Friday, March 3, 2017

LeEco slashes over 75% of its Indian workforce, denies claims of exit

LeEco's woes continue in India.

LeEco announced at the end of last year that it would downsize its operations in all markets, and the company has followed through on its word today by letting go of over 75% of its Indian workforce. In a statement to Gadgets360, LeEco said that it reduced its headcount from 350 to just over 80, with the company calling the team size "in line with industry benchmarks."

However, a report out of Economic Times suggested LeEco is looking to exit the market altogether, but the company has refuted those claims, stating that India is a strategic market for the manufacturer:

Contrary to reports in certain sections of the media, LeEco has a healthy product pipeline for India this year. In fact, the company is gearing up for the launch of its next-generation TV scheduled in the coming week. Premium models of smartphones too are to follow. LeEco television and smartphone business continues in India and has gained significant market recognition. All this certainly does not signal a company in wind-up mode.

The company's recent moves were well thought out and planned as part of a longer-term strategy for the Indian market, and not triggered by the purported slump in sales due to demonetisation.

The resource head count in India is well aligned to the scale of operations envisioned and in line with industry benchmarks. Moreover, LeEco India has a robust R&D team working for India as well as LeEco globally, as the company values the R&D function, as it is integral to long-term business.

The company's phones have been well-received in India, and its foray into the TV market has also yielded results. But the company's decision to sell devices at manufacturing cost and spend vast sums of money on advertising — contrary to Chinese rivals Xiaomi and OnePlus — have led to a cash crunch, which was alleviated with a recent $2.4 billion investment.

Chinese vendors now account for over 46% of the smartphone market in India, and while the strategy of selling phones at manufacturing cost has paid dividends for them over the last few years, the model isn't sustainable, as LeEco is finding out. LeEco already announced that it would no longer sell phones offline, and with today's "optimisation exercise," the company is now focusing on creating a sustainable and profitable business model.



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