More than 900 employees have reportedly been let go by Chinese smartphone manufacturer Xiaomi. The South China Morning Post reported that due to the economic downturn, Xiaomi fired close to 3% of its workforce. However, Xiaomi has not yet made this confirmation.
As the largest smartphone market in the world shrank as a result of stringent COVID regulations, the company reported a sharp decline in second quarter revenue. Xiaomi’s sales missed estimates and declined more sharply than expected in the previous quarter, when the company reported its first revenue decline since going public. Year-over-year sales dropped 20% to 70.17 billion yuan ($10.31 billion). The manufacturer of smartphones reported net income that was 67% below analyst expectations at 2.08 billion yuan.
The resurgence of the pandemic in the Chinese market caused difficult and weak demand, according to Xiaomi president Wang Xiang during an earnings call. Additionally, Wang noted that rising fuel costs, input costs, and inflation had an impact on export sales. Due to pressure to use sales and promotions to move inventory, net profit decreased.
More than half of Xiaomi’s total revenue comes from sales of smartphones. Sales of smartphones decreased 29% in revenue.
After taking market share from rival Huawei Technologies Co Ltd in 2021, whose ability to source components was hampered by U.S. sanctions, Xiaomi experienced a spike in sales. However, the boost was fleeting, and the company’s stock price has fallen by almost 40% since the beginning of 2022 as a result of the weakening global economy and the slowing Chinese economy.
The effects of lockdowns in Shanghai and other cities during the first half of 2022 have made it difficult for China’s consumer consumption to recover. According to data, the second-largest economy in the world unexpectedly contracted in July as it struggled to recover from the COVID restrictions that slowed growth in the first quarter, which led the central bank to lower interest rates.
According to research firm Canalys, unit shipments in China’s long-stagnant smartphone industry were down 10% year over year in the second quarter.
Xiaomi has faced government investigations in India, its biggest market outside of China, for allegedly evading tax authorities.