Emergency layoffs, slow recruitment, giants began to tighten their belts

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BAT, Microsoft, Google, Apple, and Meta can’t hold it anymore.

Author | Xu Shan Editor | Yun Peng

Source: Smart Things

The recent “joint layoffs” of foreign and domestic technology companies has set off a new round of layoffs. “Layoffs” has become one of the hottest topics in the tech world recently.

According to Bloomberg, Apple plans to slow down its 2023 employee hiring plan. This is another big tech giant announced to slow down hiring after Google, Meta, and Microsoft.

On July 12, Beijing time, a Google memo stated that Google will “slow down the pace of hiring for the rest of the year.” On the same day, Microsoft also issued an announcement saying that due to business adjustments, they will lay off employees around the world. At the same time, Meta also cancelled the logistics service outsourcing contract of its Silicon Valley headquarters on the same day, which will lead to the dismissal of 368 outsourcing employees.

Faced with the sluggish economic situation, tech giants invariably choose to control the number of employees. Relevant research institutions said that the technology industry laid off 4,044 people in May, nearly ten times the total number of layoffs from January to April, which was 459, hitting the highest level since December 2020 (5,253 people). According to data from layoffs tracker Layoffs.fyi, nearly 30,000 employees of tech companies were laid off between May and June alone.

The layoffs reflected in these figures are also a microcosm of the turmoil across the tech industry. Why did the tech giants cut jobs drastically at the same time? Which tech giants are “pruning the branches”? Where do all the lost talent go? After some investigation, we observed that behind the layoffs, tech giants are preparing for the “economic winter”.

01.

Google, Meta, Microsoft announce hiring slowdown same day

Even Apple can’t sit still

On July 12, Beijing time, on this day, foreign technology giants Google, Meta, and Microsoft simultaneously announced that they would lay off employees and slow down recruitment. Their internal documents all refer to “currently in a headwind environment and the situation is severe.”

Subsequently, on July 19, Beijing time, according to Bloomberg, Apple also plans to slow down recruitment in 2023 to face the complex economic situation.

In the industry, tech giants are sensing changes in the economic environment through their “information tentacles”. You know, in March of this year, Microsoft and Apple also planned to increase the competitiveness of high-tech talents through salary increases. However, since April, news of layoffs by foreign technology giants has gradually spread in the industry, and the situation is changing rapidly.

1. Meta: Don’t expect new budgets and new employees

“We’re in tough times, and the headwinds are strong,” said Meta chief product officer Chris Cox, according to internal documents. He also noted that teams shouldn’t expect an influx of new engineers and budgets, and that Meta should run the team more lean.

Combined with the previous, Meta has disclosed in various occasions such as earnings report conferences and media interviews that it will suspend or delay the R&D plan of some products, and concentrate R&D resources on some higher-priority projects, such as VR headsets. From these moves, we can see that Meta is seriously preparing for this economic big test.

At the same time, in this memo, Meta also pointed out the development direction of key businesses in the second half of the year:

Metaverse: Avatars (virtual human system) and Horizon Worlds+Platform (metaverse conference/social platform) will be the main projects. Among them, in the direction of Avatars, Meta will launch a new avatar art store; Horizon will launch cross-screen and cross-application; and in the second half of 2022, Meta will launch Cambria MR headset. “This kicks off our consumer/industrial mixed reality product line,” said Chris Cox.

AI: The FAIR team will continue to advance AI research. In the second half of 2022, Meta will focus on improving AI capabilities and infiltrating AI technology into multiple fields such as AR, product, responsibility, and research. Among them, AI research will mainly focus on language models and translation, the Horizon project and the expansion of research super-clusters.

Reels+Discovery Engine: Meta plans to increase the number of GPUs in its data center by 5 times by the end of this year, increasing the computing power of the computing center. At the same time, with the new discovery engine, Meta will also upgrade the home screen and core user interface of the Instagram app and Facebook app to more natively integrate short-form video, while integrating related features.

In addition to this, Meta also pointed out their development plans for the second half of this year in areas such as privacy, monetization, community messaging, and more.

2. Google: Hiring only for key positions

On July 12, Google CEO Sundar Pichai sent an internal email to his employees to inform them of the latest staffing adjustment plan.

According to Sundar Pichai, Google hired nearly 10,000 new employees in the second quarter of 2022 alone. Google will slow hiring in the second half of 2022 and into 2023, given the large number of employees it has already hired. “We’re focusing our hiring on engineering, technology and other key positions to ensure that critical projects at Google can be replenished in a timely manner.”

That is to say, even though the 2022 recruiter is exceeding expectations, Google has not opted for large-scale layoffs, but chose to slow down the pace of hiring.

3. Microsoft: Lay off 1% of its workforce

According to Bloomberg news, Microsoft announced that it will lay off some positions worldwide, with a layoff ratio of less than 1% (about 1,800 people), involving multiple departments such as consulting, customer and partner solutions. At the same time, Microsoft also said that they will continue to recruit for other positions and increase the salaries of overall employees by the end of the fiscal year.

4. Apple: slowing hiring in 2023

Apple plans to slow hiring in some divisions next year in response to a potential economic downturn, according to Bloomberg.

Apple is planning to control personnel expenses, but in response to a tightening labor market, Apple plans to increase its company-wide salary budget this year, and many employees engaged in retail and technical support will receive a salary increase of between 5% and 15%.

From what is known so far, foreign technology giants have felt the changes in the economic environment, but the situation does not seem to be that urgent. Most companies are only slowing hiring plans for the second half of the year, not mass layoffs.

At the same time, many companies may need to pay higher wages to maintain enough employees to keep the company running as the number of available labor in major overseas markets is declining. This is also one of the reasons why Microsoft, Apple, and Google have previously planned to increase employee wages.

Not only that, the CPI (National Consumer Price Index) in many countries around the world has risen sharply, and inflation is serious, which may also be one of the reasons for these companies to increase their salaries.

Data show that the five giants Apple, Microsoft, Google, Amazon and Meta held nearly $542 billion in cash at the end of March, more than 10 times more than the $51 billion in cash they had before the 2008 financial crisis. Therefore, the “Financial Times” believes that the current giants are not without sufficient funds to recruit personnel. This large-scale reduction is an adjustment made by technology giants in the face of a sluggish economic environment after the previous rapid expansion. But the “Financial Times” feels that the competition among technology giants for top technology talents will not stop.

Therefore, we can see that foreign technology giants are now in a more embarrassing situation. On the one hand, they are trying to slow hiring in response to changes in the economic environment; on the other, they are raising wages to keep existing businesses running while competing for top tech talent.

02.

BAT has not fallen, and giants have begun to “simplify”

Unlike foreign technology giants who slow down recruitment, domestic Internet giants directly control costs by streamlining business lines and related personnel.

Affected by the epidemic and the international environment in the past two years, the Internet industry has also suffered a lot. The tide has faded, and many giants have begun to learn to “throttle money”. But how to lay off employees is a technical task for the major domestic Internet giants.

Too many layoffs will affect the prospects of the company’s development, and it will also involve a large amount of compensation. To this end, technology companies have come up with clever tricks to try to weaken the impact of layoffs on the company’s business and company confidence. In June of this year, Jingdong tried to use the word “graduation” to weaken the impact of layoffs.

But as Internet giants who have gone through several economic cycles, they already have their own “winter” cheats.

In China, Tencent, Alibaba, and Baidu have all been “involved” in this wave of layoffs.

Ali was the first to hear rumors of layoffs. In March of this year, Ali announced that it would start “rolling layoffs”. The so-called “rolling layoffs” refers to the round after round of layoffs according to the needs of the company. The advantage of this is that because the number of layoffs in each round is uncertain, no one knows how many people the company has laid off.

Subsequently, it was revealed that Ali’s life service sector, Hema, and Taocaicai and other business lines were the “hardest hit areas” for layoffs, with layoffs ranging from 10-30%.

According to the latest news disclosed by the media, Alibaba’s strategic investment team will be cut by one-third recently, from more than 110 people to about 70 people.

The method of layoffs that Tencent chose is to lay off grass-roots employees first, and then lay off management employees.

According to sources, Tencent’s layoffs in the first half of the year will focus on some grassroots employees, even some newcomers who have just joined the company. The layoffs in the second half will revolve around management.

It is reported that PCG (Platform and Content Business Group) will be the hardest hit area for this round of layoffs, with the ratio of layoffs reaching 40%-50%, with a few businesses facing overall layoffs.

In contrast, Baidu’s layoffs will appear a little “gentle”, but it is reported that Baidu’s second round of layoffs is also underway, mainly focusing on business lines such as AIG (Baidu Artificial Intelligence System) and MEG (Mobile Ecological Business Group). The rate of layoffs is around 10% to 15%.

In this regard, Baidu responded that the layoffs belonged to the normal flow and optimization of the company’s personnel. If employees are unqualified for a long time, they may face optimization, but the number of optimization has not reached 10%.

It can be seen that the policy of “reducing personnel” of domestic Internet giants has already been launched. Many analysts believe that the layoffs are just preparations for the Internet giants to “overwinter” in a sluggish economic environment. For job seekers, there will also be increased competition.

03.

Is it abnormal or normal? Tech giants cautious winter

In fact, it is the first time that many Internet giants have started such large-scale layoffs. According to statistics from NBS New Media, the Internet giants have experienced at least four layoffs, in 2000, 2008, 2018, and 2022.

We have seen two different responses from domestic internet giants and foreign tech giants to economic changes. In China, employees have been cut down drastically and related business lines have been streamlined. The foreign technology giants are relatively “gentle”, choosing to slow down the next recruitment expectations, and will focus more on talent recruitment in key areas.

Interestingly, we can find that whether domestic Internet giants choose to adjust personnel, or foreign technology giants choose to slow down personnel recruitment, they are all business adjustments after their full-year or half-year financial reports are released.

That is to say, when the giants saw the current economic environment and the current state of the company, they invariably chose to control expenses by adjusting the personnel structure.

In addition, the growth rate of net profit of giants is also slowing down, which is one of the reasons why they choose to lay off employees.

Meta and Apple have lowered their earnings forecasts for this year several times. The latest financial reports of Tencent and Ali also show that their latest net profit growth has declined year-on-year. It may also mean that the giants have yet to find a new “economic engine.”

But for a technology giant, laying off employees or slowing down recruitment may affect its ability to innovate, many new projects and research directions may not be able to advance temporarily, and business vitality will also be affected to some extent. “Real growth and sustainable growth may be what major companies are currently seeking.” An industry source revealed.

All in all, the technology giants’ adjustment of personnel this time is an adjustment based on the current status of the company. However, due to multiple reasons such as the sluggish economic environment, the impact of the epidemic, and business constraints, domestic and foreign giants have laid off more employees than in previous years. This also reflects that in the next few years, the commercialization model, profit priority, and prudent investment may become the priority options of major giants.

04.

Conclusion: Mass layoffs, less recruitment

Tech giants cautious winter

Since the beginning of this year, the global economic environment has been sluggish, like a “dark cloud” hanging over the heads of every technology company. The capital market continues to look down on technology stocks, companies lower their profit expectations, and the stock prices of giants “shrink”… These phenomena seem to be telling technology companies: “A new economic winter is coming.”

The technology giants at the forefront of the air route feel the changes in the air flow of the times in time, and actively respond to them. Not only are they downsizing staff and slowing hiring, but they are also consolidating resources to focus on high-priority projects. But this may affect the innovation ability and technology research and development ability of some enterprises.

How will tech giants survive this economic winter? Who will stand firm in this economic winter? Who will be left behind in the economic winter? Perhaps we will witness more history.

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