S. Korean tech giants slow hiring amid growing biz, econ uncertainties

[Photo by Park Hyung-ki]

South Korean information technology (IT) giants and game publishers will slow down their hiring process this year to cut costs to deal with a challenging business environment, where demand for home entertainment and remote working platforms is set to dwindle following the economic reopening, and macroeconomic uncertainties from inflation and rate hikes grow.

Korea¡¯s internet giant Naver Corp. is expected to hire 500 to 700 new employees this year, which is only 70 percent of last year when it added a record payroll of 1,100 since its inception. It will mainly recruit seasoned developers with at least five years of job experience who can immediately join any development project.

Naver¡¯s slowed hiring process was highly anticipated after its leaders last month hinted at cost cutting efforts – mostly to scale back hiring – this year when the company delivered poorer-than-expected earnings results for the first quarter, which was mainly due to the rising labor costs that ate away at profit.

Until last year, Naver and other IT companies were in a war to recruit best IT developers and engineers to develop better platforms and games after experiencing booming years during Covid restrictions. The global macroeconomic conditions, however, have rapidly changed this year due to high inflation that has led to faster-than-expected global tightening that in result is drying up liquidity in the market.

[Graphics by Lee Eun-joo and Song Ji-yoon]

Major game publishers like Nexon Co., NCSoft Corp., and Netmarble Corp. are also scaling down recruitment plans this year as they are grappling with higher labor costs in an absence of new games.

Last year, gaming majors added three digits to its payroll and offered incentives to many recruits in a talent war. Krafton hired more than 700 new employees, Smilegate 500, Nexon 400, and NCSoft 100. The working-from-home environment, however, has delayed new game development and existing games are receiving tepid response from gamers which led to their weak first-quarter earnings.

In the January-March period, Nexon posted an 11 percent plunge in operating income from a year ago while labor cost gained 19 percent. Netmarble swung to a loss in the first quarter from a year ago on a 30 percent surge in labor cost. PearlAbyss also saw a sharp decline in operating income due to 50 percent jump in payroll costs.

Korean mobile platform giant Kakao Corp. added 800 jobs to its payroll in the first three months of the year, but it is urged to reverse its aggressive hiring plan in the remaining months of the year as macro-economic uncertainty grows.

Global tech companies have already started restructuring in a preemptive move to offset any fallouts from worldwide shift to normalcy from Covid-19-led social distancing and fast rate hikes to tame inflation.

Facebook parent company Meta and Amazon have announced to pause hiring and save costs and Twitter major personnel restructuring.

Staff reduction is also happening at Chinese big tech firms like Tencent and Alibaba, according to South China Morning Post, amid deteriorated earnings and government regulation.

As of end of last year, payroll at Krafton surged 2.2 times from the end of 2019, Naver and Kakao 1.5 times, and NCSoft 1.2 times, but their stock prices have plunged by up to 50 percent from their previous highs.

¡°Major local IT companies and gaming publishers like Naver, Kakao, and NCSoft have announced to advance into North America and Asia as part of global expansion but it will be challenging to achieve performance,¡± said an unnamed industry official.

[¨Ï Maeil Business Newspaper & mk.co.kr, All rights reserved]