Apple supplier Foxconn braces for staff cuts in face of falling smartphone prices

Apple supplier Foxconn is set to cut its massive Chinese workforce, blaming a falling growth in demand and tumbling retail prices in the smartphone and tablet markets.

Foxconn employs up to 1.3 million workers during peak production times - such as when a new iPhone or iPad is about to go on sale - making it one of the world's largest private employers.

But having prospered during the rampant growth of the smartphone and tablet markets in recent years - and by its high-profile partnership with Apple - Foxconn will soon need to scale back. The firm's labour costs have more than doubled since 2010, group spokesman Louis Woo told Reuters.

Woo, who is also special assistant to the company's chairman Terry Gou, said: "We've basically stabilised [the workforce] in the last three years," but when asked if further redundancies are planned, he replied "yes".

As its own name has grown in popularity off the back of Apple's massive success, Foxconn has struggled with controversy. Several workers committed suicide during 2010, and late last year a BBC investigation found poor working conditions in its factories, staff working compulsory overtime, and a link between illegal mining and tin used in Apple products like the iPhone.

Prices come down, we have to accept this

Technology research firm IDC predicts that growth in annual smartphone sales will halve this year from 26% in 2014, directly impacting Foxconn. Compounding the issue is how the average smartphone retail price (currently $297; £197) is predicted to fall by 19% between now and 2018.

Despite technology always improving and smartphones gaining new features every year, Woo conceded that this will not overturn the falling prices. "Even if technology is improving, the price will still come down. We've come to accept that, our customers have come to accept that."

One way Foxconn plans to stay profitable is to replace staff with robots, which are autonomous and use mechanical arms to perform mundane tasks on its vast production lines. Gou has previously made the bold claim that Foxconn would one day have one million robots, but Woo now refers to this as "a generic concept" rather than a realistic target.