Xiaomi to Reduce Workforce by 10% amid China’s Prolonged COVID Battle

While many companies are gradually rebounding from the adverse effects of the coronavirus pandemic, others like China Xiaomi are still battling with the COVID impact as it plans to lay off 10% of its workforce. According to the South China Morning Post, the smartphone maker has started firing employees across multiple departments, including its smartphone and internet services units.

Speaking on the cut, a spokesperson said Xiaomi is conducting a “routine personnel optimization and organizational streamlining”  due to COVID with “less than 10 percent of the total workforce” affected. The company revealed in its Q3 financial results that it had 35,314 employees, with over 32,000 in mainland China. Notably, Chinese companies often conduct layoffs in the name of “business optimization.” This is done to avoid scrutiny from labor authorities because employee dismissals that affect over 20 jobs must be referred to the government under China’s labor law. Xiaomi stated that victims of the layoff had been compensated in compliance with local regulators. A report said the laid-off workers got redundancy packages from the company. 

Xiaomi Cuts Workforce as Covid Lingers

The Chinese smartphone giant started to let go of some of its staff due to lower sales amid the lockdowns in China. Slower consumer spending also contributed to the jobs cut. Notably, most of the people that would be impacted during the layoff were just recruited in December last year. Major social media platforms in China, including Weibo, Maimai, and Xiaohongshu, have been buzzing with posts about the dismissal. Discussions on the platforms show that many are beginning to get concerned about the future of the tech industry in China. This is because other top tech companies in China, such as Alibaba Group (NYSE: BABA) and Tencent Holdings, have also been laying off workers amid the prolonged Covid-19 battle in the country. 

Xiaomi made the move to reduce headcount shortly after its founder unveiled the new flagship 13-series smartphones. The company, which plans to unseat the iPhone from the global top position by 2024, revealed that the Qualcomm Snapdragon chipset powers the new smartphones. This came as the Chinese economy struggled in the consumer electronics market. As a matter of fact, global smartphone shipments dropped 9% YoY to 297.8 million units. Market research firm Canalys confirmed that smartphone shipments in China declined 11% to 70 million units. As for Xiaomi, the 5th largest smartphone seller in China with a 13% market share as of last quarter, the company’s revenue shed 9.7% YoY to 70.47 billion yuan. Its net profit also reduced by 59.1% to 2.21 billion yuan during the same period.