Samsung announced a reduction of nearly 30% of its international staff. With this statement, the company joins the list of major technology manufacturers that have already reduced their workforce after the hiring boom in the years following the pandemic.
The South Korean company’s decision may come as a surprise, given the brand’s leading position in smartphone sales. However, it demonstrates that these devices are no longer so decisive in the sector and that they’ve lost weight to another niche market now setting the pace of technology: artificial intelligence.
Samsung Layoffs
According to Reuters, the manufacturer announced a 30% cut to its international workforce. Samsung employed 267,800 people by the end of 2023, of which about 147,000 were outside South Korea. The cuts will apply to this group of 147,000 employees.
The media outlet reports that Samsung will reduce staff by 15% in the sales and marketing departments of its subsidiaries worldwide. Meanwhile, it will cut 30% of its administrative team. The cuts will affect the central regions where the brand has a presence, including the Americas, Europe, Asia, and Africa.
The exact number of employees that the company will lay off isn’t yet known. Still, the brand’s subsidiaries worldwide employ approximately 25,100 people in sales and marketing departments and approximately 27,800 people in other administrative divisions.
The move exacerbates the company’s labor conflict at its headquarters, where employees have unionized for the first time in Samsung’s history and have gone on strike twice in recent months.
Leveling the Internal Structure
Samsung’s decision isn’t unique and follows the path already taken by other companies in the technology sector. Given that the departments affected by the cut are part of the company’s administrative workforce, it’s not difficult to assume that Samsung may be trying to level out its internal structure to reduce intermediate positions and decision nodes, thereby streamline internal decision-making.
Meta has been doing this since early 2023, and other companies like Amazon and Google are also applying this recipe. In an interview, Meta CEO Mark Zuckerberg explained why the company had reduced part of its workforce.
According to Zuckerberg, the first reason behind the decision was correcting the overhiring that occurred between 2020 and 2021. During the pandemic, demand for technology products skyrocketed, and companies responded by hiring more people to meet the increased demand.
Now that this demand has stabilized, companies are overstaffed and laying off thousands of workers.
Data collected by consulting firm Bestbrokers shows that in the technology sector alone, there have already been 211,033 layoffs in 2024 and approximately 260,000 in 2023.
Furthermore, Zuckerberg’s attributed the wave of layoffs in tech companies to an attempt to flatten the internal structure at the company, reduce bureaucracy, and streamline decision-making. Moving fast has become a matter of survival for tech companies, which must react immediately to the slightest change in their competitors’ strategy. Failure to do so can condemn them to years of recovery, as is happening to Intel.
The Race for AI Crowds Out Smartphones
With a 37% market share from Q1 in 2024, Samsung maintains a dominant smartphone sales position ahead of Apple (22%) and Xiaomi (16%). However, this dominance hasn’t prevented layoffs at the company’s subsidiaries worldwide.
The main reason is that while it’s true that the communications sector (smartphones, tablets, watches, and more) contributes about a third of the company’s capital, Samsung’s other pillar is semiconductors. There, the news isn’t so promising.
Competition in the semiconductor segment is fierce due to the push for AI and the need for specific chips to develop this technology.
Nvidia dominates this segment with an iron fist. Still, its primary headaches come from rivals like Hynix, which makes the memory chips for AI chipsets, and TSMC, which makes Nvidia’s chips. Adding to the semiconductor problem are some of its smartphone rivals, such as Huawei and Apple, who are now designing or manufacturing their processors, reducing the volume of Samsung’s chip sales.
Samsung's profit balance
These problems in the semiconductor segment leave negative balances in Samsung’s global accounts. Companies Market Cap data shows a 1.67% decline in the first quarter of the year, in addition to the 0.07% fall already recorded in 2023. A 37.5% drop in semiconductor market profits in 2023 explains much of the revenue loss the company is experiencing.
When AI struggles, employees pay the price.
Image | Samsung
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