Though the demonetisation move has enabled digital payment services to gain momentum, it has adversely affected the sales and production for several big-time companies. Joining the list is the largest contract manufacturer, Foxconn, which seen its sales slump by more than 50 percent in the last one month, reports ET.
Thus, this has pushed the company to take certain stringent steps. It has now slashed its production by about half and has instructed a fourth of its staff to take a two-week paid leave. Foxconn has put about 1,700 members from its 8,000-member strong workforce on the bench. During this period, the staff would be paid for the number of days they’re on leave but the same would be cut from their earned leaves.
According to senior industry officials aware of the matters, four of Foxconn’s facilities in Andhra Pradesh are operating at less than half of their capacities. They’re currently producing 1.2 million devices a month as compared to the previous 2.5 million.
This extreme measure from the manufacturer stems from the increased cash crunch and reduction in demand for high-end smartphones. The scrapping of 500 and 1000 rupee notes by the govt has reduced the purchasing power of the consumers. This has led to monthly sales of mobile phones being halved to Rs 175-200 crore in the last one month. And it is still not showing signs of revival.
Foxconn, who is recognized as the poster boy of the Make In India campaign is also one of the worst hit industries in the country. The sources are also of the opinion that the benching of the workforce might be extended if the levels of production do not reach 2 million by January next year.
While everyone continues to appreciate the govt’s demonetisation move, we’re blinded to the domino effect ensued by the same. Most of the leading smartphone manufacturers in the country are now also resorting to similar actions to streamline production and control inventory pile-up due to reduced consumer demand. These local players who face an extreme cash crunch due to demonetisation include Lava, Intex, Karbonn, and even Micromax. They’re also planning to provide their workers with paid leaves or ultimately show them the door if things don’t turn around in the coming months.
