image source: Visual China

BEIJING, September 22 (TMTPost) – Qualcomm’s Shanghai subsidiary will lay off employees, but denied the claims of "massive" layoffs and "withdrawal from Shanghai, according to a source close to the company.

The layoffs will incur a significant amount of severance costs, with the majority expected to be booked in the fourth quarter of the fiscal year 2023. The layoffs are expected to be largely completed in the first half of the fiscal year 2024.

On Thursday afternoon, an insider of Qualcomm responded to TMTPost App on rumors of "massive layoffs" at Qualcomm's Shanghai research and development department:

“In our third quarter earnings call and 10Q report submitted in August, we mentioned that due to the continued uncertainty in the macroeconomic environment and demand,  expect to take further adjustment measures to continue investing in important growth opportunities and business diversification. Although the corresponding plans are still being formulated, the main measures include layoffs. We anticipate that these measures will result in a significant amount of additional restructuring charges, a large portion of which is expected to occur in the fourth quarter of the 2023 fiscal year. We currently expect thatAccording to current expectation, the corresponding adjustment measures will be substantially completed in the first half of the 2024 fiscal year. The measures taken in China are also part of the previously communicated plans,” said the person. 

Qualcomm emphasized that the claims of "massive layoffs", "office closure", and "withdrawal from Shanghai" are exaggerated.

Qualcomm, founded in 1985 and is headquartered in San Diego, California, the United States, is a leading global mobile chip and communication technology manufacturer.

According to Counterpoint Research's global smartphone Application Processor(AP) data report released in September this year, in the second quarter of 2023, Qualcomm's AP/SoC shipment market share reached 29%, with a 2% increase compared to the previous quarter, ranking second. Currently, over 80% of flagship Android smartphones in China use Qualcomm Snapdragon processor platforms.

The financial report shows that as of September 25, 2022, Qualcomm's annual revenue reached $44.2 billion for the 2022 fiscal year. Qualcomm has a total global workforce of approximately 51,000 people, including full-time, part-time, and temporary employees.

For the 2022 fiscal year, the sales of Qualcomm in China reached $28.119 billion, accounting for 63.6% of the total revenue, making it the largest market. 

According to the financial report released by Qualcomm in August, the revenue in the third quarter of the 2023 fiscal year was $8.451 billion, a year-on-year decrease of 23% and the net profit was $1.803 billion, a year-on-year decrease of 52%. Among them, the revenue of the QCT department, which is mainly responsible for chips used in smartphones, automobiles, and other smart devices, decreased by approximately 24% year-on-year. The revenue of the QTL department, which is responsible for Qualcomm technology licensing, decreased by approximately 19% year-on-year.

In the past two years, due to the inflation caused by the increase in the value of the US dollar, the demand for consumer electronics has declined, and smartphone sales have stagnated. In 2022, global smartphone shipments decreased by nearly 10%, and the outlook for 2023 is still not optimistic. According to Counterpoint data, in the second quarter of 2023, global smartphone sales decreased by 8% year-on-year and 5% quarter-on-quarter. This marks the eighth consecutive quarter of decline in the global smartphone market.

Since Qualcomm generates over 60% of its revenue from the smartphone chip business, the company faces significant pressure for revenue growth. In its third-quarter financial report, Qualcomm disclosed that due to the continued uncertainty in the macroeconomic environment and demand, the company expects to take further adjustment actions to ensure continued investment in key areas. It expects that the adjustments will mainly include reducing the number of employees with significant related severance costs, most of which will be generated in the fourth quarter of the 2023 fiscal year. The aforementioned further adjustment actions are expected to be completed in the first half of the 2024 fiscal year.

Cristiano Amon, the CEO of Qualcomm, stated during the third-quarter earnings call that the company remains focused on executing its strategy, prioritizing resource allocation to support future growth and business diversification, and maintaining technological leadership while pursuing long-term profit goals. Therefore, the company takes a conservative approach to market expectations and will further reduce cost.

Multiple media outlets revealed before that Qualcomm is laying off about 100 employees at its headquarters in the United States. In January of this year, foreign media reported that Qualcomm laid off 10 employees in Israel. In June, 415 employees at its headquarters in San Diego, United States, and 84 employees in the San Francisco Bay Area got fired. From December 2022 to July 2023, Qualcomm submitted 28 WARN layoff notices in California, covering more than 730 employees. At the same time, Qualcomm may dismiss 200 employees in Taiwan in October, involving research and development personnel in the fields of product engineering, testing, and verification, according to local media. The remaining employees will face reduced benefits, and about 100 employees have already resigned. More accurate Chinese market information indicates that the layoffs in October mainly target the Athero network card chip business department, with a maximum compensation of N+7.

Currently, Qualcomm China has research and development centers in Beijing and Shanghai, and a factory in Wuxi, Jiangsu province. Frank Meng, the Chairman of Qualcomm China, stated in November last year that the total number of employees of Qualcomm in China has exceeded 6,000.

According to Tianyancha, Qualcomm Information Technology (Shanghai) Co., Ltd. (hereinafter referred to as "Qualcomm Shanghai") was established on August 16, 2010, with its registered address in the China (Shanghai) Pilot Free Trade Zone. Its business scope includes testing and maintenance of regional network chips, wired and wireless communication terminal chips and their software, as well as related technical consultation and services, import and export of communication equipment, testing instruments, regional network chips, wired and wireless communication terminal chips, and computer software and hardware. Business registration records show that Qualcomm Shanghai currently has 393 insured employees.

On Friday, the stock price of Qualcomm (NASDAQ: QCOM) fell 0.89% in pre-market trading. Year-to-date, it has only risen by 1.88%.

(This article was first published on the TMTPost App, Author | Lin Zhijia)

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