Major Tech Companies and Industries Falling to the Coronavirus

Tech companies, industries, and startups are downsizing from COVID-19 -- and don’t forget about the multiplier effect.

According to the U.S. Department of Labor, the total number of engineers in the U.S in the 1st quarter of 2019 was roughly 1.68 million. We already have a good idea of the type of engineering jobs and sectors that might be in peril from the coronavirus crisis. Now let’s consider specific companies, industry sectors and a sampling of startups.

Before we begin, it must be noted that these numbers don’t include the so-called layoff ripple or multiplier effect in which layoffs from one industry cause a multiple of layoffs in supporting industries.

Different sectors of the economy have a different multiplier effect based on the market space and how these jobs depend upon other industries. Economist Josh Bivens of the Economic Policy Institute (EPI) has used data from the Bureau of Labor Statistics (BLS) and the Bureau of Economic Analysis to determine how job losses multiply through the economy (see image). In his report, Bivens estimated “two broad categories of indirect job impacts that are spurred by direct employment changes in a given industry: supplier jobs and induced (or respending) jobs (including public-sector jobs).” Induced jobs are those that are supported by the demand that relies on the wage and salary income of both direct jobs and supplier jobs.

Consider one high-level example: According to the founder of the European carrier easyJet, his company has enough money to keep the doors open through August 2020 at best. Therefore, he wants to cancel a 4.5 billion-pound ($5.5 billion U.S.) contract with airplane maker Airbus for 107 previously ordered aircraft. If that cancellation is approved, it will negatively affect 276 supplier and induced jobs (see “transportation” category in image).

Or consider this example from the European Automobile Manufacturers Association (ACEA), which covers Europe's car, van, truck and bus manufacturers. The association recently stated that the jobs of over 1M+ European’s working in automotive manufacturing are affected by factory shutdowns the current coronavirus crisis. This amount is out of a total of 2.6 million direct manufacturing jobs in the EU auto sector. Further, this figure only refers to those people directly employed by car, truck, van and bus manufacturers. The impact on the wider automotive supply chain (supplier and induced jobs) is huge but difficult to calculate.

It’s the layoff ripple effect that has so many states worried, e.g., Boeing in Washington State, USA, and automotive companies throughout the mid-west states. Now’s let’s look at specific companies, industries and startups that have recently made the news.

U.S. Companies:

Boeing: The company is among the largest global aerospace manufacturers in the world and America’s biggest exporter. It has offered early retirement and voluntary layoff packages to its workforce of over 160,000 employees in an attempt to reduce labor costs as it struggles with the coronavirus pandemic. Boeing executives are rumored to increasingly believe potential involuntary layoffs and production cuts may be unavoidable, depending on how the crisis unfolds.

Airbus: The company is a European multinational aerospace corporation and the world's largest airliner manufacturer. While not a U.S. company, Airbus is a big buyer from several major U.S. companies like GE (see below). Further, Airbus’s Americas Engineering group located in Wichita, KS, is the company’s largest engineering office outside of Europe. On top of announcements to cut more than 2,300 jobs, Airbus has recently announced that it will cut aircraft production by a third. Such a move is ex­­pected to trigger job losses across the global aerospace supply chain and via the economic ripple or multiplier effect.

General Electric (GE): The company is the world’s biggest engine maker and a supplier to both Boeing and Airbus. Back on March 23, 2020, the company announced that it will be reducing approximately 10% of its aviation unit's workforce, amounting to about 2,500 employees. It also announced a three-month furlough effecting 50% of its maintenance and repair employees.

United Technologies Corporation (UTC): The company produces Pratt & Whitney engines and Collins Aerospace cockpit controls and communications systems. It has suspended all non-essential spending such as R&D funding and outlay on buildings and facilities. UTC has also introduced a hiring freeze and deferred employee bonuses.

OneWeb: The satellite operator backed by SoftBank Group Corp., had planned to bring Internet connectivity to the world. OneWeb filed for Chapter 11 bankruptcy protection just about a week after launching its latest round of satellites. While the company blamed COVID-19 for its economic situation, it had previously mulled a bankruptcy filing to deal with a cash crunch and strong competition. OneWeb Satellites, a joint venture between OneWeb and Airbus, had opened a production facility in Florida in 2019 to offer high-volume, high-speed fabrication of satellites.

ASML: The Dutch company is currently the largest supplier in the world of photolithography systems for the semiconductor industry. ASML has cut its guidance for first-quarter 2020 sales stating that first quarter revenue will be significantly lower than expected due to COVID-19. The company said revenues were expected to be between 2.4 billion and 2.5 billion euros ($2.77 billion) in the first quarter. It had previously forecast revenues of 3.1 billion to 3.3 billion euros. ASML said that demand for its products remain strong but it had experienced delays and shipping difficulties to customers in Wuhan, China “as well as other customers due to shipment and travel restrictions” regarding the coronavirus outbreak.

Xilinx: A U.S. technology company that is a primarily a supplier of programmable logic devices like FPGAs laid-off several hundred people at the start of 2020. Most of these layoffs were more likey from a generally bad market for the semiconductor industry in 2019. The semi market has yet to improve.

Image Source: Economic Policy Institute (EPI)

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