A wave of job cuts is crashing into the tech sector

News Analysis Iain Morris, International Editor 11/7/2022

Elon Musk bought Twitter for the good of humanity, said the world's richest man not long before scrapping thousands of roles for humans at the sinking social media platform. If mainstream press reports are correct, about half of Twitter's employees have been released into the technology wild. They are likely to form a tiny percentage of those losing technology jobs this year and next.

Twitter employed only 7,500 people last December, after adding about 2,000 to the payroll in 2021. Alongside Big Tech companies and veterans of Silicon Valley, it is a tiny bird that makes a shrill noise, garnering attention as an online megaphone for celebrities and egotists and – more recently – because of Musk's takeover. Since 2015, Apple alone has recruited enough people to staff seven Twitters, if it so desired.

Moneybags Elon Musk is said to have cut thousands of jobs at Twitter.
(Source: Kristoffer Tripplaar/Alamy Stock Photo)

The iPhone maker is one of numerous technology companies that have been on a hiring spree for several years. As telecom operators have cut thousands of jobs, so their American suppliers and other US technology firms have been adding them. A random list comprising Big Tech players, chipmakers, traditional IT companies and telecom equipment vendors – all with US headquarters – has gained more than 210,000 employees since 2018 (see US companies besides Amazon in table below), despite cutbacks at several organizations. Include the country-sized Amazon and the increase since then is more than 1 million.

This looks set to go into reverse as fears mount of a worldwide recession next year. With inflation and interest rates on the march, company and household budgets are being squeezed. A unique set of geopolitical circumstances now grips the US semiconductor industry, which is being cut off from China, one of its biggest markets, just as Joe Biden's controversial CHIPS Act pumps $39 billion of government money into semiconductor production. Even before this egregious handout, experts had warned of a looming components glut. As prices fall and stock remains unsold, chipmakers are in for a belt-tightening 2023.

Wielding the axe

Blaming the "worsening economic conditions," Intel has already told investors it is looking for about $3 billion in cost savings next year. By the end of 2025, it aims to slash expenses by as much as $10 billion. This is a huge figure, equal to about 17% of Intel's overall sales and operating costs last year. The update came as Intel reported a 20% drop in sales for its recent third quarter and a massive 85% slump in net profit.

Intel's last big round of layoffs came in 2016 and 2017, when 4,600 jobs disappeared. Since then, it has added 18,400, finishing last year with about 121,100 employees. Outside the all-important research-and-development unit, where spending soared nearly a fifth last year, the outlook for staff is suddenly worrying.

Table 1: Headcount at major technology companies and telecom vendors

	2016	2017	2018	2019	2020	2021
Amazon	341,400	566,000	647,500	798,000	1,298,000	1,608,000
AMD	8,200	8,900	10,100	11,400	12,600	15,500
Apple	116,000	123,000	132,000	137,000	147,000	154,000
Broadcom	N/A	N/A	15,000	19,000	21,000	20,000
Ciena	5,555	5,737	6,013	6,383	7,032	7,241
Cisco	73,700	72,900	74,200	75,900	79,500	83,300
Corning	40,700	46,200	51,500	49,500	50,110	61,200
Dell	138,000	145,000	157,000	165,000	158,000	133,000
–VMware	20,000	22,000	24,000	31,000	34,000	N/A
Ericsson	111,464	100,735	95,359	99,417	100,824	101,322
Facebook	17,048	25,105	35,587	44,942	58,604	71,970
Google	72,053	80,110	98,771	118,899	135,301	156,500
HPE	N/A	66,000	60,000	61,600	59,400	60,400
Huawei	180,000	180,000	188,000	194,000	196,600	195,000
IBM	380,300	366,600	350,600	352,600	345,900	282,100
Intel	106,000	102,700	107,400	110,800	110,600	121,100
Juniper Networks	9,832	9,381	9,283	9,419	9,950	10,191
Marvell	4,617	3,749	5,275	5,633	5,340	6,729
Microsoft	124,000	131,000	144,000	163,000	181,000	221,000
Motorola Solutions	14,000	15,000	16,000	17,000	18,000	18,700
Netflix	4,700	5,500	7,100	8,600	9,400	11,300
Nokia	102,687	101,731	103,083	98,322	92,039	87,927
Nvidia	10,299	11,528	13,277	13,775	18,975	22,473
Qualcomm	30,500	33,800	35,400	37,000	45,000	51,000
Twitter	3,583	3,372	3,920	4,900	5,500	7,500
VMware	N/A	N/A	N/A	N/A	N/A	37,500
ZTE	81,468	74,773	68,240	70,066	73,709	72,584
(Source: companies, SEC filings) (Notes: The fiscal year ended before December for several companies in this list; VMware was spun out of Dell in November 2021; Apple had 164,000 employees at the end of its last fiscal year in September)

Big Tech is either freezing recruitment or cutting jobs, too. Metaverse-obsessed Facebook spent $9.2 billion on research and development in the recent third quarter, a year-on-year increase of about 45%, in a desperate bid to cultivate a future business alternative to its ailing social media empire. As advertisers decamped, revenues fell 4%, year-on-year, to $27.7 billion, and net profit tumbled 52%, to roughly $4.4 billion.

After gaining another 13,366 employees last year, hiring 11,583 in the first six months of 2022 and reportedly adding about 3,500 since then, Facebook is now slamming the brakes on recruitment. Headcount in 2023 will be "roughly flat with current levels," said Dave Wehner, Facebook's chief financial officer, but press reports this week said large-scale layoffs were in the works.

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Similar messages of recruitment slowdown or layoffs have come from Amazon, Google and Microsoft, the giants of the public cloud. Given the size of its workforce, there is particular concern about Amazon, which would be unprofitable without AWS, its public-cloud business. Minus AWS, Amazon racked up a loss of $8.1 billion on sales of more than $306 billion for the first nine months of this year.

Any disruption in the public-cloud market could therefore have nasty ramifications for Amazon's other ventures and the hundreds of thousands of people who staff them. And workforce pruning already appears to have started at the biggest of Big Tech by employee numbers. Headcount had dropped from more than 1.6 million at the end of 2021 to about 1.5 million in September, according to mainstream press reports.

No safe haven

Smaller companies like Twitter, though, have made the deepest cuts so far. Lyft, a ride-hailing app that competes against Uber, last week said it would lay off nearly 13% of its workforce, or nearly 700 employees. In September, Snap revealed plans to cut its headcount by a fifth. Based on last year's numbers, that would equate to about 1,300 redundancies.

Twitter is conceivably doomed under Elon Musk's ownership. Cuts, he said, were prompted by dwindling revenues. Sales had already dipped 1% for the recent third quarter, to less than $1.18 billion, when Twitter also recorded a $270 million net loss. Various high-profile advertisers have reportedly quit the platform since Musk took charge. Whatever the public thinks of his free-speech mission, big brands seem to have been scared off by the rhetoric. The right to cause offense is not easily marketable.

Workforce shrinkage is a familiar trend for the telecom sector. AT&T and Verizon together have cut headcount by more than 138,000 employees since 2015 as they have sold underperforming assets and leant heavily on automation. Other telcos have been equally prepared to view some departments as an unnecessary cost burden. With technology companies doing likewise, the opportunities for a livelihood after telecom are drying up.

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— Iain Morris, International Editor, Light Reading