Chinese tech giant ZTE is planning to lay off 5% of its global workforce, or approximately 3000 positions, sources close to the company told Reuters. The cuts are scheduled to be completed by the end of March, but some managers were already briefed on them and were urged to do their part in the layoffs by February 1st. This move is expected to reduce ZTE’s total number of employees to around 57,000. The Shenzhen-based telecommunications equipment manufacturer is reportedly terminating 20% of employees in its home country, and 10% of its global handset business, which amounts to about 600 positions. The company’s mobile business layoffs will be concentrated in China where ZTE has been losing market share for several consecutive quarters. ZTE’s representatives declined to comment on this report.
While these layoffs were likely prompted by the sanctions ZTE is facing from the US Commerce Department, the company used this opportunity to lay off some particular employees who previously applied for jobs at Huawei and other rival companies, according to an unnamed manager of one of the firm’s overseas units. The Shenzhen-based tech giant is currently in the process of streamlining its operations and corporate structure following a rough financial year. ZTE’s Chairman Zhao Xianming recently described 2016 events as the “biggest crisis” in the history of the Chinese company which was founded in 1985.
Back in early 2016, the US Commerce Department concluded ZTE violated Washington’s export regulations pertaining to its economic sanctions on Iran. The Chinese firm allegedly delivered products to certain Iranian companies, which is why the Cabinet department prevented it from importing US-made goods to China. Seeing how approximately one-third of ZTE’s supply chain relies on the US, the decision stifled the company’s operations despite the fact that the actual sanctions are yet to come into effect. Two months ago, the US Commerce Department agreed to a fourth reprieve of its trade restrictions which are now on hold until February 27th. ZTE earned some goodwill from Washington after being fully cooperative with a federal probe into its alleged violations of the US trade sanctions on Iran, but it remains to be seen whether the company will manage to avoid further damage to its business in 2017.