Chinese Phone Maker Meizu To Cut 5% Of Workforce Due To Slowdown

Meizu Technology Corp., a popular Chinese smartphone maker, said it was planning to lay off about 5 percent of its staff as demand for lower-end phones cooled. The company said the job cuts would be completed by mid-February and would cap headcount growth at less than 10 percent for the year.

The smartphone maker, which counts the Alibaba Group as one of its backers, plans to trim as many as 200 people of its roughly 4,000 staff, Li Nan, a spokesman for the company, said Tuesday, according to local media reports.

According to IDC, a technology market research firm, China’s smartphone market growth is expected to slow to the low single-digits in 2015. The slowdown is hurting domestic brands such as OnePlus, Oppo and Meizu, particularly in the low-margin, budget-phone bracket.

“The mid to low segment of the smartphone market is shrinking,” Jeff Pu, a Taipei-based analyst at Yuanta Securities Co., told Bloomberg, “Even though Alibaba’s support helps Meizu price itself very competitively, it faces a challenge in hardware profitability.”

Alibaba bought a minority stake in Meizu last year for $590 million to promote its YunOS operating system.

On Tuesday, Meizu chief Bai Yongxiang, told employees he drew inspiration from former General Electric Co. Chairman Jack Welch’s “20-70-10” vitality model, intended to root out 10 percent of its poorly performing employees.

Meizu is expected to grow at a clip of 25 percent in 2016, shipping about 25 million smartphones, according to estimates by Bloomberg Intelligence. In 2015 the company saw a meteoric growth of 350 percent in phone shipments.