A few well-known firms have started the year by “rightsizing” — laying off staff in Singapore and abroad — even as the market is touted to perform better with rates set to fall.
Companies cited the typical concerns about profitability, but analysts call it a sign that firms are pre-emptively cutting costs in anticipation of a potential recession.
Lazada’s shock layoffs across the region, which began in its Singapore office on Jan 3, may be top of mind for many Singaporeans, but US tech names like Amazon, Google and Unity also started the year by letting go of staff worldwide.
The latter, which makes software used by video game creators, had replaced its CEO in October 2023 and later announced the closure of 14 offices, including its Guoco Tower address in Singapore.
Layoffs.fyi, a website that has tracked tech sector layoffs throughout the pandemic, counted 7,528 retrenchments across 51 tech companies between Jan 1 and 17.
See also: Lessons from Lazada for Singapore's employers and employees
While exact figures are unavailable for some firms, Unity, Google and Indian e-commerce giant Flipkart have ordered the biggest cuts year-to-date, with at least a thousand or more staff affected at each company.
Some Singaporeans are among those affected. The CEO of Amazon’s Twitch livestreaming site announced in a Jan 10 blog-post that some 500 workers, or roughly 35% of staff, would be axed.
Affected workers in the US, Canada, Brazil, Mexico and Singapore received an email about their retrenchment minutes after CEO Dan Clancy’s post went live.
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Amazon also cut hundreds of jobs in its Prime Video and Amazon MGM Studios division. The company has called time on original content from Southeast Asia, with its remaining staff in Singapore moving to a “leaner local operating model” that will have them work on regional licensing instead.
Over at Google’s Singapore office, staff have not received any internal memo about layoffs.
Google’s appointed agency in Singapore declined to confirm the exact number of employees affected here, instead repeating a statement that the tech company is “responsibly investing” in its “biggest priorities” and the “significant opportunities ahead”.
The statement said Google “made changes to become more efficient and work better” throughout 2H2023, without offering further details. “Some teams are continuing to make these kinds of organisational changes, which include some role eliminations globally,” it said.
Google, which trades under parent company Alphabet in the US, announced cuts across its Voice Assistant, Pixel, Nest and Fitbit teams on Jan 10. A week later, Google confirmed further cuts, this time to its advertising sales team. The company has yet to put a number to this latest round in its global retrenchment exercise.
These job cuts — largely by US tech companies — occurred even amid relatively healthy employment figures in the US last year. In December 2023, the US economy added 216,000 jobs, more than expected.
Here in Singapore, however, the cuts added to mounting retrenchments, with 3,200 jobs eliminated in 2Q2023 and another 4,110 in 3Q2023. According to the Ministry of Manpower, the cuts were mainly from the wholesale trade sector. Cuts in other sectors in 3Q2023 were broadly similar to the preceding quarter.
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“Retrenchments were primarily due to reorganisation or restructuring,” reads the ministry’s 3Q2023 labour market report. “However, given the subdued external demand and cost pressures, more of the retrenchments were due to concerns of a recession, poor business/business failure or high costs.”
AI not entirely at fault
Some reports have cited the companies’ boilerplate that AI is replacing jobs at tech companies, and perhaps this is true in some cases.
Language-learning app Duolingo, for example, laid off around 10% of its contracted translators in early January, having replaced them with AI. In May 2023, IBM’s CEO announced plans to pause hiring for about 7,800 positions that could be replaced by AI over five years.
While the transformative impact of automation and AI on the job landscape is undeniable, the current layoffs are more likely a response to immediate economic pressures than a direct result of AI replacing jobs, says Dr Samer Elhajjar, senior lecturer at the NUS Business School’s marketing department. “AI displacement is a gradual process, with its full effects yet to be realised.”
Global economic tensions and instability, coupled with the aftermath of pandemic-era hiring practices, play a “more significant role” in these layoff decisions, adds Elhajjar. “Tech companies might be pre-emptively cutting costs in anticipation of a potential recession. Though not yet confirmed, economic conditions are tightening, prompting companies to prepare for a downturn.”
There has been a shift in mindsets, says Elhajjar, from rapid expansion during the pandemic to a more measured and efficient approach. In the meantime, layoffs can be seen as a quick way to reduce costs and boost short-term financial performance.
“There is a notable shift in high-tech companies prioritising efficiency over sheer growth,” he adds. “The emphasis on streamlining operations and becoming more agile and cost-effective is a driving force behind these workforce adjustments.”
Nevertheless, Singapore’s labour market should continue to sport a strong tech focus, with AI an “unmissable topic” across all industries, says Lewis Ng, COO for Asia at online employment marketplace Seek.
Ng points to a GovTech announcement in May 2023 stating that the Singapore government will spend an estimated $3.3 billion on info-communications technology (ICT) in FY2023 ending March this year. In total, the government has invested some $16 billion in ICT over the past five years.
“In markets like Singapore, we are anticipating hiring confidence to be high in the employment market in the early half of 2024,” says Ng. “One in two employers we surveyed locally will continue to actively hire in the first half of the year. This reflects a cautiously optimistic perspective.”
There are no foolproof ways to predict impending layoffs, says Ng. “For instance, a company freezing hiring or promotions may be doing so to control costs for the very purpose of preventing layoffs. At the same time, even financially healthy companies may make strategic decisions like closing down a business unit that no longer aligns with the company’s direction, leading to layoffs.”
Employees should stay vigilant and informed, and focus on things within their control, Ng adds. “This could include maintaining a strong professional network, continuously investing in skills [and] being proactive in financial planning to ensure an emergency fund is in place if the worst-case scenario does happen.”
Ng says: “Employees’ focus shouldn’t be on predicting layoffs, but to position themselves to navigate challenges effectively, regardless of the company’s broader circumstances.”
Real estate impact
Aside from workers and investors of the US tech giants, real estate owners and managers are also closely watching the financial health of their tenants.
Google, for one, operates its regional headquarters out of Singapore, is a major tenant at Mapletree Business City and has also taken up space at the nearby Alexandra Technopark.
The former is in Mapletree Pan Asia Commercial Trust N2IU ’s (MPACT) portfolio and the latter is Frasers Logistics & Commercial Trust BUOU ’s (FLCT) sole property in Singapore.
Google Asia Pacific represented 4.3% of FLCT’s gross rental income (GRI) for September 2023. Meanwhile, the tenant represented 5.9% of MPACT’s GRI as of March 31, 2023.
Google’s regional headquarters here may suffer from ample shadow space — square footage leased but not used by the tenant.
In June 2019, Google Asia Pacific signed a five-year lease term at Alexandra Technopark, as its office in the neighbouring Mapletree Business City II (MBC II) was full.
Starting 1Q2020, Google’s lease for 344,000 sq ft at Alexandra Technopark amounted to 33% of the total net lettable area of the business park.
However, Google did not move in. As reported by EdgeProp Singapore, Google had yet to occupy the renovated premises even in December 2022.
In February 2023, FLCT announced Google would give up “a portion” of its space starting Feb 20, 2024. According to FLCT, the space constitutes 1.7% of the REIT’s GRI for December 2022.
Google still occupies 680,000 sq ft of office space at MBC II. When contacted, the company declined to comment via its agency about its office leases, including its plans for the remaining space at Alexandra Technopark after Feb 20.
Amazon, meanwhile, unveiled its 100,000 sq ft corporate office at Asia Square Tower 1 in October 2021.
Sovereign wealth fund Qatar Investment Authority acquired the building from BlackRock in June 2016 for some US$2.45 billion. CapitaLand Commercial Trust, now CapitaLand Integrated Commercial Trust C38U , acquired Asia Square Tower 2 from BlackRock in September 2017 for some US$2.09 billion.
Amazon has also signed up for 369,000 sq ft of premium Grade-A office space at the upcoming IOI Central Boulevard Towers.
The new commercial complex at 2 Central Boulevard will obtain its temporary occupation permit in 1Q2024. Developed by Bursa Malaysia-listed IOI Properties Group, it will boast two office blocks and a seven-storey retail podium when completed.
Local investors may be able to share in the new property’s gains. IOI Properties’ CEO Lee Yeow Seng says he might launch a Singapore-listed office REIT, including the group’s share of South Beach Tower, a joint venture with City Developments Ltd (CDL).
If CDL wants to put its share in the REIT, that would be a bonus, but IOI Properties can go ahead alone, says Lee in an exclusive interview with The Edge Singapore in October 2023. “It is about time we unlock value for our shareholders.”
Infographic: Labour market survey, manpower reserach and statistics department, Ministry of Manpower
Photos: Samuel Isaac Chua/The Edge Singapore, NUS Business School, Seek
Read more about how The Edge Singapore broke the news of layoffs at Lazada:
- The good old e-commerce days are gone
- What's gone wrong with e-commerce? A look at Alibaba's Lazada, TikTok Shop and PDD's Temu
- Lessons from Lazada for Singapore's employers and employees
- MOM notes 'good progress' in Jan 5 talks between Lazada Singapore and union
- Lazada lets go of C-suites; ex-staff in five of Lazada's six markets sharing CVs online
- Alibaba's regional online shopping unit Lazada marks new year with layoffs in Singapore
