Huawei Layoff Reports: Growth Days Over? 华为裁员消息：增长时代终结？

By newsdoug on June 7, 2012

Huawei: Layoffs in progress? Domestic media have been buzzing for several days now about reports of massive layoffs at telecoms equipment giant Huawei, prompting the company to finally come out and deny the rumors. But where there’s smoke there’s usually fire, and I suspect that Huawei is playing with words to try and downplay the fact that indeed it is having to make some big adjustments to its workforce as its breakneck growth of recent years slows considerably due to a wide range of issues. Let’s look at the reports first, which quote a Huawei spokesman saying the company has made no large-scale layoffs recently, though he didn’t rule out future cuts. (English article) It’s hard to guess what’s really happening at Huawei, since rumors of layoffs usually come from affected employees who may know the situation in their own departments but aren’t really informed about the bigger picture. At the same time, companies themselves — especially in China — are usually reluctant to ever admit to large-scale layoffs, even though job cuts are relatively common, especially in former state-run enterprises trying to become more market-oriented. In this particular case, I would guess that Huawei has already drafted a plan to cut perhaps up to 10 percent of its workforce, and is starting to execute that plan without making an official announcement. Since the company has been keen to show the world its more transparent side, as part of an effort to distance itself from suspicions that it’s controlled by Beijing, I would expect it might actually make a formal announcement on its workforce “adjustment” plan perhaps as soon as September or October. No one should be all that surprised by such an announcement. To the contrary, some might even find such it refreshing that a Chinese company of that size is being more open about the recent challenges it has faced in most of its major global markets. Those challenges for both Huawei and crosstown rival ZTE (HKEx: 763; Shenzhen 000063) have been numerous over the last year. Huawei itself has seen several major initiatives blocked in the US and Australia in recent months, and is now reportedly being investigated in the European Union for receiving unfair subsidies from Beijing. (previous post) One of its other major markets, India, is also caught up in a domestic corruption scandal that has slowed purchasing of new telecoms equipment to a crawl. Meantime, spending in Huawei’s home market is also slowing after a boom over the last 3 years as China’s 3 telcos built up their 3G networks. Huawei has tried to offset the slowdown in its traditional networking equipment business by building up its cellphone unit, but even that will take time. In the meantime, the company may be suffering with growing numbers of underemployed workers and idle production lines, necessitating this upcoming “adjustment” to its workforce.

Bottom line: Huawei has very likely created a plan to cut up to 10 percent of its workforce, as it tries to adjust following setbacks in many of its major markets.

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