In this article, we will discuss the tech sector layoffs in the big tech giants in USA. Also, we will look at the impact of this on the Indian IT sector.
Amazon has recently laid off nearly 10,000 of its employees joining the bandwagon of the companies like Meta, Twitter, etc. Meta has laid off nearly 11,000 of its employees. Total is nearly 120k+ layoffs in the tech sector. 2000-01 dot com layoffs were ~107k. Q4 layoffs have just begun. A brutally cold tech winter is coming. Other companies like Apple, Disney have already freezed hiring.
Why Amazon has laid off so many employees?
Amazon’s operating income in Q3FY23 is 2.5 billion dollars, which is half of what it was during the previous year. This is due to high inflation and the recessionary trends in the country. Amazon’s alexa has nearly 5 billion USD losses. Amazon’s prime business is also slowing down and it is still betting on the subscription model. It has also invested 6.5 billion USD in the Indian market but is still not able to generate enough returns. This is due to low margins in electronic products, high competition across various categories from players like Flipkart, Meesho, etc. It has also entered in the food delivery market which is also suffering from losses in the Indian market. Strict e commerce rules by the government, ONDC platform can also be challenging for Amazon. All these factors led to the laying off the employees by Amazon.
Why layoffs across the Tech sector?
Following are the reasons:
- Economic downturn: Russia-Ukraine war, Inflation, recession and rising Interest Rates all have contrinuted to the economic downturn.
- Acknowledging redundancies: During the lockdown the tech sector received an impetus due to which many jobs were created. But they were unware that the slowdown will come so soon and they extra talent which they have hired had to be laid off.
- Cost reduction: Due to slowdown the companies want to reduce the cost. For majority of the tech companies people are their biggest costs hecne, they have reduced their numbers by firing them.
- Muted Q3 results: Q3 results have been muted for the tech industry in USA.
Layoffs in the Indian startups
Funding has reduced due to which they have to reduce the no of employees due to demand slowdown. Ola, Byjus, Unacademy etc all have laid many of their employees.
Impact on the Indian IT sector
The above data is taken from the Naukri hiring Index. With IT sector showing a decline, the metros of Bangalore (-16%), Hyderabad (-12%) and Pune (-11%) showed decline in hiring activity. But there is still no major tech slowdown in India. The management commentary from Indian IT companies during Q2FY23 has been cautiously optimistic. It is important to note that the further degradation of the situation in the USA and Europe over the longer term can have negative impact even on the Indian IT sector. But currently the situation seems normal.
Disclaimer: The information here is provided for reference purposes only and should not be misconstrued as investment advice. Under no circumstances does this information represent are commendation to buy or sell stocks or MF.