Taipei-based smartphone maker HTC announced on Tuesday (Jul 3) that it plans to slash almost a fifth of its total workforce, or 1,500 workers, from its manufacturing division in Taiwan in the biggest staff cull for the last three years following heavy losses. The layoff announcement was made despite a new deal with Google completed in January, which has boosted HTC’s first quarter performance after a bleak sales in 2017.
HTC is currently struggling in an intensely competitive smartphone sector, as it is facing head-to-head competition with global brands such as Apple and Samsung as well as strong Chinese brands such as Huawei.
Last year, it incurred a net loss of NT$16.91 billion (or S$756) million and a loss per share of NT$20.58, which marked the higher numbers since it listed on the the Taiwan Stock Exchange in March 2002. Shares in the firm plunged almost 6 percent in Taipei on Jul 3. Losses of NT$9.8 billion in the last three months of last year represented its worst quarterly results, Straits Times reports.
Set to be implemented by the end of September this year, the company describes the massive layoffs as “a decisive step in the realignment of resources across the organisation” that would create “more flexible operations management”.
Under the US$1.1 billion (S$1.5 billion) deal with Google, the US tech giant got to take on half of HTC’s research and development staff – about 2,000 people. Many of them had already been working on its Pixel handset, manufactured by HTC, as well as acquiring intellectual property licensing. The deal reflected Google’s ambition to compete with the success of Apple iPhones by controlling the hardware as well as the software used in the premium-priced handsets.
Following the Google deal, HTC announced its first quarterly gains for almost three years in May, posting a net profit of NT$21.1 billion. However, while some analysts said the Google agreement would bring some immediate benefits for HTC, such as more capital and cost reductions, they predicted that the turnaround in its fortunes was unlikely.
In 2015, HTC slashed more than 2,000 jobs, or around 15 percent of its workforce, after posting its biggest quarterly loss of NT$8 billion.
Previously, HTC stated its intention to better coordinate its smartphone and virtual reality businesses. The company is among major tech firms, including Facebook and Samsung, to venture into virtual reality. Its first VR headset called Vive was launched to the market in 2016. Unfortunately, analysts have been skeptical about the earning potential of its investments in virtual reality and other emerging areas.