Big techs: how Apple is the exception in mass layoffs – 02/07/2023 – Tech

With an increase in interest rates, world growth will be drastically reduced this year, according to forecasts by international organizations. And many Wall Street companies already know that this will result in reduced sales and profits.

In this scenario, almost all North American technology giants adopted the same strategy: to reduce costs. Microsoft, Google, Amazon, Tesla, Facebook and Nvidia, among many other companies, are simultaneously laying off tens of thousands of employees.

Amazon will lay off 18,000 workers; Microsoft, 10 thousand; and Salesforce will lay off 8,000 people. Twitter lost more than 50% of its income and Alphabet (which owns Google) will lay off about 12,000 employees.

The list of tech companies that have announced payroll cuts also includes Netflix, Stripe, Snap, Coinbase, Robinhood, Peloton, Lyft and many others. Each company has its own reasons, but they are part of the tech boom that peaked during the pandemic, after years of extraordinary progress.

But amid all this storm, Apple is an exception among the mass layoffs promoted in the technology sector.

Caution during the pandemic

So far, the company has avoided major cuts in personnel and investment after a period of cautious growth.

Analysts agree that Apple is in a different position than its peers because it was more strategic about its growth, which better prepared it for a possible scenario of economic recession.

Between September 2021 and September 2022, the company hired just 10,000 new employees, increasing its staff from 154,000 to 164,000 full-time employees, according to documents filed with the United States Securities and Exchange Commission (SEC, its acronym in English). ) and analyzed by the North American publication Business Insider.

This number is much smaller than the tens of thousands of employees hired by Amazon, Meta and Google over the same period.

More services, less hardware

Another reason that keeps Apple’s accounts in the black is the company’s commitment to premium services and products, compared to other business sectors more focused on hardware, such as iPhones, iPads and computers.

“The action [negociada na bolsa de valores] most valuable asset in the world is a symbol of many of the challenges and opportunities faced by large technology companies today,” explains Ben Laidler, global markets strategist at the investment platform eToro.

“It’s driven big shifts away from hardware and towards services like Apple Pay and Apple Music.”

“This sector has doubled its ratio to revenue in recent years, driving a significant increase in profit margins,” he continues, “which in turn has helped Apple maintain an above market valuation, unlike many of the their counterparts from the big tech companies”.

Laidler believes that Apple has also taken advantage of the increased demand for premium luxury products.

“With its $1,000 iPhones (about R$5,200), it has 20% of global smartphone sales, but receives 80% of the sector’s profits”, he says. “This is helping to offset the current brutal drop in demand for smartphones.”

In addition, it is believed that 60% of sales abroad are benefited by the fall in the dollar.

the relocation

Considering that increased tensions between the United States and China could reduce the profits of American technology companies that hold sources of revenue or manufacturing capacity in the Asian giant, “Apple has drastically reduced its over-reliance on China in its supply chain “, says Laidler.

“After Vietnam, Apple has accelerated the diversification of its supply chain in India and its main suppliers, Pegatron and Foxconn, have increased their production in recent years,” according to Jacques-Aurélien Marcireau, co-head of equities, and Bing Yuan, analyst of international equities of the asset management company Edmond de Rothschild AM.

“Apple’s long-term goal is to move 40% to 45% of iPhone assembly to India, up from the current single-digit figure and 25% by 2025,” they say.

According to Bloomberg, Apple is internally developing new chips and modems, to try to reduce dependence on suppliers such as Qualcomm and Broadcom.

“Looking ahead, consumer-oriented digital business models are likely to underperform enterprise-oriented business models,” said Trevor Noren, thematic investment strategist at asset management firm Wellington Management.

“The International Data Corporation estimates that the enterprise datasphere will grow more than twice as fast as the consumer datasphere,” according to Noren.

Finally, it should be remembered that Apple’s chief executive, Tim Cook, recently accepted a 40% reduction in his salary package, after only 64% of shareholders approved the 2022 profit distribution plan.

This text was originally published here.