Smartphone Giant Oppos Move To Disband Chip Design Unit Zeku Triggers Speculation On Cause Of Action, As 3,000 Engineers Are Laid Off

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Smartphone Giant Oppos Move To Disband Chip Design Unit Zeku Triggers Speculation On Cause Of Action, As 3,000 Engineers Are Laid Off

Economic uncertainty forced Oppo to close Zeku and lay off nearly 3,000 engineers, one of the biggest layoffs in the country's semiconductor industry.
Speculation by Chinese analysts points to an attempt to avoid possible US trade sanctions as another reason for the Zeku closure.

Chinese smartphone giant Oppo's sudden decision to dissolve its own chip engineering division has sparked intense speculation about the reasons behind the move, including the layoff of nearly 3,000 engineers at one of the continent's biggest semiconductor firms. China. . Travel across the country.

Oppo announced the closure of Zeku in a brief statement last Friday, citing "uncertainty in the global economy and smartphone market", calling it a "difficult decision".

"The clear reason now is the economic slowdown and the need to lock in profits," said Shovit Srivastava, senior analyst at Omdia, a technology research and consulting firm. "Supporting a chip manufacturing business is not easy [because] it requires significant investment as well as support from partners to succeed."

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But there is speculation among Chinese analysts about non-financial reasons as the reason for Zeku's shutdown, including an attempt to avoid possible US trade sanctions. While Oppo's blacklisting has not been talked about or reported, Huawei Technologies Co., an already struggling telecommunications equipment maker that also operates cutting-edge semiconductor design firm Hi-Silicon, provided an example of how trade restrictions can affect companies. .

A man visits Semicon China, a semiconductor technology expo, on March 17, 2021 in Shanghai. US trade sanctions have actually slowed the development of advanced chips in China. Photo: Reuters

© South China Morning Post Contributed A man attends the Semicon China semiconductor expo in Shanghai on March 17, 2021. US trade sanctions have actually slowed the development of advanced chips in China Photo: Reuters

Huawei ran out of in-house semiconductors for smartphones last December as US trade sanctions effectively cut off the company's access to new, advanced chips, according to a report by Counterpoint Research. According to industry sources, several HiSilicon engineers have joined Zeku as US sanctions continue to affect Huawei's operations.

In an 18-minute video of a staff meeting last Friday, Zeku CEO Liu Jun said the weak smartphone market was the main reason behind Oppo's decision to close its chip division for four years. "The company simply cannot afford such a large investment in chips," said Liu, who was shown on video crying explaining the situation to employees.

Oppo declined to comment on Monday.

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The closure of Zeku is another blow to China's ambitions in the semiconductor industry and its aim to become self-sufficient in this high-tech space, as US trade sanctions continue to disrupt major domestic companies in the field.

Chinese smartphone brand Oppo has shut down its chip design division due to pressure on efficiency

Before announcing the closure last Friday, Zeku was actively recruiting recent college graduates in China and semiconductor talent with attractive salaries from other Chinese chip companies. Just two weeks ago, the company posted a job posting for chipset engineers to work in offices in Shanghai, Beijing, Chengdu and Xi'an.

Oppo launched Zeku in 2019 to develop chips that can improve the performance of smartphones and other devices. In the past four years, Zeku has introduced two semiconductor designs: MariSilicon X, a dedicated image processing chip available in December 2021, and MariSilicon Y, an audio processing chip released late last year.

Zeku offers all its employees a so-called N+3 severance pay, where N stands for N years of service. N+3 will be multiplied by the employee's 12-month base salary plus average bonus, which is generous compensation by industry standards.

According to Zeku's notice, previously hired fresh graduates can work in other departments at Oppo's headquarters in Dongguan City, southern Guangdong Province, or receive the N+3 package.

Smartphone shipments in China fell to the lowest level in a decade in the first quarter

Oppo's creation of a 3,000-employee semiconductor division turned out to be a strategic mistake, as the number was too high even for a chip design startup, according to an industry source.

According to Counterpoint Research, Apple, Samsung Electronics and Xiaomi Corp. in the first quarter. After that, Oppo ranks fourth in global smartphone sales. Oppo shipped 20.8 million smartphones last quarter, down 10% from 30.9 million units in the same period in 2022.

Oppo's total smartphone shipments, including OnePlus and Realm, declined sharply in 2022, down 20.7% year-on-year to 107.6 million units. That pushed Oppo's revenue down 23% to $38.2 billion last year, according to Counterpoint.

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