Chinese tech giant Tencent is undergoing another round of layoffs across the company to counteract worsening financial results, Chinese media outlet Caijing reported (in Chinese) last Friday.
Why it matters: Tencent’s reportedly new layoff round indicates that Chinese tech’s “great layoff” is far from over.
Details: Tencent initially began a headcount reduction at the end of last year, with an estimated 20% of employees at the firm affected. However, continued redundancies at the company, including its core business unit like gaming, in the wake of disappointing financial results may suggest that the cuts will go even deeper.
- Caijing reported that Tencent has expanded layoffs, focusing on five sectors: cloud computing, gaming, advertising, and content, citing unnamed sources at Tencent.
- The gaming sector appears to be one of the worst-hit, with 10% of the unit’s workforce reportedly let go. The Cloud and Smart Industries Group (CSIG) is another sector that has been heavily impacted by the company’s cutting of staff, having already lost 15% downsizing of its team in March this year.
- The cited sources added that “the layoffs are due to the pressures of business performance” and attempts to “decrease costs.”
- When contacted by TechNode about the report, Tencent declined to comment.
Context: Tencent’s continuing layoff came against the backdrop of a slowing Chinese economy, a widespread regulatory crackdown in the tech sector, and several major hurdles in the gaming realm (including a seven-month pause in new game licenses), where it is an industry leader.
- Tencent earned RMB 135.4 billion ($21.3 billion) in the first quarter of 2022, a 6% quarterly fall in earnings. The company’s net profit also plummeted by 23% to RMB 25.5 billion compared to the same quarter last year.
- Martin Lau, president of Tencent, said in an earnings call on March 23 that “the entire industry is focused on core businesses, more efficiency, and more cost rationalization.” He also noted that the firm will “streamline for the non-core businesses, or may exit [business areas] in some cases.”
- However, the firm has stated that it will continue to hire more staff than it has dismissed. Tencent’s employee count increased 3% in the first quarter of 2022, according to its financial reports.
- Tencent’s gaming business may also see more growth outside of China. Although revenue from domestic games in the first quarter of 2022 dropped by 1% compared to the same quarter last year, international game revenues grew by 4% to RMB 10.6 billion.
- Tencent is not the only Chinese tech major to have laid off staff in recent months. Since Didi’s US IPO sparked a cybersecurity review and industry-wide crackdown in July 2021, at least 216,000 people in the tech sector lost their job from last July to March, according to the Cyberspace Administration of China.