Analysts Cite Consolidation and Recession Concerns Amid Global Layoffs
As tech companies adjust to shifting market dynamics and prepare for a potential recession, many have resorted to layoffs to consolidate their operations. This trend, particularly prominent in the United States, has led to the retrenchment of over 35,000 workers in the past six months, as reported by Layoffs.fyi, a website tracking such job cuts. However, these layoffs are small in comparison to the overall workforce in the IT sector, according to Associate Professor Damien Joseph from the Nanyang Business School.
In the U.S., notable tech giants like Coinbase, Peloton, Netflix, and Paypal have reduced their staff this year. In Singapore, Shopee has let go of workers from its food delivery and online payment teams in Southeast Asia and other regions such as Mexico, Argentina, and Chile. Shopee’s parent company, Sea Ltd, once the most valuable firm in Southeast Asia, has suffered a sharp decline in valuation following a selloff in U.S. tech stocks. The company has since withdrawn from markets in India, France, and Spain.
Other companies affected by the current economic climate include Tesla, which laid off its Singapore country manager, and Crypto.com, which cut 260 employees amid a slump in the cryptocurrency market. Robot investor StashAway also made the difficult decision to lay off 31 employees across five markets, with a spokesperson attributing the cuts to economic uncertainty and fears of a global recession.
According to Assoc Prof Joseph, many companies expanded rapidly during the pandemic but are now scaling back in anticipation of an economic slowdown. The tightening of liquidity in Asia and more challenging access to venture capital funding has led to start-ups closing down. The question remains whether the local operations of global firms, like those in Singapore, are valuable enough to sustain in a leaner environment.
Yorlin Ng, COO of Momentum Works, noted that while no one knows how long the current downturn will last, companies must adapt to the changing market landscape. During the boom period, many raced for growth, but now, some firms are cutting back, while others are adjusting to secure their future. Companies with significant cash reserves, such as Grab and Sea Group, are better positioned to weather the storm, while early-stage tech firms are less impacted, thanks to ample venture capital funding in the region.
The real challenge lies with growth-stage companies that have yet to achieve profitability and need to make significant adjustments. Despite the layoffs, analysts agree that the demand for IT professionals remains strong, with 9,000 permanent IT job listings in Singapore as of the latest report. Software developers, business analysts, data scientists, and project managers are still in high demand.
Ng pointed out that prudent companies with solid financial reserves might use the current situation as an opportunity to hire top IT talent, which has been in short supply. While layoffs are occurring, the overall impact on the job market is limited, and the departure of experienced professionals could lead to new business ventures or innovation in other sectors.
