Chinese smartphone maker Xiaomi cut about 3% of its employees in the second quarter. Following Alibaba and Tencent, Xiaomi, China’s big tech companies, whose profitability has deteriorated in the aftermath of global inflation and China’s COVID-19 blockade, are trying to reduce their size one after another.
Hong Kong’s South China Morning Post (SCMP) reported on the 21st that Xiaomi reduced its number of employees by 924 in the second quarter in the aftermath of falling sales. According to the second-quarter results released on the 19th, Xiaomi’s sales fell 20% year-on-year to 70.2 billion yuan (about 13.7 trillion won), much larger than the first quarter (-4.6%), when sales fell for the first time since listing. Net profit plunged 83.5% year-on-year to 1.4 billion yuan.
Xiaomi’s continuous deterioration in performance is attributed to a slowdown in China’s economy and a decrease in consumption demand centered on durable consumer goods such as smartphones and automobiles. In fact, Xiaomi’s smartphone shipments in the second quarter decreased by 26.2% compared to the previous year. Not only Xiaomi but also Big Tech as a whole have been hit by worsening domestic demand and sluggish advertising sales due to the blockade of major Chinese cities, SCMP said, citing a Guo Sheng Securities report, adding, “The demand for smartphones is still weak and the growth of Chinese Internet companies is expected to slow.”
Earlier, Alibaba, China’s largest e-commerce company, and Tencent, a game and social media company, have also started to drastically reduce their workforce in response to a drop in sales. Alibaba lost more than 9,000 jobs in the second quarter alone and 13,000 in the first half of the year due to the first layoffs since March 2016. Alibaba’s sales remained flat for the first time since its foundation in the second quarter, and its net profit halved compared to the same period last year.
Faced with its first decline in sales since its listing in the second quarter, Tencent also cut 5,000 employees, or about 5 percent of its employees, during the period. In order to reduce costs, Tencent has eliminated some of its small employee welfare, including free fruit provision in the cafeteria, SCMP said.
