News on November 25th, the world's second-largest PC giant, HP, has made further adjustments to its procurement system after recent changes, mainly targeting the R&D department and high-level procurement executives. It is reported that the R&D department will undergo another round of layoffs, with the supply chain and business focus continuing to return to North America.

Reporters have noticed that since 2022, HP has conducted multiple rounds of layoffs and adjustments. It is worth noting that in this adjustment, an additional layer of foreign executives has been added above the positions of all Chinese procurement managers. For example, in this adjustment, the position of HP's Global Senior Vice President, Jian Wenjian, has been retained, but his procurement responsibilities have been handed over to the newly appointed procurement manager, Jonathan Jennings.

HP's series of adjustments have not only attracted industry attention but also shaken the entire supply chain industry. A source close to HP told reporters that these measures, although named "adjustments," actually weaken the authority of Chinese procurement managers. At the same time, the company's supply chain and production focus are also accelerating the adjustment and dispersion to various parts of the world.

Layoff adjustments are underway

This adjustment mainly focuses on the company's supply chain and R&D areas.

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In terms of specific personnel changes, the position of HP's Global Senior Vice President, Jian Wenjian, is retained, but his procurement responsibilities have been transferred to the newly appointed procurement manager, Jennings. This change means that HP's decision-making power in the procurement field will be more concentrated in the hands of North American executives.

In the Personal Systems Business Group, the power of President Alex Cho has also been weakened, and the two major businesses he originally managed, Poly and Workstations, have been transferred to other departments.

At the same time, the authority of HP's top supply chain executive, Ernest Nicolas, has been further expanded, covering not only IT and cybersecurity fields but also taking over the transfer of procurement power. This series of changes has made Nicolas more prominent within HP, and some supply chain insiders even speculate that he may become a hot candidate for the next CEO.

Faced with HP's frequent personnel changes, relevant supply chain company personnel have expressed that they are actively contacting and communicating with customers to understand HP's latest trends and confirm their future cooperative relationships. The aforementioned supply chain insiders said that HP's adjustments have kept everyone busy, and in response to its personnel changes, supply chain companies have recently been actively contacting customers, hoping to grasp new trends and confirm their relationships.

Public information shows that HP was established in 1939 and is headquartered in Palo Alto, California, USA. HP has three major business groups - the Information Products Group, the Printing and Imaging Systems Group, and the Enterprise Computing and Professional Services Group, mainly focusing on the production of printers, digital imaging, software, computers, and information services.

HP's global layoff plan began in 2022 when it announced that it would lay off 10% of its global workforce by the end of the 2025 fiscal year, affecting 4,000 to 6,000 employees.

HP reiterated in its last quarter's financial report that it aims to reduce its overall annual structural costs by $1.6 billion by the end of the 2025 fiscal year. The aforementioned source told reporters that in the process of promoting supply chain and business transformation, HP's personnel adjustments due to product portfolio optimization and operational efficiency reform will continue until 2025.

Parallel to layoffs is the shift in the focus of procurement supply chains and the dispersion adjustment of global production layouts.

It is worth noting that after the pandemic, HP shifted its procurement focus to Taiwan, China, and expanded its procurement and R&D teams, but recently, it has been downsizing, not only transferring senior management power back to the United States but also dispersing to Southeast Asian regions such as Singapore.

At the same time, in response to the current relatively weak PC market outlook, HP will also make adjustments to mid-low-level personnel. It is reported that before the Lunar New Year, the R&D team in Taiwan, China, may face a new round of layoffs, with a scale of 5% to 10%.

The aforementioned supply chain insiders believe that currently, it is not only HP but also many other giants that have personnel and layout adjustment plans, conducting sandbox exercises in response to changes after the previous U.S. president, including accelerating the dispersion of production globally.

Performance and market pressures are highlighted

Behind the layoff adjustments is the continuous pressure on performance.

In the third quarter of the 2024 fiscal year, HP achieved $13.5 billion in revenue, a 2.4% increase compared to the third quarter of the 2023 fiscal year, which is also the first time it has recorded a year-on-year increase in revenue since the third quarter of the 2022 fiscal year. However, in this fiscal quarter, the company's net profit decreased by 16% year-on-year.

In the post-pandemic era, global economic growth has slowed down, the online office dividend has dissipated, consumer demand for personal computers has decreased, and strong competition from domestic and foreign PC giants has led to a significant decline in HP's main product, personal computer shipments.

Specifically, on the business level, the Personal Systems business, which contributes more than 60% of HP's revenue (including PCs, laptops, tablets, etc.), has slowed down, and the printing business, which accounts for more than 10% of revenue, has negative growth, directly affecting the company's performance growth.

When disclosing the financial report for the third quarter of the 2024 fiscal year, HP said that it encountered a cold market in China, with weak sales of PCs and printers. In the printer business, in recent years, Canon, Tsinghua Tongfang, Razer, and Hasee have been gradually eroding HP's market.

Actually, since the third quarter of the 2022 fiscal year, HP's operating income has experienced a continuous decline.

"HP's layoffs this time are indeed surprising. In the past, layoffs were mainly concentrated in the sales department, but this time even the R&D department is not spared, indicating that HP's financial situation is indeed not optimistic, and there are also problems with product competitiveness," the aforementioned source said.

Not only HP, but the entire personal computer market is facing the problem of weak demand and slow growth. IDC's data shows that from the first quarter of 2022 to the second half of 2023, the global shipment of traditional PCs, including desktops, laptops, and workstations, experienced a continuous decline.

Another PC giant, Dell, although it has been profitable in recent years, has also faced revenue growth difficulties since 2022.

Against the backdrop of the industry's coldness, layoffs, and strategic transformation seem to have become the standard answer for giants to relieve performance pressure. In addition to HP, Dell's total revenue in the third quarter decreased by 6% to $24.7 billion. Dell planned to lay off 5% in 2023, but the actual number of layoffs was 13,000 people. In early August this year, Dell confirmed a new round of layoffs, with an expected reduction of up to 12,500 people.

With the increasing application of AI large models in technology products, AI is becoming a new economic growth point for various manufacturers to compete for, and the same is true for the PC industry. Compared with Lenovo and Dell, HP's pace in deploying AI PCs is slightly slower.

Industry insiders believe that layoffs are the inevitable pain of optimizing cost and strategic transformation, and behind it is the performance anxiety of this old PC giant. However, how to solve the problem of turning the elephant, in addition to business and personnel adjustments, and focusing on AI PCs, it still needs to provide more convincing answers.