After 2 Years, US Big Tech Holding Champagne Glasses Faces Surgery Knife Due to COVID-19

[Asia Economy Reporter Yujin Cho] Big tech companies hit by the U.S. Federal Reserve's (Fed) aggressive tightening measures are tightening the reins on workforce reductions and cost-cutting. Riding the wave of the COVID-19 pandemic, these big tech firms had been experiencing unprecedented growth and record-breaking performance, but now face growth stagnation due to aggressive tightening policies and inflation impacts, prompting them to seek self-help measures.

Following Apple, the world's largest company by market capitalization, major big tech firms such as Meta, Google, and Microsoft (MS) have recently begun hiring freezes and cost reduction efforts, according to major foreign media reports. On the 21st (local time), The Wall Street Journal (WSJ), citing sources familiar with the matter, reported that social media giant Meta plans to reduce costs by at least 10% over the coming months through workforce cuts as it faces growth stagnation and intensified competition.

Current and former managerial employees explained that Meta is employing methods such as reorganizing departments to achieve its workforce reduction targets.

The company offers employees targeted by this organizational restructuring opportunities to be reassigned to other departments, but by limiting the timing and scope, it expects that workforce redeployment will effectively result in a 'net reduction' in headcount. WSJ explained that it has been Meta's long-standing practice that employees who fail to find a new role internally within 30 days face termination of their employment contracts.

Meta spokesperson Tracy Clayton said, "As CEO Mark Zuckerberg stated during a Q&A session with employees in June, the company will need to reallocate resources to priorities."

According to the WSJ report, CEO Zuckerberg declared during a Q&A session with employees at the end of June that employees who do not meet the company's aggressive performance goals would be weeded out, and he instructed to identify and remove low performers.

Google is also encouraging reductions through department redeployments as part of its cost-cutting measures. Last week, Google designated about half of the approximately 100 employees in its internal startup incubator, 'Area 120,' for transfer and ordered them to find other jobs within the company within 90 days.

Google provides 60 days for laid-off employees to find new roles within the company, but an internal employee said that Area 120 employees face greater time constraints due to frequent project cancellations.

Earlier, Apple also decided to reduce hiring and spending amid recession concerns. It plans to cut next year's budgets by department compared to previous levels and induce 'natural attrition' by not filling some vacant positions. As part of restructuring, Apple laid off 100 recruiters last month.

After announcing its first-quarter earnings, Apple forecasted during a conference call that "(due to supply constraints of components such as semiconductors) there will be a revenue impact of $4 billion to $8 billion in the second quarter of this year." At that time, Apple CEO Tim Cook expressed concern that "the effects of inflation are spreading to more and more areas."

MS also conducted layoffs in July, reducing less than 1% of total employees in each business unit, citing 'strategic realignment.'

From 2020 through the recent two years, U.S. big tech companies including Apple experienced soaring performance riding the COVID-19 pandemic. The surge in online advertising demand due to the expansion of non-face-to-face consumption significantly boosted the core business revenues of big tech firms. As their size rapidly expanded, big tech companies greatly increased hiring, but with the end of COVID-19, government policies turning to tightening, and worsening economic downturn, the market cooled rapidly, prompting them to slow down.

WSJ forecasts that this round of layoffs will be the prelude to a harsher wave of restructuring, and Bloomberg reports that market anxiety is growing ahead of the big tech companies' full-scale second-quarter earnings season.

The U.S. Consumer Price Index (CPI) for August rose 8.3% year-over-year, exceeding market expectations of 8.0%. The core CPI, which excludes volatile food and energy prices, also increased 6.3% year-over-year and 0.6% month-over-month, surpassing market forecasts.

In response, the Federal Reserve (Fed) took a 'third consecutive giant step' (a 0.75 percentage point increase in the benchmark interest rate) on the 21st to curb inflation. Since entering the rate hike cycle in March this year, the Fed has raised rates by a total of 3.0 percentage points, including the last three giant steps.

Fed Chair Jerome Powell confirmed the additional tightening policy, stating, "We will not consider cutting rates until we are very confident that inflation is moving down toward the 2% target," and that "restrictive policies will continue."

This content was produced with the assistance of AI translation services.