[News] Qualcomm Initiates Major Layoffs in China, Shanghai R&D Center Closure Rumored

2023-09-21 Semiconductors editor

According to Taiwan’s TechNews, the ongoing soft demand for smartphones, combined with Huawei’s launch of the Mate 60 Pro, has severely impacted Qualcomm. Reports within the Chinese industry suggest that Qualcomm is planning significant layoffs in China, with severance costs estimated to be as high as N+7.

Based on discussions in Chinese forums and media reports, Qualcomm’s Shanghai R&D center is set to undergo substantial layoffs. This center primarily focuses on wireless-related businesses. The severance standards for permanent employees are at least N+4, which means the employee’s tenure plus an additional 4 months are considered for severance pay. As for contract employees, the severance compensation is set at N+7.

In fact, Qualcomm announced its downsizing plan in August, with reports suggesting that Qualcomm Taiwan plans to lay off about 200 employees in October. This will affect personnel in product engineering, testing, and verification fields, comprising 11.8% of the total workforce. The company is also implementing cost-saving measures such as eliminating annual salary adjustments and reducing bonuses to 70%.

This downsizing rumor has also extended to China, with reports at the time suggesting that Qualcomm China might lay off up to 40% of its workforce. The main reasons cited were sluggish demand for smartphones and Huawei’s new Kirin processor.

Analyst Ming-Chi Kuo of TF International Securities stated that Huawei is expected to fully adopt its own designed Kirin processors in its upcoming phones next year. Qualcomm will be the major loser in this scenario, losing Huawei’s orders entirely.

According to Kuo’s data, Huawei purchased 23 to 25 million smartphone SoCs (System on a Chip) from Qualcomm in 2022, but this number increased to 40 to 42 million in 2023. However, starting in 2024, Huawei will use its own chip designs, causing Qualcomm to not only lose orders but also face the risk of declining shipments from other Chinese brand customers due to Huawei’s increased market share.

Kuo also expects that, influenced by Huawei’s actions, Qualcomm’s SoC shipments to Chinese smartphone brands will decrease by 50 to 60 million units next year and continue to decline in the following years.

With a significant potential decline in performance in the Chinese market and increasing price competition towards the end of the year, Qualcomm is expected to carry out more layoffs. As of September last year, Qualcomm had approximately 51,000 employees worldwide. The company’s restructuring costs in the last quarter amounted to $285 million, with most of it being severance pay. In June of this year, the U.S. headquarters also reduced around 415 positions.