It has not been a good year for Chinese company ZTE and their chairman supposedly said in his New Year’s speech that they are encountering their “biggest crisis in its 31 year history”. Now sources within the company are saying that they may be laying off around 5% of their 60,000-strong global workforce, including a fifth of the positions in the struggling handset business unit in China. This comes on the heels of the U.S. trade sanctions that they are about to face and may further disrupt their business both in North America and in China as well.
According to insiders, around 3,000 employees will be let go within the first quarter of 2017, and 600 of those will be from China itself. ZTE has been steadily losing market share in its native country, amidst the increasingly competitive market in the entry-level and mid-tier smartphone segment. Local managers have been given instructions to have a 10% quota of people that will be let go, and this will include those who have applied for positions with rival Huawei, since they are considered “unstable factors”.
ZTE is actually the fourth-largest smartphone vendor in the US and is the only Chinese brand that has made significant inroads in the US market. However, all that progress may soon be gone as the company is facing a ban on exports by US companies because they have allegedly broken trade sanctions on sales to Iran. The ban by the US Commerce Department hasn’t taken effect yet but the last of its reprieves will end on February 27.
Should the ban finally take effect, then this would severely affect their supply chain. Right now, it relies on US companies like Qualcomm, Microsoft, and Intel to power about a third of their components. That plus the dwindling sales in China would really put the company in crisis as the chairman stated in his translated speech. What a way to start the New Year for ZTE employees.
VIA: Reuters
