Starting from this week, there have been rumors circulating on major social platforms about the upcoming large-scale layoffs at Qualcomm Shanghai. It is reported that this round of layoffs will mainly focus on the wireless business research and development department. The compensation standards are N+4 for regular employees (including newly hired employees) and N+7 for senior employees without a fixed term, with no cap limit of three times.
Although the compensation standard is higher than the industry average, as of the time of writing, Qualcomm has not provided an official response to this layoff news. Public information shows that Qualcomm China has research and development centers in both Beijing and Shanghai.
In recent years, the sluggish trend in the smartphone market and the impact from competitors have had a significant effect on companies in the supply chain such as Qualcomm. Cost reduction and efficiency improvement are also becoming mainstream measures for global technology companies.
According to global smartphone shipment forecast data from the third-party organization Counterpoint, it is projected that global smartphone shipments will decline by 6% in 2023, reaching a record low of 1.15 billion units. The replacement cycle for smartphones has extended from one or two years in the past to over three years currently, reaching an unprecedented level.
At the same time, Qualcomm is facing a long-term challenge from MediaTek in the mobile phone market. In the past three years, MediaTek has maintained its leading position in global shipments of mobile phone SoCs (System on Chips), continuously squeezing Qualcomm’s market share along with Apple.
On the other hand, nearly 60% of Qualcomm’s mobile chip revenue comes from the Chinese market. With the relaunch of Huawei’s Kirin chips at the end of August, Ming-Chi Kuo, a well-known analyst at TF International, stated that Qualcomm will ultimately lose Huawei’s smartphone orders as a result. According to his data, in just one year in 2022, Huawei purchased approximately 23-25 million SoCs from Qualcomm.
In the latest quarterly financial report, the revenue of Qualcomm’s mobile chip business (attributed to the QCT division) was $5.26 billion, a year-on-year decrease of 25%, which has directly impacted Qualcomm’s revenue performance significantly.
Under the influence of these external negative factors, Qualcomm has started layoffs globally since the end of last year.From December 2022 to March this year, 232 employees at Qualcomm’s headquarters in California, USA were laid off. In May, Qualcomm announced a global layoff of 5%, mainly focused on the mobile division.
In June of this year, Qualcomm announced that it will continue to lay off 415 employees at its headquarters in San Diego, California, with the majority of them being engineers. In August, Taiwanese media predicted that Qualcomm would lay off 200 people in Taiwan, covering areas such as product and testing.
Qualcomm’s Chief Financial Officer, Akash Palkhiwala, has publicly stated that the cost-cutting measures of the company are expected to continue into the next fiscal year. In addition to the cost reduction efforts being undertaken by major technology companies, Qualcomm’s excessive hiring during the pandemic is also a significant reason for its ongoing layoffs this year.
Qualcomm’s financial report for the third quarter of fiscal year 2023 shows a significant decline in data. The total revenue is $8.451 billion, a decrease of 23% compared to the same period last year. The net profit is $1.803 billion, a decrease of 52% compared to the same period last year.
Qualcomm CEO Cristiano Amon explicitly stated during an analyst conference that Qualcomm will further reduce costs through measures such as layoffs.
According to public data, Qualcomm’s expenses for restructuring in the previous quarter amounted to $285 million, which includes a significant proportion of employee severance costs. Qualcomm expects this expense to increase further in the fourth quarter.
However, in early September, Qualcomm just announced a chip supply agreement with Apple to provide Snapdragon 5G modems and RF systems for their smartphones launching from 2024 to 2026. This three-year order is the biggest positive news for Qualcomm in recent times, but it also means that Apple has delayed the development and launch progress of its self-developed products.
In addition, Qualcomm is also taking proactive measures to clear inventory and improve the company’s financial performance. Recently, Qualcomm announced a 10%-20% price reduction on its low-end 5G smartphone chips to increase customer purchasing willingness and accelerate inventory clearance speed.