Wednesday 24 April 2019

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.
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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
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