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Inflationary pressures, a tight credit market and declining demand have hit tech companies around the world. In Asia, China’s regulatory crackdown on the sector has created uncertainty. However, Southeast Asia’s tech companies are also facing the heat and now are on a downturn, ending a decade-long boom in the sector.
As the prospects of a global recession take shape, Southeast Asian tech companies struggle to achieve long-term stability. The state of the technology sector is reflected in the recent statement by SoftBank Group, which said that it had lost all gains made through its Vision Fund – focused on investing in technology start-ups and the like.
Troubles in Southeast Asia tech
Singapore-based Grab Holdings, which was once Southeast Asia’s most valuable start-up and went public last year in December, has seen it’s market capitalization fall by 80% as of November 2022. Grab has been making losses for years, and investors are now getting impatient with the company’s poor performance.
Launched as a food-delivery service, Grab now runs a super-app in Southeast Asia, but the declining consumer demand has hit its growth plans. The company has been implementing cost-cutting measures across the board, which helped it cut its losses by over $500 m during the quarter that ended September. However, the company more than doubled its revenue during this period.
Some of the cost-cutting measures include slowed hiring, streamlining business, lower incentives and reduced corporate costs. The company has announced it will be reducing its headcount, but final details are yet to emerge.
However, Grab’s peers in the Southeast Asia tech sector are in a worse position. Considered a gem of Indonesia, GoTo Group is struggling to achieve profitability after an IPO earlier this year. In the quarter after it went public, the company saw its losses widen 3x even as revenue climbed.
The Indonesian super-app saw its operating loss in Q3 widen by 19% compared to 2021, and the company has now announced it will be cutting its workforce by 12%, that is 1,300 employees. As of November 29, the company’s stock has lost over half its value from its listing price.
A favourite among mutual funds in the region, Sea Ltd has cited macro uncertainties and rising rates significantly impacting its business. Sea’s troubles are more amplified compared to the other tech giants in the region, as it had to shut down some of its businesses, the most notable being Shopee’s exit from Europe and Latin America.
The company has also laid off thousands of employees and has revoked job offers as it struggles to stay afloat. Sea’s Chairman and Group CEO Forrest Li has confidence that the company will emerge from the slump. Sea’s main problems lie with the rapid expansion it carried out during the Covid-19 lockdowns. India’s ban on its popular game Free Fire also hit revenues, which were being used to fund Shopee and SeaMoney. Tencent, an early investor in Sea, has trimmed its stake in the company, whereas Tiger Global Management has sold nearly half a million-dollar worth of Sea shares.
Listed on the New York Stock Exchange, Sea has seen its share price fall by over 80% in the past 12 months.
While these are listed firms, start-ups in the Southeast Asia tech space are also reorganising themselves to survive the economic slowdown.
“What happened was people hired very rapidly. You have a problem, you just throw people at it,” said Jessica Huang Pouleur, a partner at venture capital firm Openspace, told CNBC, adding that more people will be laid off by tech firms going forward.
Singapore-based StashAway has let off 14% of its headcount, Malaysian online shopping platform iPrice cut a fifth of its workforce in June, Indonesia’s edtech startup Zenius let go of 200 employees, while Singapore-based Crypto.com laid off nearly 5% of its workforce.
