Chinese smartphone maker Xiaomi cuts over 900 jobs, nearly 3 per cent of its workforce, as revenues shrink 20 per cent
- In the June quarter, net income fell 83.5 per cent to 1.4 billion yuan, compared with a profit of 8.3 billion yuan the same period last year
- Smartphone shipments decreased 26.2 per cent, primarily due to global macroeconomic headwinds and the resurgence of Covid-19 in China
Chinese smartphone company Xiaomi cut more than 900 jobs, or nearly 3 per cent of its workforce, over the past three months as revenues continued to shrink amid an economic slowdown.
Revenue reached 70.2 billion yuan (US$10.3 billion) in the second quarter, representing a 20 per cent year-on-year drop, a wider decline in revenue than the one reported in the last quarter.
In the three months ended June 30, net income also missed estimates, falling 83.5 per cent to 1.4 billion yuan, compared with a profit of 8.3 billion yuan the same period last year.
As of June 30, 2022, the Beijing-based company had 32,869 employees, compared with a total 33,793 employees at the end of March this year, meaning a loss of 900 jobs over the period.
“In this quarter, our industry faced many challenges, including rising global inflation, foreign exchange fluctuations [and] complex political environment,” said Xiaomi president Wang Xiang during a conference call after the earnings release. “These challenges significantly impacted overall market demand and our financial results for the period.”
China’s gross domestic product grew only 0.4 per cent in the second quarter, the worst since the first quarter of 2020, when the coronavirus outbreak shut down large swathes of the country, driving GDP down by 6.8 per cent.
Revenue from Xiaomi’s smartphone segment decreased 28.5 per cent, from 59.1 billion yuan in the second quarter last year to 42.3 billion yuan in the same period this year, primarily due to lower smartphone sales.
Smartphone shipments decreased 26.2 per cent in the quarter, primarily due to global macroeconomic headwinds and the resurgence of Covid-19 in mainland China, the company said in the earnings report.
A research note from Guosheng Securities said the demand for smartphones was still weak and that revenue growth for Chinese internet companies was expected to slow, dragged down by weak advertising demand and the resurgence of Covid-19.
Tencent Holdings, the video game and social media giant, this week reported its first quarterly revenue drop and cut over 5,000 jobs, or about 5 per cent of its total workforce, in the second quarter.
The Shenzhen-based company also withdrew certain minor employee benefits, such as free fruit in the company canteens.
Alibaba Group Holding, owner of the South China Morning Post, also reported better-than-expected earnings results, with sales stagnating at 205.56 billion yuan for the June quarter.
Lei Jun, Xiaomi’s co-founder and chief executive who is known among fans as “China’s Steve Jobs”, gave an hour-long motivational speech at a product launch in August, recounting his past struggles as a serial entrepreneur.
“The world has undergone tremendous change in the past three years, which has had a profound impact on our lives and work,” Lei said in his “annual speech”, a tradition that started in 2020 when he recounted the now-familiar growth story of Xiaomi to celebrate its 10th anniversary.
“Many people are feeling confused, and even anxious, in the face of these continuous and huge changes,” he said.
Author: Tracy Qu, SCMP