Silicon Valley Business Journal/Jennifer Ellis: Manufacturing Exclusive: Apple supplier Jabil to close Silicon Valley site, impacting nearly 300 employees

Silicon Valley Business Journal
Manufacturing
Exclusive: Apple supplier Jabil to close Silicon Valley site, impacting nearly 300 employees

Jabil robotics at one of the company's Silicon Valley locations is shown in 2015. The company, a supplier to Apple, is closing one of its Silicon Valley sites and laying off hundreds of local employees as business slows.
Enlarge

Jabil robotics at one of the company's Silicon Valley locations is shown in 2015. The company, a supplier to Apple, is closing one of its Silicon Valley sites and laying off hundreds of local employees as business slows.

Vicki Thomson
By Jennifer Elias
Technology Reporter, Silicon Valley Business Journal
Apr 23, 2019, 1:22pm PDT
Updated Apr 23, 2019, 1:26pm PDT

Jabil Inc., a manufacturer for tech giants like Apple Inc., is closing one of its Silicon Valley sites and laying off or transferring hundreds of local employees as business slows.

The St. Petersburg, Florida-based electronics manufacturer and contractor is closing its Silver Creek facility in San Jose, affecting 298 total employees, the company confirmed to the Silicon Valley Business Journal on Tuesday. The site at 6375 San Ignacio Ave. supports Jabil's R&D teams and houses metalwork, wafer-handling and design, as well as manufacturing and integration tools.

Jabil spokesperson Michelle Smith told the Business Journal that 150 employees will be laid off while 148 will be transferred, along with several lines of business, to the company's other San Jose facility, Great Oaks, as well as its Fremont site. Terminations will begin June 4 and continue through June 30.

“This is an isolated closure, due to the softening demand and slow recovery in the semi-cap market,” Smith said in an email to the Business Journal, referring to the semiconductor capital equipment sector. "We do not expect additional closures related to this situation."

The site closure come after pullback from iPhone giant Apple, one of Jabil's biggest customers. Apple accounts for nearly 30 percent of Jabil's revenue, according to the contractor's most recent annual report.

The layoffs also come amid a bigger trend in the semiconductor industry in which companies like Apple are increasingly choosing to make their own chips and hardware in-house.

In its annual report, Jabil said it "depends on a relatively small number of customers for a significant percentage" of its revenue.

That means that shifts at a big customer like Apple, which saw its iPhone revenues fall 15 percent in the first quarter, can have a big impact on Jabil's business too. Wells Fargo analysts have said they expect “weak implied iPhone shipment trends" to continue when Apple reports quarterly earnings after on April 30.

Weakened demand started materially affecting Jabil's South Bay operations at the end of 2018, when the company temporarily shut down its four Bay Area facilities, affecting 1,285 workers who were only paid for part of that time period.

Jabil employs 200,000 employees worldwide, according to its most recent annual report. The Business Journal couldn't immediately confirm how many Silicon Valley workers the supply chain company has ahead of the coming layoffs.

For the 2018 fiscal year ended Aug. 31, 2018, Jabil reported revenue of $22.1 billion, up from $19.1 billion in 2017. At the time, Jabil CEO Mark Mondello said he expected zero expansion or marginal growth beginning in fiscal 2019 through 2021.

Despite slowing growth, the company's stock has surged nearly 15 percent in the last year after closing a deal with Johnson & Johnson and winning new contracts related to healthcare and 5G.

Still, analysts expect its near-term struggles to continue. Zacks Investment Research downgraded the stock from "hold" to "sell" in a research note on Tuesday, explaining: “Jabil is expected to suffer from weakness in mobility and sluggish semiconductor capital equipment business. These negatively impacted the company’s second-quarter fiscal 2019 results and are also expected to hurt top-line growth at least in the near term despite new contract wins in healthcare, automotive, cloud and 5G."

Jabil shares closed up 0.78 percent on Tuesday.
The List
Largest Greater Bay Area manufacturers
Ranked by Greater Bay Area manufacturing employees
Rank     Business name     Greater Bay Area manufacturing employees
1     Tesla Inc.     9,000
2     Lam Research Corp.     3,050
3     Sanmina Corp.     1,730
View This List
Companies In This Article

Jabil Inc.

St. Petersburg, FL

$22.1B Revenue

199K Employees

See full profile

Apple Inc.

Cupertino, CA

Consumer Electronics

$229.2B Revenue

See full profile
 Tuesday, May 7, 2019
Agtech: Food Safety in the Agricultural Industry

Join the Silicon Valley Business Journal and our panel of experts as we explore food safety.
Register now
Related Content
Exclusive: Apple supplier Jabil Inc. nearly triples Silicon Valley
Exclusive: Apple supplier Jabil Inc. nearly triples Silicon Valley
Jabil to conduct temporary shutdown of local plants
Jabil to conduct temporary shutdown of local plants
More in Manufacturing
More
Rich Mester, a former Boeing technician who reviewed planes before delivery, on Johns Island, S.C., on April 18, 2019. Workers at a 787 Dreamliner plant in South Carolina have complained of defective manufacturing, debris left on planes and pressure to not report violations. Mester described a losing battle with debris: “I’ve found tubes of sealant, nuts, stuff from the build process.” (Swikar Patel/The New York Times)
Claims of shoddy production draw scrutiny to a second Boeing jet

The New York Times
A Model 3 on display at Tesla's auto factory in Fremont.
Tesla launches Model 3 leasing, pulls the cheapest Model 3 off website

By Luke Stangel
Andrew Wheeler, then the nominee to head the Environmental Protection Agency, testifies in front of the Senate Committee on Environment and Public Works in Washington, Jan. 16, 2019. As the Trump administration prepares to drastically weaken Obama-era rules restricting vehicle pollution, nervous automakers are devising a strategy to handle their worst-case scenario: a divided American auto market, with some states following President Trump's weakened rules while others stick with the tougher ones. (Sarah Silbiger/The New York Times)
Automakers plan for nightmare: Market divided by emissions rollback

The New York Times
Tesla's automobile production facility is in Fremont, where the company makes all of its electric vehicles.
Tesla loses its senior director of global security after 8 months on t

By Luke Stangel
A Tesla Model 3 on display at the company's showroom in the Stanford Shopping Center in Palo Alto.
Tesla cuts dozens of salespeople amid shifting retail strategy

By Luke Stangel
The assembly area at Gradall Industries, a manufacturer of heavy equipment, in New Philadelphia, Ohio on Tuesday, April 2, 2019. Orders have been strong this year, but business in China is down sharply and tariffs are driving up costs. (Ross Mantle/The New York Times)
Manufacturing surge, a boon for Trump, may be fading

The New York Times
Workers assemble Model 3 sedans in a tent at Tesla's factory in Fremont on June 28, 2018.
​Tesla bond falls by most in 7 months on delivery miss

Financial Times
The Tesla store in Westfield Century City in Los Angeles on Oct. 18, 2018.
​Tesla’s Q1 deliveries fall short of already muted expectations

Financial Times
Back to Top

    Silicon Valley Business Journal

    User Agreement   |   Privacy Policy
    Your California Privacy Rights   |   Ad Choices

© 2019 American City Business Journals. All rights reserved. Use of and/or registration on any portion of this site constitutes acceptance of our User Agreement (updated 5/24/18) and Privacy Policy and Cookie Statement (updated 5/24/18). The material on this site may not be reproduced, distributed, transmitted, cached or otherwise used, except with the prior written permission of American City Business Journals.