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What is behind layoffs in the tech industry?

 February 6, 2024 at 12:36 PM PST

S1: Welcome in San Diego , it's Jade Hindman. The tech industry has seen thousands of layoffs and many more to come. We'll talk about what San Diego can expect and how it's impacting the industry. You're listening to Kpbs Midday Edition , where we connect our communities through conversation. Welcome back to Midday Edition. I'm Jade Hindman. 2023 proved to be a difficult year for the tech industry , which saw more than 260,000 job losses. San Diego's tech workers weren't spared from that trend. Last fall , local tech giant Qualcomm announced more than 1000 layoffs in San Diego. Carlsbad based Viasat saw major layoffs before the year end , cutting 10% of its workforce. Now , one month into 2024 and the tech industry has seen 25,000 more job cuts. I mean , just yesterday , social media giant snap announced its plans to layoff 10% of its workers later this year , which amounts to about 500 employees. And while the new year hasn't stopped the trend , it may be shifting to a new phase. New York Times tech reporter Mike Isaac spoke with Midday Edition producer Andrew Bracken about what he's been seeing in the tech industry as of late.

S2: So you say this wave of tech layoffs , it began in 2023 , but it's kind of taking on a new phase this year. What did we see last year and what shift are you seeing today ? Yeah.

S3: So , you know , once the , uh , economy sort of started taking a dip , especially in the digital advertising market , I would say about 18 months ago , the big companies like meta , Google and Microsoft and all the folks who essentially really profited from lockdowns during pandemic when people were using their computers in record amounts , uh , they saw dips in their revenue. And so in order to sort of compensate for that and deal with , you know , profits sort of shrinking , uh , they did massive layoffs over the over 2022 and 2023 , the ones we're seeing towards the end of last year and , and all throughout January are are pretty different. I would say there's the big companies which are doing sort of ongoing cuts that are more small and strategic , but can still lay off entire departments of people. And then there's , you know , the medium sized companies that are pre pre IPO haven't gone public yet. We're trying to sort of shore up their finances uh before they decide to go public. And then honestly there's the the smaller tech startups out there that may have found it easy to raise money a few years ago , but now are having a much more difficult time and are just trying to stay afloat.

S2: When did you start noticing this as a trend ? You mentioned this kind of started , you know , in 2022. I mean , I think when it came on , a lot of people's radar may have been when Elon Musk , you know , after he bought Twitter , there was like a lot of news there where he , you know , just cut somewhat like 80% of their workforce.

S3: You're exactly right. I think the , you know , one of the real hallmarks of tech , at least since the dotcom era and then later the recession , was this sort of idea that you always have to be hiring , you always sort of have to be competing for the top talent across the industry. And so just to your point , it's really striking when you see , uh , waves of layoffs at some of the largest tech companies in the world , it definitely started becoming more apparent towards the end of 2023 , I would say , particularly because you started you started seeing venture capital investment going to to one area , which is artificial intelligence , and then companies like Meta and Google really trying to , uh , trim a lot of their expenses that they've had over the years. You know , if they're not making profits as quickly , if their revenue curves aren't , like growing as quickly , their way of of sort of keeping that momentum is by reducing their expenses. And those big expenses are headcount and um , and other sort of like budgets that they might have once never even worried about in the past. I talked to a person inside of meta the other day who said it was jarring for them to be sort of told no on some traveling and dinner expenses , where in the past they could just sort of dine out on their credit card whenever they wanted to.

S2: And you mentioned AI there.

S3: Uh , I think we are in kind of the early days. Everyone is really excited in terms of technologists are really embracing it , just in terms of , okay , this is the next big wave of computing. You know , we haven't seen innovation like this since the iPhone or the internet. And they a number of folks believe that this is going. To be transformational. I still think that we're in very early innings , just in terms of what that will look like , whether these startups that are getting funded and formed actually provide anything useful. There's a ton of companies just being created every day where venture capitalists are funding them , but the products may not , you know , may just be a novelty , may not be something people care about , may not be as sustainable business. And I think we're in the experimentation phase right now. Now , where I imagine people need to start worrying is perhaps , um , in the next year or a few years from now when the real products , uh , that have sustainable businesses and that people embrace and find useful , start sticking around and catching on. And then then the executives at these companies who , you know , are still looking for ways to bring their costs down , then that's when they start looking at jobs and seeing which ones are crucial versus which ones aren't. So I , I mean , I , I think that folks are still sort of finding their way around what AI means for each of their industries. You know , whether that's Adobe's new Photoshop tools in AI that could make make it easier for people to do things that only graphic designers could do before , or , you know , automated customer service robots that could replace people in call centers or even the sort of rudimentary robots that they have right now that sort of auto respond to people. I really think it's early , early days and folks will figure out what actually work for their company , and that's when we should probably start worrying.

S2: And you're right , though. I mean , there is so much change. It seems like every week you hear about some new use case for ChatGPT or some way to kind of hack some task or something. Totally , you know , here in San Diego , kind of related to the artificial intelligence movement you mentioned , but also related to the layoffs. Apple here in San Diego recently announced it's restructuring. An AI team that's based here in San Diego kind of affects over 100 workers. And basically they're telling them , you know , they're restructuring , moving all the AI team back to Austin , Texas and saying , you know , you need to move from San Diego and move to Texas.

S3: Um , one company meta actually has been recently sort of trying to reduce the number of what are called technical program managers inside of Instagram , which meta owns. And what they tell employees when they're affected by this is , is , you know , you're welcome to apply to another job inside of the company and you can try for it. Uh , and then you'll be fine. But the subtext there is if you don't get those other jobs , then best of luck. You'd no longer have a job. So I think it is their way of being a little more strategic , a little more low key , and getting fewer headlines whenever they want to reduce the number of people that work there , but without , um , without really getting the sort of morale hits and gnarly , uh , blowback that , uh , a wave of layoffs would , would bring with it. And I think that sort of thing is , is spreading. I think that's happening at Google as well. They're doing sort of ongoing layoffs that the CEO said essentially didn't have an end in sight. Um , and because Google is so large , you know , like more than 100,000 employees across the world , they probably have more room to do that. But it really does have an effect on workers and the workforce over time. And just , you know , the the looming suspicion that you're going to get cut any day when you don't know what your boss does want or what teams are vital to them anymore.

S2: Well , that no end in sight. You mentioned. I mean , that definitely sounds foreboding. Um , yeah. You know , with all these layoffs in the in that industry and the tech industry that I imagine means there's a lot more competition for jobs.

S3: I have a friend who I just saw the other day who got laid off from his job of probably ten , 15 years , and he sort of shocked that the job market right now , I think probably looking at different types of jobs and maybe outside of the traditional big , uh , what are called Faang companies Facebook , uh , Apple , Amazon , Google. I think Netflix is in there too. There there are. Believe it or not , there are other types of tech companies out there. And so you don't have to work at one of the giants. But I think. Targeting industries that are doing well right now. You know , the nvidias of the world , which produce hardware that powers the AI programs that people are developing right now. They're they're they have a more than trillion dollar market cap. And our , uh , you know , sort of conquering the sector of , uh , uh , what are called GPUs or the chips that run AI algorithms. So I think they're hiring , uh , pretty aggressively. They're all trying to get sort of top AI talent and perhaps looking at looking at different types of companies than one might have before is where you might have opportunity , but just it is a very different economic environment. I'm just hearing it from a lot of folks who used to who used to get a ton of , uh , LinkedIn messages for recruiters every day. And those are starting to slow down. Yeah.

S2: Yeah. And and like you mentioned there , I mean , there are some sectors in tech that have been impacted more than others. Uh , I'm thinking the video game industry has been particularly hit hard. Um , I think Microsoft announced nearly 2000 job cuts in January this year , but many other studios have announced cutbacks.

S4:

S3: The games industry have been has been rocked by layoffs big time. There's a company called unity , which makes a bunch of the sort of like underlying software for many games. They're basically sort of imploding. Um , and their CEO was essentially , uh , shown the door , as you said , Microsoft , Activision , uh , is making cuts. They're smaller studios like Riot Games and Eidos. And I was curious about that as well. I think gaming , what I've sort of gleaned is the gaming industry is pretty cyclical , and it's sort of rising and falling. You know , like game development tends to happen in big sprints. And when a huge game has come out , then , uh , or is about to come out , a number of folks are just working all nighters and they throw as many people as they can at it. And then after those moments , it just starts to quiet down. They don't need as many people on staff , and we had a number of blockbuster releases last year , which aren't really happening this year. I would say 2024 is more of a fallow period relative to 2023 , so it's quieting down a little bit. But I think the other thing is , you know , gaming was huge when pandemic lockdowns were happening. You know , like everyone was forced inside to use their devices , including the games that they maybe didn't have time to play before. And the industry was booming. And there is no way they have been able to get back to those sort of pandemic era highs and the types of revenue and usage that they were getting at that point , and I don't think they fully recovered from that and are trying to figure out new ways to improve the business , but it's just not the same. So gaming is no. The gaming industry is no different than a number of these companies , which say they really over hire during boom times and are now just sort of having to make drastic cuts as things , uh , wane in terms of usage.

S2:

S3: One person I spoke to , uh , a venture capitalist , made the very good point that , you know , layoffs give companies cover to do layoffs. So if you , uh , say you're the CEO of a company A , and you see company B doing layoffs and you could , uh , you could trim down your workforce but didn't want to take heat for it. You can do a round of layoffs and say , hey , don't blame me. It's the industry. It's not our company. Everyone's doing layoffs , and it makes it much easier for you to do it. You still have to go through the short term pain , um , that everyone sort of undergoes as everyone is , you know , uneasy and teams are sort of decimated and morale plummets. But I think a lot of the CEOs think that it's it's short term pain and long term gain. And so I imagine it will probably continue at least for the next few months. And then we need to keep an eye on on a bunch of the , you know , the larger economy , whether that's interest rates coming back down or , uh , digital advertising improving or people deciding they do want to play games again , there's a lot of , um , really different factors that go into it. But short answer is , uh , I think it's I think we're not out of the woods yet.

S2: And of course , it's always I don't know , it's kind of , um , important to sort of keep in mind. I mean , we're talking about , you know , people's jobs , but they're people with families. That's right. You know , and and it's always a very stressful situation to go. Through layoffs , so hopefully they won't continue too much longer.

S3: Oh , I totally agree. And I think that's a really important , uh , thing to , to look at is like how this stuff really affects people who have mortgages or families to support or kids to put through college or whatever , you know , like that. And that's the sort of , um , thing that gets lost a lot. Sure , these companies may be making record profits or their stock is soaring , but , you know , at the cost of a lot of workers who are suddenly back on the job market.

S1: That was New York Times tech reporter Mike Isaac speaking with Midday Edition producer Andrew Bracken. You're listening to Kpbs Midday Edition. As we just heard , the outlook for tech workers is gloomy. With 250,000 industry layoffs over the past year and a half. So how are tech layoffs impacting San Diego , specifically ? Well , Natalie Rocha covers business for the San Diego Union-Tribune , and she joins us with the answer to that question. Natalie , welcome to midday.

S5: Thank you so much for having me.

S1: Glad you're here. So looking over your recent stories , it seems we really can't talk about business without talking about layoffs. Tell me about that. Yeah.

S5: Yeah. So right now , in the past year , really , we've seen a lot of layoffs in the tech industry. And locally. That includes biotech as well , where a lot of companies are trying to , as they say , rightsize their workforce because there was a point in the pandemic when a lot of companies just really grew rapidly to kind of support either a demand for their technology or , you know , Covid 19 testing , whatever it may be. They really ramped up their workforces , and now they're kind of scaling them back.

S1: And tell me about rightsizing. I mean , what is that ? Yeah.

S5: So it's a term I've heard a lot of people use because 2021 in particular , going back during the pandemic , interest rates were lower than they are now. And so money was cheaper , if you will. And so investors were kind of throwing money at tech startups or just growing companies with promising technology that , again , enabled these companies to grow their workforce to meet that demand or just , again , kind of make use of that cash. What they're seeing now is rightsizing and kind of going back to what they actually need to kind of operate on a , you know , tighter budget.

S1:

S5: Back in October we had a quite a big layoff there where it was just over a thousand employees. And that was in an effort to cut costs. After part of the issue there was they had some slowing smartphone sales globally. Another example just last week was Illumina had a layoff about 111 workers. And that one , again is just coming off of their effort to cut costs. Even last year , where they had a couple rounds of layoffs , kind of in a leadership transition and coming off a deal that didn't quite work out. And then another one that sticks out in the biotech sector is CU health , where they cut about 30% of their workforce. Um , and that one kind of goes back to a company that really grew rapidly during the pandemic. And when there was a high demand for Covid 19 tests that they were making. But since that demand's kind of declined , they've really scaled back their workforce and what they're producing.

S1:

S5: I think they really look to the diversity of companies that we have here and how they are able to kind of spread out as far as the impact of these layoffs are. So San Diego has a lot of biotech , has a lot of tech , and also some consumer startups in the area. So it's really , you know , some of them are more optimistic , I guess , about how San Diego will be able to bounce back compared to some of these other major metros that have taken a hit who are primarily focused in tech.

S1: Natalie Rocha is a business reporter for the San Diego Union Tribune. Natalie , thank you very much for joining us today.

S5: Thank you so much for having me.

Chip-maker Qualcomm said Thursday it is buying NXP Semiconductors in a deal valued at approximately $38.1 billion.
Gregory Bull
/
AP
Chip-maker Qualcomm said Thursday it is buying NXP Semiconductors in a deal valued at approximately $38.1 billion.

The year 2023 proved to be a difficult year for the tech industry, which saw over 260,000 job losses. San Diego’s tech workers have not been spared from the trend. Last fall, local tech giant Qualcomm announced more than 1,000 layoffs in San Diego. Carlsbad-based Viasat also announced major layoffs last year, cutting 10% of its workforce.

Meanwhile, the layoff trend has continued into 2024, resulting in over 25,000 layoffs so far. On Monday, California social media company Snap announced upcoming layoffs of 10% of its workforce, impacting over 500 workers.

On Midday Edition Monday, we hear about some of the reasons behind the cutbacks in San Diego and across the country.

Guests: