Three top executives, including President Wang Xiang, are set to resign at Xiaomi as China’s biggest smartphone maker grapples with lost sales and profits from the country’s Covid-19 disruption.
Lu Weibing, who joined the company three years ago to lead its Redmi sub-brand, will replace Wang as president. Two co-founders, Hong Feng and Wang Chuan, will step down from day-to-day operations, according to a note sent to employees by Chairman Lei Jun and seen by the Financial Times. The move leaves Lei as the only co-founder with an operational role in the company.
“Xiaomi has achieved a smooth handover of the stable iteration,” Lei said in the internal letter, adding that the company is “currently facing many difficulties” but will continue to improve operational efficiency.
The restructuring comes at the end of a grueling year for China’s tech sector, which has been battered by a government crackdown and the impact of Covid. Xiaomi has reported three straight quarters of falling sales and earnings.
The world’s third-largest handset maker, behind Apple and Samsung, also this week began shedding 10 percent of its workforce across several divisions, including its flagship smartphone business.
Li Chengdong, founder of Dolphin, a Beijing-based consulting firm, said the timing of Xiaomi’s layoffs came as a surprise — just as China eased its zero-Covid policy and ahead of the Lunar New Year.
“Xiaomi’s fourth-quarter results could be worse than expected,” he said, adding that the group would lay off such a “large” number of employees only if there was an urgent need to “control costs.”
Analysts at market research provider TrendForce predicted that Xiaomi would lose market share in global smartphone sales in the three months to December as China’s economic outlook for 2022 clouded over and amid falling sales in India, which has long been a key growth market and where it is faces regulatory pressure.
Xiaomi said the job cuts are part of “routine workforce optimization and organizational rationalization.” It added that “less than 10 percent of the total workforce” was affected and would be “compensated in accordance with local regulations.”
Revenue for the Beijing-based group fell 9.7 percent to $9.8 billion in the three months to September compared to the same period in 2021 after sales were hit by slowing global demand for smartphones and weak consumer spending had been affected in China. The group’s net profit collapsed by almost 60 percent in the same period.
Xiaomi announced that a Rmb 10 billion (US$ 1.43 billion) investment in electric vehicle production last year contributed to rising research and development costs, while the company is yet to receive a license from regulators for such cars had.
The troubles have been reflected in job cuts at other tech companies, including Tencent. At a year-end meeting with employees last week, Pony Ma, founder and CEO of Tencent, hinted that the company may need to downsize underperforming businesses, according to Tencent employees in attendance.
“It was the first time Pony had pointed out the difficult position Tencent is in in years,” said a senior programmer who attended the online meeting. “Tencent’s recent layoffs may not solve the problems. The direction is unclear.”