12/12/2016 10:32 AM IST | Updated 12/12/2016 11:50 AM IST

Hit By Cash Crunch, 'Make In India' Success Story Foxconn Puts A Quarter Of Workforce On Forced Leave

Other mobile device makers are following suit with plans to sack up to 40% of their staff.

Tyrone Siu / Reuters

Contract manufacturing giant Foxconn, which serves the mobile handset market and considered a 'Make In India' success story, has put nearly a quarter of its 8,000 staff on paid leave for two weeks hit by severe cash crunch and sluggish demand, the ET reported.

Four of Foxconn's plants in Andhra Pradesh are currently operating at less than half their capacity at "1.2 million a month, down from 2.5 million," a senior industry executive familiar with Foxconn's manufacturing told ET. The company has put 1,700 staff on bench or on forced leave.

But it isn't just Foxconn that has hit a wall. Other manufacturers including Intex, Lava and Karbonn are reportedly either sacking or putting on bench up to 40 per cent of their workforce, ET said. Lava is reportedly shutting down its plant, which has about 5000 staff, for a week; Karbonn may fire 1,200 to 2,000 employees soon; while Micromax has slowed down production at two of its plants, according to the report.

"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 Lava senior executive told ET. Lava and Intex together employ more than 10,000 people.

The mobile handset industry has been hit hard by the government's demonetisation move as the vast majority of cheaper-range handsets of less than Rs 5,000 are bought with cash. Mobile phone sales have halved to about Rs 175 crores – Rs 200 crores, and sales aren't expected to pick up as predicted before, ET report said citing industry insiders.

Foxconn serves China's Xiaomi, Gionee, Infocus and Nokia among others.

A senior executive from Karbonn, which may lay off up to 2,000 employees or 40 per cent of its workforce, told ET its management does not expect normalcy for another 4-5 months because of weak consumer demand.