Quanta Computer Inc, the world's largest PC contract maker, said on Wednesday that employees at its Taiwan production line number less than 2,000, down from about 3,000 in the first half, following a decline in client orders.
Quanta spokesman Elton Yang said the about 1,000 employees who had left were all contractors and the company would keep staff levels at the Taiwan production line at a minimum as order visibility remained unclear.
Tang did not say what the minimum level was, and declined to say which client the affected production line served.
Taiwan media on Wednesday reported that the reason for the move was a drop in orders from BlackBerry maker Research In Motion Ltd for its struggling PlayBook tablet device.
Fubon Securities analyst Arthur Liao said Quanta's Taiwan factory was specifically for RIM production, and Quanta had shipped 1.5 million PlayBooks in the first half, while RIM had sold only 700,000.
Last week, RIM said it shipped only 200,000 PlayBook tablets in the last quarter versus 600,000 tablets expected by analysts, which went on sale globally in June after weathering scathing reviews at a North American launch in April.
RIM posted a sharp drop in quarterly profit, painted a dismal picture for the current quarter and said it expected to reach only the lower end of an already reduced full-year outlook.
Liao said a cut in the PlayBook production line would have a limited impact on Quanta as RIM accounted for less than 1 percent of Quanta's revenue.
Taiwanese contract makers manufacturing non-iPad tablets were likely to scale back production as sales of the products lagged those of Apple Inc, he said.
Yet revenue at the contract makers would not be affected materially, analysts said, because tablet PCs, a market created only last year, accounted for a very small portion of their business.
At 0300 GMT, shares of Quanta were down 3.33 percent, underperforming the broader market's 0.46 percent rise.
Yang added that Quanta was looking to add jobs in China, and said overall notebook shipments in September would be better than expected.
Hewlett-Packard Co (HP) said late last month that it planned to drop its TouchPad tablet, launched only six weeks earlier, after the product failed to challenge iPad.
Taiwan's Acer Inc is expected to sell 1.5-2 million iConia tablets this year, short of its full-year target of 2.5 million.
World No.2 PC contract maker Compal Electronics Inc manufactures Acer's iConia, but Liao expected Compal would not cut jobs like Quanta as its factories are all in China, offering more flexibility on staff mobility.
(Editing by Chris Lewis)