Report: ZTE to slash up to 600 jobs from its mobile division after 2016 results and the possibility of US trade sanctions

While ZTE’s star continues to rise, the news isn’t all great for the Chinese telecom equipment maker, with reports surfacing today that the company may slash up to 3,000 jobs in the wake of US trade sanctions which are shortly to take effect.

Ausdroid understands that up to 5% of ZTE’s global workforce could be affected, with 600 jobs to go from ZTE’s global handset operations, including up to a fifth of the handset business in China itself. A senior executive briefed on the layoffs partly confirmed them, stating “cuts to the handset business in China will be beyond 20 percent”.

It’s also understood that there’s a list of names at ZTE who have to go amongst the cuts, because those staff have unsuccessfully applied for jobs at rival company Huawei, though the source for this information has declined to be named for obvious reasons.

The Chinese firm faces a ban on exports from US companies, severely hindering its ability to source key components, including those made by Qualcomm, Microsoft and Intel.  Those sanctions are set to commence on February 27, unless a further reprieve is given (noting sequential delays have been given since the sanctions were announced in March this year, in response to ZTE allegedly supplying products to Iran).

It seems the uncertainty of trade sanctions over the head of ZTE have had an impact, with IDC reporting a drop of 36.5% in smartphone shipments in 2016 compared to 2015.

ZTE chairman Zhao Xianming said in his New Year speech to staff that the company, which has annual sales of more than $15 billion, had “encountered its biggest crisis in its 31 year history”, according to a transcript on the company’s official WeChat account, in which he also undertook to streamline parts of the business:

“In 2017 … businesses that don’t fit our strategic direction or with low output performance will be shut, suspended, merged or reconfigured, improving the company’s core competitiveness,” Zhao said.

We understand from ZTE Australia that there won’t be a staffing impact locally, with Australia seen as a key growth market — if anything, the impact locally will be an increased investment in growing ZTE’s presence in the market.

On the bigger question of what ZTE will do if it is precluded from sourcing key US-made components, the answer remains necessarily unclear — with the US trade sanctions set to kick in from February 27, only time will tell whether they are further postponed, cancelled altogether, or put into effect.

With a number of competitors in most of those key areas (for example Samsung, MediaTek and others for processors), the worst case scenario doesn’t look all that bad — it just might involve a little short term pain to re-tool to remove US-sourced parts and software, with the benefit of no longer being reliant on it in future.

Whatever happens, ZTE remains confident that 2017 will be a great year, and we look forward to ZTE wowing us with new local product in coming months.