(Yicai Global) Jan. 22 -- Hon Hai Precision Industry -- better known as Foxconn -- Pegatron and other major Apple suppliers are not requiring their staff to work overtime and have encouraged employees to take normal leave over this year's Spring Festival because of shrinking iPhone orders.

Apple's supply chain has been ravenous for component shipments since the iPhone came out in 2007 and has long required employees to work overtime during the Lunar New Year vacation, even recruiting en masse just before the Spring Festival to feed the strong demand for handsets.

This year's iPhone sales have been flaccid, however, and the supply chain is thus not working overtime -- always a rarity -- Economic Daily News, based in Foxconn's home of Taiwan, noted yesterday.

This Lunar New Year's off-season effect will be more significant this year and will affect the relevant supply chain's performance from the end of January to February, and even into early March.

Apart from major suppliers' not working overtime, some minor Apple suppliers are even starting the holiday for some staffers in the last week of January or extending the vacation for a few days because of major drops in orders, Taipei-based Economic Daily News reported. These suppliers refused to comment on the change, saying they arranged vacations based on set schedules.

Taiwan firms Largan Precision and Genius Electronic Optical will not go into overtime production unless a customer has an urgent need, the two companies said in statements.

All Is Calm

The peak production season for Foxconn's plant in Zhengzhou, in eastern Henan province lasted until about November last year, and it gradually entered the traditional off-season at the end of December, the company said. The Zhengzhou unit has no need to work overtime in the first quarter, and the situation is calm now without extra workers needed.

Pegatron will grant at least three days off to workers in the Lunar New Year, after which the business circumstances of each factory will determine working hours, it said.

Printed circuit board manufacturers will adopt rotating shifts for this holiday due to the traditional off-season and plant automation. Taiwan's Zhen Ding Technology Holding is uncertain about the market this year which, unlike previous years, is fraught with more external variables, the company said.

It expects the market situation to clear after the vacation.

January's production can still support market demand, so PCB makers do not need to specially boost production during the Chinese New Year and adopt flexible schedules and arrange regular shifts and equipment maintenance during the holidays, said major PCB maker Unitech Printed Circuit Board, which is also Taiwan-headquartered.

The first quarter is the industry's off-season, coupled this year with Apple's lackluster mainland sales, so the chances of working overtime in the supply chain are very slight. 

Suppliers incur cost spikes with overtime when customer demand is weak, one industry insider noted.

Editor: Ben Armour