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Xiaomi-backed Black Shark lays off workers

Xiaomi-backed gaming phone brand Black Shark is facing fresh challenges after it laid off most of its employees and failed to pay severance payments, according to Chinese media reports, as the unit continues to struggle in the wake of a failed acquisition deal with tech giant Tencent Holdings.

Black Shark has conducted multiple rounds of lay-offs since August 2022, cutting its workforce from over 1,000 employees to just over 100 currently, tech media outlet China Star Market reported on Wednesday.

The company told affected employees via a text message on Tuesday that it has experienced “tremendous operational difficulties” and has failed to pay severance in full for the time being. Black Shark will continue to find ways to solve its funding problems and pay the remainder of severance payments owed to employees, according to the report, citing the company text message.

Some of the laid-off workers turned to social media page on Weibo, a Twitter-like site, to vent their anger about reduced severance payments. A Tuesday post by Black Shark CEO Luo Yuzhou that says “Good morning” has been flooded with angry comments asking for full payment of the severance package, as promised to employees when they were made redundant.

“Please pay the severance! I need the money for Lunar New Year,” one of the most upvoted comments said.

Some users said they had only received 2,000 yuan (US$296) in compensation on Tuesday. “How can I get through the Lunar New Year with 2,000 yuan in compensation? How can I tell my family about this?” some users asked Luo in the comments section.

An ex-employee, who was laid off in September and said he is owed 150,000 yuan in compensation, told the Post that over 100 affected workers have filed their cases to the labour arbitration commission in Shanghai’s Pudong district in an effort to protect their rights and solve the disputes.

“No one from the company showed up and none of the key executives including the CEO can be reached,” said the employee who gave his surname as Yang, adding that they were supposed to receive the first of six phases of payments this week.

Black Shark did not immediately respond to a request for comment on Thursday.

The latest troubles faced by Black Shark come after Tencent walked away from an acquisition deal that would have marked the Chinese gaming giant’s first investment in hardware in the metaverse field.

Tencent began talks with the phone brand in January 2022 with the aim of having it produce virtual reality (VR) headsets for metaverse-related content, but the internet and gaming giant walked away after failing to get approval from authorities for a deal, local media reported in May.

Founded in 2017, Black Shark became a leading player in the niche category of gaming phones, which emphasised speed and performance compared to standard handsets.

However, the brand hit roadblocks after venturing into VR while the broader smartphone industry in China struggled with a weak economy in 2022. In the first 11 months of 2022, smartphone shipments in China were down 23.6 per cent compared to the same period in the previous year, according to a report by the China Academy of Information and Communications Technology last week.

Total smartphone shipments in China may have shrunk 10 per cent in 2022 to 285 million units, and the market is not expected to see meaningful growth until 2024, according to forecasts by industry research firm IDC.

Continuous performance enhancement for mainstream smartphone brands has also put further pressure on the niche space of gaming handsets. Black Shark’s main backer Xiaomi, which recently conducted a new round of lay-offs affecting nearly 10 per cent of its workforce, has also given up on one of its own gaming phone products.

Lu Weibing, the new group president of Xiaomi, announced the cancellation of a gaming handset in the latest Redmi K60 series, which was launched at the end of December. “You don’t need a gaming phone any more in 2023,” Lu declared in a Weibo post in December. South China Morning Post

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