Demonetization effect: Foxconn asks 1700 workers to go on two-week paid leave


Taiwanese based multinational manufacturer Foxconn has asked 1700 of its factory workers to go on a two-week paid leave after the demonetization move caused 50% of the company’s sales crash, reported Economic Times.

Prime Minister Narendra Modi’s announcement to defunct Rs 500 and Rs 1000 notes as legal tender hit the mobile industry where a large number of phones are bought for less than Rs 5000 and cash is the main mode of payment. ET reported that the consumer purchase power has been reduced drastically as the industry’s monthly sales halved to Rs 175-200 crore and it might not revive in the near future.

Foxconn, which devices Xiomi, Oppo and Gionee, along with Lava, Intex, Karbonn and Micromaz accounts for 50% of the handsets assembled in the country. “The four plants in Sri City (Andhra Pradesh) are operating at 1.2 million capacity a month, down from 2.5 million that it has,” a senior industry executive aware of Foxconn’s manufacturing details told ET. While 1700 workers will get paid, the number of days would be deducted from their earned leaves. This may continue if production, which is directly related to consumer demand, does not reach 2 million a month by January, said the senior executive.

ET reported that local players like Intex, Lava and Karbonn too are planning to lay off or bench 10-40% of their workforce. This is happening because companies want to control the inventory pile-ups as move has caused cash crunch in the economy. Starting December 12, for a week, Lava is shutting down its plant which holds 500 workers. According to theET, other manufacturers may follow suit soon too.

“The first week of December has been really bad and now we’re thinking of cutting production and deferring imports of semi-knocked down (SKD) kits,” Unnikrishnan M Thazhath, product head at Intex Technologies said. Another senior executive at Intex told ET that 500-600 people will be laid off in January at the company’s Noida plant.

“All 5,000 people who work on the factory floor have been asked not to come for a week from Monday, as entire production of smartphones and featurephones is being shut for that time,” a senior executive at Lava International told ET. Lava and Intex together produce over 5 million phones a month and emply more than 10,000 people.

A senior executive at Karbonn told ET that the company does not expect the consumer demand to revive for another four to five months. Consequentially, the company might lay off 40% of the workforce. Micromax too has slowed down its production in Rudrapur and Telangana facilities.