Samsung India to lay off over 200 executives
What's the story
Samsung Electronics is preparing to lay off more than 200 executives in India, according to the Economic Times. This decision comes in response to a slowdown in business growth and a decrease in consumer demand. This move coincides with an ongoing strike at its Chennai factory, which is disrupting production ahead of the festive season.
Impact
Layoffs to affect multiple departments
The layoffs at Samsung India are expected to affect various departments including mobile phones, consumer electronics, home appliances, and support functions. This represents a significant reduction of approximately 9-10% of its total managerial workforce. The decision comes as the company grapples with a decline in market share in its smartphone business and seeks to reduce costs to boost profits.
Industrial action
Strike at Chennai factory disrupts production
The layoffs coincide with an ongoing strike at Samsung's Chennai factory, now in its third day. The industrial action is disrupting the production of televisions, refrigerators, and washing machines ahead of the crucial festive season. Despite these challenges, the company is attempting to maintain operations at approximately 50-80% of its capacity.
Organizational changes
Samsung India considers restructuring operations
In addition to the layoffs, Samsung India is also considering a restructuring of its operations. This may involve merging certain business divisions like television and home appliances, which could potentially increase the number of people laid off. The company has also put a hold on fresh hiring and may reduce the count of off-roll employees as well.
Compensation
Severance packages and salary adjustments
Those being laid off are being offered three months of salary as per their employment contract and a severance package of one-month salary for every year of service in the organization. An industry executive told ET that salaries at Samsung India had significantly increased in recent years when it was growing at a double-digit pace. "The salaries were almost double of market salaries," he said, adding that this has necessitated a course correction since business has slowed down considerably.
Market dynamics
Samsung India's market position and competition
Samsung has been facing stiff competition in the mobile phone business from Chinese brands. According to Counterpoint Research data, Samsung lost its market leadership in smartphones to Xiaomi by volume sales. However, it still leads in terms of value. In the April-June quarter, Samsung's volume share in smartphones was 18.1% compared to Xiaomi's share of 18.9%.