Samsung India Electronics cuts flab, rivals unlikely to go for lay-offs

The move is unlikely to prompt its rivals in India - Xiaomi, Vivo, Oppo to do the same.

Samsung India Electronics, the country’s leading consumer electronics player, is in the process of handing out pink slips to hundreds of employees to rationalise its workforce in line with market realities.

The move, however, is unlikely to prompt its rivals in India - Chinese manufacturers like Oppo, Vivo, and Xiaomi - to do the same.

Samsung’s recent drive to cut flab and replace ‘redundant’ manpower with more ‘suitable’ ones is backed by the rationale that the company has lost significant market share in the fast growing smartphone and smart television markets.

While executives at Samsung declined to confirm the exact number of lay-offs, sources said it could be over 500.

However, company sources pointed out that the exercise was not merely to cut down employee cost.

“While we have let some people go, we have also hired close to 2,000 for our new plant and other verticals. Thus, our total employee strength has actually gone up,” said a senior executive at the company.

Retrenching massive number of employees at one go is not very common in an industry that is highly dependent on skilled manpower - in manufacturing, R&D and sales.

Unlike Samsung, Xiaomi, Vivo, and Oppo have not resorted to mass layoffs. They have, in fact, been consistently keeping their employee count in check and maintained a leaner structure.

According to sources, major Chinese players in the market have laid off 600 people in past six quarters. “Companies have to consistently reduce or replace manpower, given the nature of the business,” said an executive, who worked in Samsung and two leading Chinese handset makers. “The smartphone business has become highly competitive, especially after the entry of Chinese giants. These companies’ success lies in the fact that they maintain a very lean employee structure and play on slim margins,” said Faisal Kawoosa, lead analyst, TechArc.

Take Xiaomi, for example. The largest smartphone player by volume uptake has only over 700 employees in India.

All its manufacturing operations are outsourced. And despite its stated objective of maintaining a net profit margin of less than five percent, it did not offer heavy discounts on any of its products.

Vivo and Oppo, the third and fourth largest players after Xiaomi and Samsung, have been rationalising their workforces periodically.

In the mid-2017, the two firms sent back close to 400 expat employees to China, following a 30 per cent drop in sales. Earlier in July 2017, Vivo abruptly fired close to a 100 employees at its Noida plant, following which violent protests had taken place. Another consumer electronics giant LG had faced long-standing issues related to payments with its plant workers.

Despite all their efforts, Vivo and Oppo continued to remain in losses. In 2016-17, Vivo posted Rs 114 crore net loss, which in 2017-18 widened to Rs 120.5 crore. Oppo Mobile India’s net loss in 2017-18 widened to Rs 358 crore from Rs 42 crore the year before.