Xiaomi India Restructures Operations, Plans To Reduce Workforce
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Xiaomi India Restructures Operations, Plans To Reduce Workforce

Xiaomi India Restructures Operations, Plans to Reduce Workforce

Xiaomi India, the Chinese smartphone brand is reducing its workforce to less than 1,000 employees due to a reorganisation, a decline in market share, and increased scrutiny from government agencies, according to current and former employees of the company. At the beginning of 2023, Xiaomi India had employed around 1,400 to 1,500 people, but in the past week, approximately 30 employees were laid off, and more job cuts are expected in the coming months. The restructuring has centralised decision-making authority with the Chinese parent company, and the headcount reduction has been happening gradually since the start of the year.

A spokesperson from Xiaomi India stated to a leading media house, that the headcount decisions were based on the business outlook and that the local Indian leadership remained empowered. They explained that workforce adjustments are made in response to market conditions and business projections, and the company continues to hire as necessary.

However, another senior executive at Xiaomi revealed that the leadership team was instructed at the beginning of the year to identify underperforming employees for a performance improvement plan (PIP), making it easier to let them go based on performance grounds.

The layoffs coincide with internal restructuring within the company, where decision-making authority has shifted primarily to the Chinese parent company. Several employees believe this change is at the core of Xiaomi’s declining market share. Xiaomi India and market research firm Counterpoint Research disagreed with this perspective, attributing the decrease in market share to weak demand in the sub-Rs 10,000 segment, where Xiaomi previously had the highest volumes, but experienced a 44 per cent decline in shipments, the largest recorded by the brand.

In the first quarter of 2023, Xiaomi India’s shipments dropped to five million from seven to eight million a year earlier, causing it to slip to the third position in the market behind Samsung and Vivo, after holding the top spot for 20 consecutive quarters with a market share of 16 per cent. Counterpoint Research predicts a challenging year for Xiaomi in 2023, with a significant decline in shipments compared to the previous year.

The company is also facing various business challenges, including a cash crunch resulting from the Enforcement Directorate (ED) seizing over Rs 5,500 crore of its bank assets for allegedly remitting money abroad illegally. Xiaomi is legally contesting these accusations and seizures by the ED. In the 2021-22 fiscal year, Xiaomi’s revenue increased by 9 per cent to Rs 39,099 crore, but the company has been grappling with governmental scrutiny, similar to other Chinese companies.

After Manu Kumar Jain, the former India head, left in June 2021, Alvin Tse, the former head of Xiaomi Indonesia, assumed the role of general manager. Additionally, Muralikrishnan B was promoted to the position of president of India operations. According to employees, Alvin Tse is now responsible for key teams in online and offline sales, distribution, marketing, and product categories. Tse actively engages in all meetings, takes charge of decision-making primarily through the business management committee (BMC) following consultations with the headquarters, and even oversees performance evaluations.

A Xiaomi spokesperson downplayed the transfer of decision-making power, stating that while there is a strong and empowered Indian leadership team, critical decisions are made jointly by Indian and global leaders through coordination mechanisms with the headquarters. Another senior executive confirmed that members of the India leadership are part of the BMC.

The layoffs and internal changes are occurring amidst the ongoing ED case. Xiaomi’s legal team has mentioned the company’s cash crunch while fighting the matter in court and requested an interim order allowing the use of bank accounts for day-to-day expenses.

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