The business world is a harsh place and failures to perform adequately can have painful consequences. This is the unfortunate reality that almost 3,000 ZTE employees are about to face, according to Reuters. Overall, about 5% of ZTE's global workforce will face the axe.
What most of us know as ZTE will lose 600 jobs, or roughly 10% of positions. The handset division has not been doing too well of late in China, despite gains here in the U.S. These layoffs are set to occur this quarter, with some managers receiving quotas to terminate their staff by the end of January. One of Reuter's sources told the publication that he was given the names of employees who had applied for jobs at Huawei and therefore had to be let go, having been labeled as "unstable factors."
Part of ZTE's troubles lie within the trade sanctions placed against it by the U.S. Department of Commerce, which are set to go into effect in February following a series of reprieves. The reason for these sanctions is that, back in March of last year, the Department of Commerce declared that it would impose a ban on U.S. exports to ZTE. Why? Well, because the Chinese manufacturer supposedly broke the U.S. trade sanctions with Iran. ZTE relies upon some U.S. companies, such as Qualcomm, for various components of its devices. The ban on the exports from these companies will be very harmful to the handset division.
The CEO is trying to keep the morale up pending the layoffs, despite the company's "biggest crisis in its 31-year history." He has vowed to improve the internal auditing mechanisms and to hone the management structure. It is never good to see such a drastic measure like laying off that many people, but sometimes that is what needs to be done in order for the company to survive.