Massive job cuts signal turning point for information technology sector

Editorial

12:58 JST, January 12, 2023

U.S. tech giants have announced a series of drastic workforce reductions. It can be said that the management of U.S. information technology companies, which have been growing rapidly through online shopping, social media and other services, has reached a major turning point.

Amazon.com Inc. has said that it will cut more than 18,000 jobs, the largest layoff in its history. Amazon had expanded its workforce, mainly in the logistics division, as demand increased from people staying home due to the COVID-19 pandemic.

The major job cuts this time will mainly target the device division, which engages in speakers that utilize artificial intelligence, the book division and the retail division.

Among U.S. tech companies, Facebook Inc. parent Meta Platforms Inc. announced in November that it would lay off more than 11,000 employees. Enterprise-oriented software maker Salesforce Inc. also said it would cut about 8,000 jobs.

These companies had expected their IT business to continue booming due to reasons such as telecommuting taking root. The full resumption of economic activities, however, has thrown their estimates off course. This is likely why they are being driven to cut jobs on such a large scale.

In the July-September 2022 quarterly financial results, four of the five major U.S. tech companies — Meta, Amazon, Google LLC parent Alphabet Inc. and Microsoft Corp. — posted declines in net profit.

This was due to a drop in advertising and other revenues amid concerns of a slowdown in the U.S. economy. Increased labor costs also put pressure on their earnings. The stock prices of these companies, which had been at high levels due to expectations for growth, have fallen sharply.

These companies have built monopolistic or oligopolistic markets through their online shopping, social media, search and other services, so their moves have a significant impact on the markets. In the tech sector, a stern eye has been cast on companies’ handling of data and personal information. They must work to dispel such concerns even as they reduce their workforce.

One cause for concern is Twitter Inc. Elon Musk, who acquired the company and took over as chief executive officer, has reportedly cut more than half the staff in an attempt to improve Twitter’s flagging profits.

He also appeared to have reduced the number of people who were in charge of monitoring tweets, which has led to a sharp increase in hate speech and false information. Twitter is infrastructure used by prominent figures, including politicians, to disseminate information, so monitoring such posts appropriately is essential.

Musk expressed his intention to resign his position as CEO, but a successor has not yet been decided. A new management structure should be established as soon as possible to bring the chaos under control.

Major job cuts by U.S. tech companies may at the same time provide an opportunity for talented engineers and other personnel to do great work at other companies. In addition, there will be room for Japanese companies with operations around the world to acquire such human resources and create new fields of business.

(From The Yomiuri Shimbun, Jan. 12, 2023)