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The pandemic-led boom that boosted tech companies and their valuations has now turned into a bust in the face of decades-high inflation and rapidly rising interest rates.
One of the big news stories in recent months has been Elon Musk’s takeover of Twitter and mass layoffs at the social platform. But Twitter isn’t the only tech company making drastic changes to its staffing as fears of a looming recession continue into the new year.
Big Tech companies have been announcing massive layoffs and hiring freezes – most recently Amazon, which said on Monday it would cut 9,000 more jobs, bringing the total so far this year to 27,000.
Other household names include Google, Microsoft, Twitter, Meta and Apple.
Why are so many tech companies cutting back on staff?
When it comes to careers, tech has long been advertised as a safe bet in job security.
It can undoubtedly be a stressful working environment, but the pay is generally good and, ultimately, the world will always need people who can work in tech.
So it may seem strange that in 2023, the era of the James Webb Telescope and robots that can interact like actual humans, so many companies across the sector are making cuts and announcing hiring freezes.
The reason? Unfortunately, the same reason we’re seeing this trend across the board in business right now. High interest rates and the cost of living crisis means consumers are spending less money. That, in turn, impacts the revenue of these companies. Less revenue means businesses need to cut costs.
The tech sector, however, grew exceptionally quickly over the last several years due to increased demand, as employees began to work remotely. But as pandemic lockdowns ended and people started going outside again, revenue growth began to falter.
The key tech companies announcing layoffs and hiring freezes
Amazon, which saw its workforce double to more than 1.6 million people during the pandemic, now plans to eliminate 9,000 more jobs in the next few weeks, CEO Andy Jassy said in a memo to staff on Monday.
The job cuts would mark the second largest round of layoffs in the company’s history, adding to the 18,000 employees the tech giant said it would lay off in January.
The job cuts will hit profitable areas for the company including its cloud computing unit AWS and its burgeoning advertising business. Twitch, the gaming platform Amazon owns, will also see some layoffs as well as Amazon’s PXT organisations, which handle human resources and other functions.
Last week, Facebook’s parent company Meta also announced it was slashing another 10,000 jobs and would not fill 5,000 open positions.
The social media giant already axed 11,000 jobs in November, about 13 per cent of its workforce at the time. That marked one of the biggest tech layoffs of 2022, as Meta grappled with a weak advertising market and mounting costs.
The company said it would reduce the size of its recruiting team and make further cuts in its tech groups in late April, and then its business groups in late May.
Last month, Meta posted falling profits and its third consecutive quarter of declining revenue.
In February, Twitter laid off at least 200 employees, or about 10 per cent of its workforce, the New York Times reported.
Twitter began mass layoffs in November. Since then, the company has laid off around 3,700 people, or roughly half of its workforce, including staff who had publicly embraced Elon Musk’s “hardcore” vision for the social media platform.
Among those let go was loyalist Esther Crawford – who oversaw the company’s Twitter Blue verification subscription and was photographed last year tucked inside a sleeping bag on the office floor.
Apple has “paused almost all hiring,” a decision that could last until later this year. Apple is also scaling back the frequency of bonuses for some employees, according to Bloomberg.
In January, the software giant said it would cull 10,000 jobs, or approximately 5 per cent of its workforce, in response to “macroeconomic conditions and changing customer priorities”.
“While we are eliminating roles in some areas, we will continue to hire in key strategic areas,” CEO Satya Nadella said in an email to employees.
He emphasised the importance of building a “new computer platform” using advances in artificial intelligence (AI) and a service offering OpenAI’s futuristic chatbot ChatGPT.
In January, IBM announced 3,900 layoffs and forecast weaker annual revenue growth.
The company said pandemic-led demand for digitising businesses had given way to cautious spending by clients worried about a recession.