Qualcomm, a leading mobile chipmaker, is set to cut 1,258 positions across its San Diego and Santa Clara offices. This move comes as the company faces the challenges of lackluster demand in the smartphone chip market. The layoffs, which constitute about 2.5 percent of Qualcomm’s global workforce, will predominantly impact engineers.

The decision to downsize was revealed in Qualcomm’s last earnings report, where the company cited “continued uncertainty in the macroeconomic and demand environment” as the reason behind the layoffs. Around 1,064 workers from the San Diego office and 194 workers in Santa Clara will be affected. However, no facility closures are expected at either location.

The chip manufacturing industry has encountered numerous challenges over the years, leading Qualcomm to restructure its operations and refocus its efforts within the industry. These restructuring actions are expected to be completed by the first half of fiscal 2024.

As Qualcomm approaches its upcoming earnings report, it predicts a revenue shrinkage of approximately 19% for the current fiscal year. Furthermore, industry tipster Ming-Chi Kuo raises concerns about Qualcomm’s System on Chip (SoC) shipments to China in 2024, estimating a decline of 50 million units compared to this year.

In addition to the market challenges, Qualcomm faces the emergence of Samsung Exynos 2400, which is gaining a higher-than-expected market share. Samsung plans to utilize this deca-core chipset in some Galaxy S24 series phones next year instead of Qualcomm’s Snapdragon 8 Gen 3. Moreover, Apple plans to replace Qualcomm’s 5G modem chip with its own by 2025.

Overall, Qualcomm’s decision to downsize reflects the difficult landscape of the chip manufacturing industry and its efforts to adapt to changing market dynamics.