China’s Xiaomi Corp, one of the world’s largest smartphone companies, has announced that it will be cutting 10% of its workforce amid China’s ongoing battle with COVID-19.
Xiaomi’s decision to cut jobs follows similar moves by tech giants such as Meta and Twitter, which have recently laid off thousands of employees.
On Tuesday, a company spokesperson stated that the job cuts, which are part of a “personnel optimization and organizational streamlining” practice, would impact less than 10% of the total workforce. The spokesperson added that affected employees have been compensated in accordance with local regulations.
Xiaomi has already implemented significant job cuts earlier this year. In the first nine months of 2022, the company reduced its workforce by nearly 1,900, as reported in its financial documents. As of September, it had around 35,000 full-time employees, with over 32,000 of them based in mainland China, according to the company’s third-quarter financial results.
The COVID-19 pandemic has had a significant impact on the global economy, with many companies experiencing financial difficulties due to reduced demand and supply chain disruptions. Xiaomi is no exception, having reported a 9.7% year-on-year decline in revenue to CNY 70.47 billion (USD 10.1 billion) for the three months ending September 30. During the same period, the company’s net profits decreased by 59.1% to CNY 2.21 billion.
In addition, Dr. Mark Liu, chairman of TSMC, the world’s largest semiconductor foundry, told Nikkei Asia that global geopolitical uncertainty and the resurgence of the COVID-19 pandemic have slowed the market development of consumer electronics products. The shipment of mobile phones in the Chinese market from January to February 2022 experienced a year-on-year decrease of 22.6%.
The job cuts at Xiaomi come at a time when China is facing a range of economic challenges. China’s strict zero-COVID policy has disrupted factory and consumer activities for nearly three years, particularly affecting small businesses and unemployment rates.
“Us fresh graduates are definitely the first batch of people to be laid off because we just joined the company and haven’t made many contributions,” said a 22-year-old fresh graduate from China, in an interview with CNN.
This year, a record 10.76 million college graduates entered the job market at a time when the economy is unable to absorb them. As a result, the youth unemployment rate has reached new highs, with the rate for people aged 16 to 24 rising from 15.3% in March to a record 18.7% in August, according to data from the National Bureau of Statistics. This means that approximately 20 million young people in cities and towns are currently out of work. The situation may worsen in the coming year as a record 11.6 million college graduates are expected to enter the job market, according to the education ministry.
However, relaxation of Beijing’s strict containment restrictions, including the “Zero COVID” policy, could potentially help recover the economy and unemployment rates. Julian Evans-Pritchard, senior China economist at Capital Economics, said “A shift away from zero-Covid will boost domestic demand over the medium term”. According to Liu Pengyu, the spokesperson of China’s Washington D.C. embassy, as the economy recovers and policies to stabilize employment are strengthened, “the employment situation on the whole will gradually improve and remain stable.”
