China Smartphone Slump: "Xiaomi to Lay Off Over 3,000 Employees"

Expected Impact on 10% of Over 35,000 Employees

[Asia Economy Reporter Cha Min-young] Xiaomi, a smart device manufacturer known as the "Accidental Continent" for its high cost-effectiveness (performance relative to price), is undertaking a rigorous restructuring. This is due to deteriorating profitability caused by the stagnation of the Chinese market due to COVID-19 and sluggish global smartphone sales.

On the 20th (local time), Xiaomi announced in an official statement that it would streamline its organization. The target is less than 10% of the total workforce, which means that considering the total number of employees at the end of the third quarter (about 35,000), more than 3,500 employees are expected to leave the company. The South China Morning Post (SCMP) also reported citing Xiaomi employees' social media that internal dissatisfaction has erupted. In some departments, there are expectations that up to 75% of the workforce will be cut.

This measure is due to a decrease in domestic demand caused by factory closures in China due to COVID-19, as well as a slowdown in global smartphone demand. According to market research firm Statista, the Chinese market, which peaked in the fourth quarter of 2016, has been on a continuous downward trend. Shipments within China, which once approached 140 million units per quarter, have fallen by half to about 70 million units per quarter.

The decline has become more pronounced this year. According to market research firm IDC, the Chinese smartphone market in the third quarter recorded shipments of 71.1 million units, down 11.9% year-on-year, marking the third consecutive quarter of decline. Vivo (-20.5%), Oppo (-27.9%), and Xiaomi (-17.9%) all showed double-digit decreases compared to the previous year. This contrasts with Apple, which showed a 2.5% growth. According to another market research firm, Canalys, global smartphone sales also decreased by 9% year-on-year in the third quarter, totaling 97.8 million units.

Xiaomi's poor smartphone sales, which account for 60% of its revenue, directly impacted its performance. When Xiaomi announced its third-quarter results last November, it revealed that smartphone sales decreased by 11% year-on-year, causing third-quarter revenue to decline by nearly 10%. Quarterly revenue was 70.47 billion yuan, down 9.7% from the previous year, and net profit fell 59.1% to 2.21 billion yuan.

This content was produced with the assistance of AI translation services.