PCH to cut 1,500 jobs, with majority of cuts to happen in China

21 Jun 2016

Irishman Liam Casey is known as 'Mr China' for his knowledge of the vast Chinese manufacturing space

Liam Casey’s $1bn global supply-chain empire PCH is to cut 1,500 jobs from its 2,100-strong workforce, with it shifting its focus from manufacturing and packaging to professional services around internet of things (IoT) products.

The decision will impact 1,500 workers, predominantly based in China, as well as some support services globally.

Speaking with Siliconrepublic.com, Casey, PCH’s CEO and founder, said the decision was positioning the 20-year-old company for the next 20 years.

‘We are becoming more of a professional services consultancy for the IoT space and brands are coming to us to orchestrate the supply chain from beginning to end’

Casey and PCH are seen increasingly in Silicon Valley as the go-to businesses for turning ideas into hardware, from smartphones to wearable devices like smartwatches.

However, in the past year, PCH has also been cultivating specialised relationships with consumer brands in the fashion, luxury and health markets, including alliances with brands like Johnson & Johnson and L’Oréal.

Technology consulting firm Gartner projects that 6.4bn connected things will be in use worldwide this year, up 30pc from last year.

Gartner forecasts that number will grow more than threefold, to nearly 21bn, by the year 2020.

Mr China

While PCH has been increasing its presence in San Francisco, including through the acquisition of Lime Lab and by building up the Highway 1 accelerator, Casey said that PCH will retain a presence in Shenzen.

He said PCH has built up the valuable and unsurpassable skills, knowledge and expertise necessary to navigate the vast Chinese technology manufacturing ecosystem.

Casey explained that the majority of the cuts are in low-end activities, such as packaging, and that Cork-headquartered PCH will retain some of these activities in Shenzen for high-value-add contracts only, while outsourcing to nearby contract manufacturers in China where necessary.

“There is a lot of change in our sector and if you look at categories like IoT wearables, especially for healthcare, luxury and beauty, the client interaction in San Francisco is at a much higher level and engagement happens much faster,” said Casey.

“We still have knowledge of China and that knowledge and expertise doesn’t disappear, but we will focus on where we can add significant value and get better returns.”

Casey explained that freeing the company up from packaging and manufacturing will make it “unconstrained” in order to be nimble to capture new opportunities.

Tech industry in transition

He said that for the last 20 years PCH has been the strategic outsourced partner for consumer electronic brands. But as part of the shift in the IoT world PCH will need to free itself up from costly manufacturing work in order to enjoy greater margins from higher-value activities.

“In the past couple of years, we had to take on business that may not have been as attractive from a margin point of view but it helped us to establish a good base in terms of engineering and development.”

The remaining workforce of 600 people will consist of engineering, product development, design, planning and supply base managers with some elements of customisation and packaging.

“We have put together a great package for the workers and we are ensuring a good transition and we will help them find other work.”

He said that many of the workers’ skills will be highly sought after in the Shenzen region.

“China is building massive factories and the whole sector is in continuous change. For us, it is about having the skillsets in San Francisco around engineering and development and applying our knowledge and expertise of China to access factories.

“We are becoming more of a professional services consultancy for the IoT space and brands are coming to us to orchestrate the supply chain from beginning to end.

“This frees us up to serve new entrants in the IoT space whose product categories will be vast. This decision is about having more flexibility to react to the market,” Casey said.

John Kennedy is a journalist who served as editor of Silicon Republic for 17 years