Three Xiaomi executives to step down as smartphone demand weakens

Three top executives, including President Wang Xiang, are to step down at Xiaomi, as China’s largest smartphone maker battles a hit to sales and profits from the country’s Covid-19 disruption.

Lu Weibing, who joined the company three years ago to lead its Redmi sub-brand, will replace Wang as president. Two co-founders, Hong Feng and Wang Chuan, will step down from daily operations, according to a note sent to employees by its chair Lei Jun and viewed by the Financial Times. The move leaves Lei as the only co-founder left standing with an operational role in the company.

“Xiaomi achieved a smooth handover of the baton iteration,” said Lei in the internal letter, adding that the company is “currently facing many difficulties” but will further improve operational efficiency.

The reshuffle came at the end of a bruising year for China’s tech sector, which has been reeling from a regulatory clampdown and the effects of Covid. Xiaomi has reported three consecutive quarters of falling revenues and profits.

The third-largest handset maker globally, behind Apple and Samsung, also began to shed 10 per cent of its workforce this week in multiple departments, including the flagship smartphone business.

Li Chengdong, founder of Dolphin, a Beijing-based consultancy, said the timing of Xiaomi’s lay-offs was surprising — coming just as China loosened its zero-Covid policy and ahead of the lunar new year period.

“Xiaomi’s fourth-quarter results could be worse than expected,” he said, adding that the group would fire such a “large” number of employees only if there was an urgent need to “control costs”. 

Analysts at the market intelligence provider TrendForce predicted that Xiaomi would lose market share in global smartphone sales in the three months to December, as China’s economic outlook for 2022 darkened and amid falling sales in India, which has long been an important growth market and where it faces regulatory pressures.

Xiaomi said the job cuts were part of “routine personnel optimisation and organisational streamlining”. It added that “less than 10 per cent of the total workforce” would be affected and it would be “compensated in compliance with local regulations”. 

The Beijing-based group’s revenue declined 9.7 per cent to $9.8bn in the three months to September, compared with the same period in 2021, after sales were hit by softening global demand for smartphones and weak consumer spending in China. The group’s net profit plunged nearly 60 per cent in the same period.

Xiaomi revealed an investment of Rmb10bn ($1.43bn) in electric vehicle production last year had contributed to rising research and development costs, while the company had yet to obtain a licence from regulators for such cars.

Its troubles have been mirrored in job cuts at other tech companies, including Tencent. At an end-of-year meeting with employees last week, Tencent founder and chief executive Pony Ma hinted the company might have to cut underperforming business units, according to Tencent workers present.

“It was the first time in years that Pony pointed out what a difficult position Tencent is in,” said a senior programmer who attended the online meeting. “Tencent’s recent lay-offs might not solve the problems. The direction is unclear.”