Author: Faizal Bin Yaya, NUS
In 2022, big tech companies laid off thousands of jobs around the world. The trend highlights the end of the era of cheap capital flooding markets and accelerating growth as interest rates rise to contain inflationary pressures.
Many high-growth technology companies were too aggressive to hire during the COVID-19 pandemic to meet the unprecedented demand for digital goods and services. Instead of hiring contract workers for more flexibility in managing their workforce, companies focused on hiring full-time workers to inflate salaries and compensation packages. In Singapore, Internet company Sea aggressively recruited an engineer by offering twice his salary compared to competitors. At the end of 2021, Sea had 67,300 employees, a 99.1% increase from 2020.
A wave of layoffs has begun in Southeast Asia. In Singapore, home to his 80 of the world’s top 100 tech companies, job openings in the tech sector fell from 9,200 in July-August 2021 to 8,850 in April-May 2022. Did. The expanding gig economy.
GoTo, the merger of ride-hailing company Gojek and e-commerce company Tokopedia, has announced that it will lay off 12% of its workforce, or 1,300 people, in November 2022. GoTo’s layoffs, which caused a loss of US$1.29 billion in the first nine months of 2022, were necessary to support long-term sustainability.
Gaming, e-commerce and financial services platform Sea will cut 7,000 employees in the second half of 2022, or 10% of its total workforce. Startups like Indonesia’s Lummo and his LinkAja, Singapore’s Crypto.com and Malaysian tech unicorn Carsome have similarly scaled back their regional workforce. Big companies like Amazon, Meta and Shopify have also started laying off workers in Southeast Asia.
Many start-ups are wary of scaling rapidly given the uncertainty of the global economy. Big tech companies expanded rapidly during the pandemic in response to changes in consumer behavior caused by lockdowns and the rise of remote work. As consumer lifestyles return to pre-pandemic mode, consumer behavior shifts from online shopping to in-person shopping and travel. Concerns about rising inflation are also curbing consumer buying sentiment.
In 2022, the rising cost of capital has forced companies to pursue sustainable growth rather than “burn cash” to gain market share. Businesses, especially smaller ones, are finding it harder to secure capital as interest rates rise. As a global recession looms, supply chain disruptions continue, and inflation accelerates, tech companies will become increasingly dependent on funding to “survive.” If the tech industry can reduce its reliance on loans, businesses will need to consolidate resources to rebuild and build a workforce that is more adaptable to changing consumer preferences.
Layoffs are likely to continue through 2023, and possibly 2024, and tech companies are still losing money. In Singapore, eight of his ten employees laid off were in non-technical roles, including sales, marketing and corporate functions. In contrast, workers in the information and communications (I&C) sector were able to secure employment in other sectors such as financial services. Job openings in the I&C sector continue to grow from 11,100 in December 2021 to 12,100 in June 2022.
One silver lining is that some startups and technology companies are expanding their I&C services. So there is an opportunity to attract and retain technology talent that was previously unavailable. Local recruiters are also seeing an increase in applications from former employees of major technology companies such as Meta, Twitter and Amazon in areas such as product development, data analytics, software engineering and HR technology.
The long-term impact of market volatility on big tech companies is limited for several reasons. Demand for technical jobs and talent will continue to outstrip supply as the region’s economy becomes more digital. Emerging technology markets such as Vietnam are reporting significant increases in employment as companies seek to diversify their operating locations to make global value chains more resilient.
Southeast Asia’s internet economy will reach US$363 billion by 2025, surpassing the previous forecast of US$300 billion, increasing demand for skilled workers in the region. This growth also provides more business opportunities and puts pressure on non-tech companies to mirror developments in the tech sector.
Despite losses and layoffs, investors remain interested in tech companies with sustainable business models. A venture capital fund focused on Southeast Asia, he raised US$900 million in 2022. This is the same as his 2021 fundraising amount. Inflation is expected to moderate in the second half of 2023, and digitalisation will remain a key driver of a strong economic recovery.
Dr. Faizal Bin Yahya is a Senior Fellow in the Governance and Economics Division at the National University of Singapore Policy Institute.