October 13, 2023
- Qualcomm, the American multinational corporation headquartered in San Diego, is cutting down its workforce starting on December 13.
- This decision has come after their company sales saw a dip in Quarter 3 of 2023. The company will finish restructuring itself by the first half of 2024.
By December 13th, Qualcomm aims to reduce its workforce by approximately 2.5%. Specifically, it intends to eliminate 1,064 employees in San Diego and 194 employees in Santa Clara. This move is part of the company’s strategic realignment.
Among the positions being cut, approximately 750 employees are from the engineering department. And the remaining layoffs could take place between the technical and accounting teams. The layoffs were expected by the company, which predicted a decrease in sales in single digits this year. CFO Akash Palkhiwala told analysts in August that “Qualcomm would proactively implement additional cost actions. We had previously communicated. We would evaluate additional cost actions as the environment continues to evolve. Until we see sustained signs of improving fundamentals, our operating framework does not assume an immediate recovery,” he said on a conference call.
The company will report its earnings next month and has seen a 19% drop in revenue this fiscal year. CEO Cristiano Amon is working on expanding the company’s product reach into new areas. Qualcomm’s stock was priced at $111.10 at 3:05 PM in New York. So far this year, their shares have gone up 1%, whereas the Philadelphia Stock Exchange Semiconductor Index has surged by almost 40%.
Factors that led to this decision
- Mobile chip market scenario: The global economic downturn of 2023 is negatively affecting sales of mobile and semiconductor devices. The increased cost of mobile devices due to inflation has reduced demand for mobile chips. Geopolitical conflicts have resulted in supply chain issues. Chips are becoming more expensive and scarce due to these battles. Finally, the market for mobile chips is suffering from the ongoing geopolitical tensions between the US and China. The latest technology and equipment are difficult for Chinese chipmakers to obtain due to restrictions imposed by the US.
- Competition: Chinese chipmakers such as Huawei and MediaTek have become increasingly competitive in recent years, offering lower-priced chips with comparable performance to Qualcomm’s chips. This has made it difficult for Qualcomm to maintain its market share in some key markets, such as China.
- Internal Issues: First off, Qualcomm is having issues with the US Federal Trade Commission and Apple. Apple and its legal battle stem from Apple’s belief that its patent fees are excessive. Secondly, the FTC claims Qualcomm is abusing its position to undermine rivals in the mobile chip industry.
- Tariff dispute with China: Qualcomm encountered difficulties in China. China penalized them $773 million in 2017 because they were excessively powerful. 2019 saw a trade spat between the US and China over tariffs. Qualcomm processors were subject to taxes from China, which increased their costs and decreased sales. Qualcomm also faced difficulties operating in China as a result of the tariff spat, as chip sales approvals were delayed. Qualcomm continues to suffer from this conflict in China. But they are looking for new markets and chips from other suppliers. Moreover, since the Chinese government backs them, they are up against competition from domestic semiconductor manufacturers.
In conclusion, the recent announcement of Qualcomm’s decision to cut 1,258 jobs in California is undoubtedly a significant development for both the company and its employees. As the news of “Qualcomm prepares to slash 1,258 jobs in California” reverberates through the tech industry, it highlights the challenges faced by even well-established companies in an ever-evolving market. While such restructuring moves are often undertaken to adapt to changing economic conditions and market demands, they inevitably affect the lives and livelihoods of many.
