From what it seems, Chinese hardware makers are going through a tumultuous period of hardships. Post LeEco’s cash crunch and Xiaomi’s debate of not making money on smartphones, reports of ZTE planning to get rid of some 3,000 employees have surfaced on the interwebs. This includes a fifth of the positions in the smartphone division of the company, which stems from a slowdown in the said market in China.
According to sources aware of the development, the company is planning to slash 5 percent of its 60,000 global workforce to streamline its operations in this competitive market. This includes a 10 percent cut in the handsets business as well. It amounts to the loss of over 600 jobs worldwide but they are mostly concentrated in the home country itself. The layoffs are scheduled to be completed in the first quarter of 2017 itself, reports Reuters.
A senior-level industry executive, on the other hand, estimates these layoffs to be even severe with more than 20 percent of the employees being shown the door. And the effect of the same seems to be widespread. A manager at one of the company’s overseas units (not handset) has confirmed the development saying,
I was also given names that must go because they had tried to apply for jobs at (rival) Huawei and are therefore branded as ‘unstable factors.’
This workforce reduction could also stem from the cohort of troubles which have been knocking on the Chinese phone manufacturer’s door in the past year. The U.S Department of Commerce is currently holding off its decision of imposing a ban on exports from U.S companies to ZTE, who is allegedly accused of breaking a sales sanction placed on Iran. It heavily relies on U.S-based suppliers namely Qualcomm, Intel, Microsoft, and others to source components for its devices.
The sharp sword of the ban, which has been delayed due to a series of reprieves, is still hanging over the company’s head. The last reprieve is said to come to expire on 27th February but ZTE is already taking measure to protect its handset business from unnecessary damage. It also plans to shelter its operations in the United States, which is one of the prominent markets and accounts for 10 percent market share of the company.
With regard to the same, ZTE chairman Zhao Xianming addressed the staff in his New Year speech saying,
[The company has] encountered its biggest crisis in its 31-year history. In 2017 … businesses that don’t fit our strategic direction or with low output performance will be shut, suspended, merged or reconfigured, improving the company’s core competitiveness.