Explained | Big tech firms swing the axe on talent
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Why are tech companies freezing their hiring process and laying off their employees? How has the new app tracking feature by Apple led to the sacking of employees?

November 11, 2022 10:30 am | Updated 01:23 pm IST

Explained | Big tech firms swing the axe on talent

Explained | Big tech firms swing the axe on talent | Photo Credit: REUTERS

The story so far: Reports of Twitter cutting half of its staff globally, and almost all in India, a week after Elon Musk took the reins of the micro-blogging platform may have overshadowed a much gloomier tech talent landscape. Several large technology firms have already paused hiring and, in some cases, companies are laying off employees as macroeconomic headwinds and tight business budgets are making them restructure their business processes and talent needs. Earlier this month, Amazon said it was pausing hiring in its corporate function.

Why are companies laying off employees?

Apple’s CEO Tim Cook recently told investors that the company would “continue to hire people and invest in areas, but we are being more deliberate in doing so.” A new report by  Business Insider said that the iPhone maker is freezing hiring for the next two quarters. 

Despite the U.S. government’s support through the CHIPS Act to the semiconductor industry, Intel has decided to lay off employees in certain divisions. The chip maker, as part of its Q3 earnings, announced plans to cut about $3 billion in costs over the course of next year.

Social AR firm Snap Inc. is planning to cut a fifth of staff. In August, CEO Evan Spiegel told employees in a memo that the company would cut its workforce by over 1,000 workers. He cited bleak revenue projections and noted that a restructuring was needed for long-term success in a tight environment.

On Wednesday, Facebook’s parent company said it is laying off 11,000 employees. Just a year ago, after CEO Mark Zuckerberg renamed the company as Meta Platforms and took a plunge into the amorphous metaverse, the company made elaborate plans to hire 10,000 employees over five years in the European Union (EU) region. That plan seems to be put on the back-burner now as it prepares to cut discretionary spending and extend a hiring freeze for the next several months.  

Is Apple behind tech companies’ decision to lay off employees?

Social media platforms like Meta and Snap have been hit by an update from Apple. The iPhone maker introduced an app tracking feature that lets users to opt out of apps that track them.

Facebook and Snap get a large proportion of their revenue from selling space for ads. And to make their platforms effective in placing relevant ads, they must collect and analyse user data. But Apple’s new feature has made it difficult for these firms to push targeted ads. According to some estimates, Facebook lost about $12 billion as a result of Apple’s app tracking feature.

What are the primary reasons?

In the case of chip makers like Intel and Qualcomm, the challenge comes from drop in sales of laptops and mobile devices. In its earnings call last week, Qualcomm cited the “rapid deterioration in demand and easing of supply constraints across the semiconductor industry have resulted in elevated channel inventory.”

For smartphone companies that typically end the year on a high note, the chip firm’s gloomy outlook is a cause for concern as Qualcomm does not expect the market to recover soon.

Higher inventory for chip makers, lower demand for handset manufacturers, loss in revenue from selling ad spaces for social platforms, and uncertain long-term bets like the metaverse have played a significant role in making large tech firms restructure their business practices. This has made them pause hiring in some cases, and in others swing the axe on talent.

THE GIST
Several large technology firms have already paused hiring and, in some cases, companies are laying off employees.
Social media platforms like Meta and Snap have been hit by an update from Apple. The iPhone maker introduced an app tracking feature that lets users to opt out of apps that track them.
Higher inventory for chip makers, lower demand for handset manufacturers, loss in revenue from selling ad spaces for social platforms, and uncertain long-term bets like the metaverse have played a significant role in making large tech firms restructure their business practices.

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