Once a market leader, Samsung India lays off again in a tough market

Amid falling profit and tough market conditions, Samsung Electronics is cutting the flab. Its new realignment exercise may make over a hundred people redundant. Once the market leader, Samsung had already resorted to such exercise once earlier in the year.

According to sources, apart from job cuts, two of its top level executives - its chief marketing officer Ranjivjit Singh and a divisional business head Sukesh Jain resigned.

While a official clarification is due, sources said the tough challenges it faced in recent years in India since it lost the top spot in smartphone market to Xiaomi may have been a reason for the realignment. Further, growing competition from Chinese rivals have squeezed its bottomline.

In 2016, Xiaomi replaced Samsung from the top spot in the smartphone segment. Samsung's profitability also declined sharply from Rs 3,713 cr in FY18 to Rs 1,540 cr in FY19; a drop of 59 per cent.

Moreover, it also failed to regain the top slot in the premium handsets market - a key segment that drives profit for manufacturers. In the past two years, Samsung has mostly remained behind OnePlus & Apple in the above Rs 30,000 price segment.

Rationalisation of workforce is not very uncommon in the handsets industry. But changing dynamics may have left Samsung at bay. Unlike Samsung, most leading handset firms depend heavily on contract manufacturers.

Xiaomi, for example., the largest smartphone player by volume has only over 700 employees in India. 

All its manufacturing operations are outsourced. And despite its stated objective of maintaining a net profit margin of less than five percent, it did not offer heavy discounts on any of its products.

Vivo and Oppo, the third and fourth largest players after Xiaomi and Samsung, have been rationalising their workforces periodically. 

In mid-2017, the two firms sent back close to 400 expat employees to China, following a 30 per cent drop in sales. Earlier in July 2017, Vivo abruptly fired close to 100 employees at its Noida plant, following which violent protests had taken place. Another consumer electronics giant LG had faced long-standing issues related to payments with its plant workers.