Following the announcement of Chinese tech giant Tencent’s first-ever quarterly decline earlier this week, it’s been revealed that the company has laid off 4.7 per cent of its workforce – approximately five and a half thousand employees.
This marks the first staffing decline since 2014.
Bloomberg report that some of China’s largest tech companies have slowed recruiting due to tighter regulations imposed by the country’s government following a decade of expansion, with Alibaba likewise losing nine thousand staff in 2Q22. Bloomberg states that 2021’s government crackdown wiped over $1 trillion off of the combined market value of the Chinese tech sector.
Adding to the problem, Bloomberg reports that Tencent is grappling with a “deepening consumer crisis in the world’s No. 2 economy, the product of a property slump and ad-hoc Covid lockdowns from Shanghai to Shenzen. The uncertainty is wreaking havoc on businesses from advertising to cloud computing and gaming.”
As such, Chinese tech firms are focusing on keeping themselves profitable. Tencent has achieved this by shutting down lagging businesses in a variety of areas, such as e-commerce and news aggregation.
Hit hard by inflation
Worldwide, numerous other companies are cutting down to rein in spending due to the global rise in inflation, as well as political tensions and rising costs. Google, Netflix, and Amazon likewise laid off staff, with Amazon – the second largest employer in the United States – cutting 100 thousand staff in the last quarter.
Tencent is one of the largest tech companies in China, and the world’s most profitable video game company. However, this decline shows that no company, regardless of profitability, is too big to fail. The company’s main competitor in the Chinese market, NetEase, managed to buck the trend of declining profits this last quarter, largely due to the worldwide success of Diablo Immortal.
We listed Tencent as one of last year's top 50 mobile game makers. We'll be unveiling our list for 2022 later this month.