After a rocky year with mass layoffs, how will US tech giants fare in 2023?

SAN FRANCISCO: Ms Annalice Ni landed her first job out of university as a software engineer at tech giant Meta, a dream for many young tech enthusiasts, after an internship. 

However, just a month into the job, the 22-year-old was one of more than 11,000 employees hit by the first mass layoffs in the company’s history.

“At the end of the day, we were shocked, but we kind of had a feeling that it could happen,” she said.

It has been a rocky year for US tech companies and their employees. Like Meta, a number of tech giants, including Amazon, Salesforce and Twitter, laid off thousands in the second half of 2022. 

And the outlook for tech companies in 2023 remains uncertain, as the United States Federal Reserve continues to raise interest rates.

CUTTING COSTS, INCLUDING LABOUR

The online shift at the start of the COVID-19 pandemic did not continue the way many companies had predicted, said observers. 

ZipRecruiter lead economist Sinem Buber said: “There was a big demand for the tech products, and tech companies took that advantage and (expanded) their payrolls to meet the consumer demand. And they were expecting that expansion to go beyond the pandemic.”

That miscalculation, coupled with rising interest rates, means many tech firms had to find ways to cut costs.

Tech firms are typically more sensitive to higher interest rates because many have been considered growth stocks, with valuations based on future earnings potential. 

Growth stocks fare better in low interest rate environments, when other options are less attractive to investors.

WHAT’S NEXT FOR TECH INDUSTRY?

Companies such as Meta and Amazon are still sitting on lots of cash, according to observers, and have used that to invest billions of dollars in projects that may or may not pay off, like the so-called metaverse.

Dr Daniel Keum, associate professor of management at Columbia Business School, said: “Some people say the tech industry is going through a mid-life crisis. We saw phenomenal growth in the past two decades, but what is the next big thing for these big techs?”

Meanwhile, many laid off tech workers are now looking for work.

“I think computer science is still a very high in-demand skill to have,” said Ms Ni, adding that such tech expertise and experience are sought after by organisations, from big firms to startups. 

Tech workers may however start looking beyond big tech, with the US unemployment rate remaining low and with lots of job options available in other sectors of the economy, especially for engineers.