyst conference call following the earnings announcement in January:

Recruiters said hiring has stopped for the iPhone and iPad production lines in Shenzhen, as well as at Zhengzhou, which also makes iPhones. Taiyuan, which makes iPhone parts, and Chengdu, which makes the iPad, were also putting a freeze on hiring, FT reported.

Following the earnings announcement on January 23, Tim Cook also told analysts to be wary of rumors of order cuts.

“I would suggest it’s good to question the accuracy of any kind of rumor about build plans, and also stress that even if a particular data point were factual, it would be impossible to accurately interpret the data point as to what it meant for our overall business,” Cook said.

Apple’s stock is down more than 1 percent in pre-market trading to $459.99 and has been under pressure since the company reported revenue and iPhone sales that fell short of analyst expectations for its fiscal first quarter.

Update: A report by MacRumors says the hiring freeze is due to a strong number of returning workers, not waning iPhone 5 demand. And resuming hiring again in late March would align with the ramp up production period for the iPhone 5S. We’ll keep an on the story as it progresses.