The 6 Major Events of a Catastrophic 2022 for Tech.
#3: An unprecedented wave of layoffs.
To say that tech has fallen off its pedestal in 2022 is an understatement. The sector, which until then accumulated billions in advertising revenues and market capitalization, is hit hard by the return of war in the heart of Europe, the economic downturn, inflation ...
From the first social plan at Meta to the incredible takeover of Twitter by Elon Musk, let's take a look at the 6 major events of a catastrophic year 2022 for tech.
1. Growth breakdown for GAFAMs
Back to reality for Silicon Valley. In many ways, 2022 will have been an annus horribilis for entire sectors of tech. Gone are the double-digit growth rates of the past decade, the thousands of new hires, and the easy money. It's the end of the free lunch. Tech now faces the same risks as other sectors.
The year 2022 also marks the end of the paradoxically positive period of COVID-19, when the explosion of time spent online boosted digital advertising and allowed e-commerce to reach new heights.
The crisis is partly cyclical. Like other sectors, tech is affected by the war in Ukraine, inflation, and rising interest rates. Geopolitical and macroeconomic hazards are pushing advertisers to revise their advertising budgets downwards, cutting into the revenues of social networks.
The situation is such that in the spring of 2022, Meta's (ex-Facebook) revenues will drop for the first time since Mark Zuckerberg created the group in 2004. The same trend at YouTube, which is also seeing its advertising revenues fall for the first time. Apple's restrictions on ad targeting have also had an impact.
But the difficulties are also and above all structural. Older social networks, such as Facebook, are losing ground to TikTok, Snap, Twitch, or even BeReal, newer services that are perceived as more innovative. Faced with this, Facebook is trying to make a new start with the metaverse. But this project of a “new immersive Internet” does not convince either internally or investors.
After this difficult year, 2023 could bring a new paradigm for the sector, with a refocus on fundamentals. Tech giants will have to look more for profitability but without sacrificing their growth drivers. This balancing act will be one of the main challenges for the sector in 2023.
2. 3,000 billion in market capitalization gone up in smoke
Not surprisingly, the operational difficulties triggered a stock market storm, reviving the specter of the Internet bubble bursting in 2000. In one year, Amazon's share price is divided by two, Snap by three, and Meta by six! Even Apple is losing ground, with its share price down by almost a third in one year...
However, the Apple brand is protected by a hybrid model, mixing hardware, services, and audiovisual content, with Apple TV+. But investors are still worried about China's zero-COVID strategy, which complicates iPhone production, especially in the Foxconn factory in Zhengzhou, the scene of violent protests in the fall of 2022.
Overall, the six largest American tech groups (Apple, Netflix, Amazon, Microsoft, Meta, and Alphabet) had already lost $3.3 trillion in market capitalization by the end of October 2022. The fall is particularly brutal for Meta. At $312 billion at the end of December 2022, Meta is now worth less on the stock market than traditional economic heavyweights such as Procter & Gamble ($361 billion) or the oil company Chevron ($343 billion).
3. An unprecedented wave of layoffs
The hour is critical and tech giants from San Francisco to Shenzhen must react. Everywhere, layoffs are multiplying. The platforms are forced to implement the first social plans in their history. They who, until now, were recruiting at the four corners of the planet ...
In total, more than 152,000 tech employees were laid off in 2022, all countries combined, according to the aggregator Layoffs.fyi. Snap led the way in the summer of 2022 by announcing a layoff plan affecting 20% of its roughly 6,500 employees. Even the 70 people at Zenly, a French startup bought by Snap in 2017 for $300 million, are affected.
The app with the little ghost must make savings: if it conquers more and more users, its revenues do not grow in the same proportions. In the third quarter, Snap even posted a net loss of $360 million.
A few weeks later, Meta announced that it would lay off 13% of its workforce. In concrete terms, 11,000 employees out of 87,000 will have to leave the group. The news came as a bombshell, and for good reason: Meta had never launched such a social plan.
In a blog post, Mark Zuckerberg calls it “one of the most difficult changes in Meta's history.” But the worst is yet to come. In the fall of 2022, Elon Musk, who just bought Twitter for $44 billion, decides to lay off ... half of the platform's employees. In passing, he says he wants teams ready to be “extremely hardcore,” capable of working long hours at high intensity.
An expression far from the image of Silicon Valley. Later, the billionaire will justify himself by comparing Twitter to a plane without a captain, about to crash. Here again, all teams and almost all countries are concerned.
4. Elon Musk becomes the only master on board at Twitter
It was the surprise of 2022: the purchase of Twitter by Elon Musk. After saying “yes” and then renouncing, the billionaire finally closed the deal in October 2022, no doubt to avoid the long legal battle that was looming between him and Twitter. His goal is to make the social network “the global platform for free speech.” And unleash Twitter's economic potential, by diversifying revenue beyond strict advertising.
Elon Musk's project was not long before coming to fruition.
Donald Trump, blocked by Twitter since the assault on the Capitol, is allowed to make a comeback on the platform. Twitter Blue, the paid version, is relaunched. At the same time, Elon Musk changes the rules of content moderation, which until then had been governed by internal standards. The billionaire boss imposes himself as the chief moderator, making decisions himself, which he sometimes submits to a popular vote, via polls among "the people of Twitter."
But in December 2022, Elon Musk crossed the red line.
His decision to suspend several journalists from Twitter provoked a wave of anger, from the UN to the European Commission. Poking fun at these critics, the billionaire then put his head on the line. In yet another poll, Elon Musk asked users if he should make way for a new boss at Twitter. “Yes” answer 57% of respondents.
Musk complies, announcing that he'll step aside when he finds “someone crazy enough to run Twitter.” But at this point, the billionaire remains in the post, which promises new twists and turns in 2023 ...
5. Cold snap on the chip market
The return to normalcy does not only concern social networks. Microchips, too, are caught up in the economic climate. In 2022, demand for these small components that are essential for a myriad of products was much lower. The year is even expected to end with sales down 4.4% - the first time this has happened in three years, according to WSTS, the global industry statistics body.
After the 26% jump in 2021, this cold shower cuts short the hopes of some manufacturers for a decade of continued growth.
Historically highly cyclical, the market has once again taken a downward dive due to customers who have suffered from the economic slowdown linked to inflation in the US and Europe. For example, smartphone manufacturers have ordered fewer chips due to the slowdown in the mobile market, with sales down 9% through 2022, according to IDC.
But some segments of the chip market continue to enjoy unprecedented demand growth. For example, chips for the automotive world that Franco-Italian STMicroelectronics designs and manufactures.
6. Mega plans for mini chips
However, the decline in demand for semiconductors is not scaring the United States or Europe. The two powers are lining up billions in 2022 to finance new foundries, the factories where chips are produced. The objective is to rebalance the world map of the sector, in the face of Asia, which manufactures 75% of the world's semiconductors.
In the United States, Congress has released a budget of 52 billion dollars to attract the world champions of the sector, such as TSMC, Intel, and others. The same companies are also being courted in Europe, where the Commission has presented a $43 billion plan to quadruple European production by 2030.
Already, Intel has chosen to set up shop in Germany and GlobalFoundries has joined forces with STMicroelectronics near Grenoble in France. Is this enough to stand up to China, with its own $136 billion plan to support the sector? The fight for strategic autonomy in this key sector of the economy is just beginning.