Technology

2022: The year that tech bubble burst

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Tesla billionaire Elon Musk slashed nearly half of Twitter’s global workforce in 2022 just days after taking over the social networking site. FILE PHOTO | AFP

The tech industry was one of the worst hit in 2022, making it the year that put brakes on a sector that had witnessed roaring growth for decades.

The Covid-19 pandemic helped cushion the sector as consumers went online and organisations grew online presence, but it was not enough to reverse the downturn.

As the pandemic softens, tech firms seem to be seeing the last of their short-lived season of glory as even the revered Silicon Valley’s most powerful and established companies send disturbing signals of tough days.

The shocks of the pandemic are slowly catching up with all sectors thanks to inflation impacts and rising lending rates that have curtailed consumer spending.

In October this year, American tech giant Google reported a sharp decline in profits just weeks after social media companies such as Meta indicated their advertising sales had dropped.

Microsoft, which is touted as the tech industry’s most solid performer, had predicted a slowdown towards the end of the year.

Mass job layoffs from global tech giants have been making headlines during the second half of the year with pointers showing the industry woes are still far from over.

Last month, Tesla billionaire Elon Musk slashed nearly half of Twitter’s global workforce just days after taking over the social networking site with Meta and Amazon following suit with staff layoffs that saw thousands lose livelihoods days before the Christmas holidays.

Read: Twitter layoffs start, company tells staff in an email

During the month, Meta, which owns popular networking platforms Facebook, WhatsApp and Instagram, fired 11,000 workers, affecting 13 percent of their entire staff.

Read: Facebook owner fires 11,000 staff, extends hiring freeze

The giant said in October its profit for the most recent quarter declined by more than 50 percent compared to a similar period a year ago.

Overall, more than 900 tech companies collectively fired 150,000 employees globally this year surpassing the great recession levels of 2008-2009.

Closer home, tech start-ups have not been spared either. A Business Daily analysis in October showed that at least six promising tech newbies had collapsed in quick succession, most of them citing difficult market conditions and funding hitches.

The six included Kune Foods, Notify Logistics, WeFarm, BRCK, Sendy and Sky-Garden, which went under within just four months to October.

But what exactly is ailing the tech sector?

Anza Now CEO Bobby Gadhia, whose initial tech firm PC World Limited collapsed in 2016 after being in the game for 21 years, faults overzealous hiring during periods of rapid growth, the effects of the Covid-19 pandemic as well as copycat culture.

“When things are going well, companies are optimistic and tend to hire more people in efforts to capitalise on future opportunities. In this particular case, a lot of those future opportunities received a hit when the pandemic struck and firms had to go back to the drawing board,” says Mr Gadhia.

“A key cause of the mass layoffs is the copycat effect. When one company starts firing and downsizing, others follow suit. For ‘social acceptance’, firms tend to do it when everyone is doing it so that it doesn’t look abnormal or erode public confidence,” he adds.

Tech policy expert and founder of Lawyers Hub Linda Bonyo faults regulation in the deployment of capital that puts off angel investors from pumping resources into tech ventures.

“The decision by the US Government to raise lending rates has impacted sources of venture capital fund, which largely focused on growth metrics for start-ups in terms of personnel and customer acquisition without a necessary focus on revenue,” states Bonyo.

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