Qualcomm to downsize Shanghai R&D facility amid tech tensions and declining smartphone sales

Qualcomm (NASDAQ:QCOM), the American semiconductor giant, is set to reduce its workforce at its research and development (R&D) facility in Shanghai, China, as it navigates a challenging period marked by ongoing technology tensions between the US and China, as well as a slump in smartphone sales. The planned downsizing measures are expected to be implemented primarily in the fiscal fourth quarter, according to Chinese news service Yicai Global on Monday.

The layoffs will primarily impact the wireless business research and development department, although the exact number of affected employees has not been specified. Despite this restructuring, Qualcomm clarified that there are no plans for extensive layoffs at its Shanghai facility, which has been operational since 2010 and currently employs close to 393 individuals.

This move comes amidst a challenging period for Qualcomm. In the second quarter of 2023, smartphone sales in China declined by 4% compared to the previous year. This drop was attributed to economic challenges that negatively impacted consumer sentiment, leading to the lowest second-quarter sales figures since 2014.

In an August stock exchange filing discussing its quarterly revenue, Qualcomm noted its anticipation of 'workforce reductions' as part of broader restructuring efforts. The company mentioned that it aims to facilitate ongoing investments in critical growth and diversification endeavors, given the persistent macroeconomic and demand uncertainties. Their latest financial report revealed a substantial year-over-year drop in revenues, standing at $8.4 billion — a 23% decline, coupled with a significant 52% decrease in net income to $1.8 billion.

The company also maintains an R&D presence in Beijing and over a dozen other Chinese cities for its semiconductor and mobile telecommunications ventures. The impending restructuring measures are anticipated to incur significant additional costs for Qualcomm but are seen as necessary steps to navigate through the industry’s challenges.

Furthermore, Qualcomm is not alone in its downsizing efforts in China. Other US chip companies have been reducing their workforce in the country as well. For instance, in March, California-based Marvell (NASDAQ:MRVL) Technology announced the complete closure of its research and development team in mainland China in response to an industrial downturn. This move came approximately five months after the company initiated job cuts to streamline its operations in the country.

Qualcomm has stated that it will provide attractive severance packages to all the affected employees as part of its restructuring process.

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