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    Meta, Facebook’s Parent, to Lay Off Another 10,000 Workers

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    It would be the tech company’s second round of cuts since November. Mark Zuckerberg, its chief executive, has declared 2023 the “year of efficiency.”Meta, the owner of Facebook and Instagram, said on Tuesday that it planned to lay off about 10,000 employees, or roughly 13 percent of its work force, the latest move to hew to what the company’s founder, Mark Zuckerberg, has called a “year of efficiency.”The layoffs will affect Meta’s recruiting team this week, with a restructuring of its tech and business groups to come in April and May, Mr. Zuckerberg said in a memo posted on the company’s website. The announcement is the company’s second round of cuts within the past half year. In November, Meta laid off more than 11,000 people, or about 13 percent of its work force at the time.Meta also plans to close about 5,000 job postings that have yet to be filled, Mr. Zuckerberg said in the memo. Other restructuring efforts include a plan to wrap up this summer an analysis of Meta’s hybrid return-to-office model, which it began testing last March.“This will be tough and there’s no way around that,” he wrote.Meta’s stock rose more than 7 percent by the close of trading on Tuesday.Mr. Zuckerberg is culling employees after years of hiring at a breakneck pace. His company gobbled up workers as its family of apps, which also includes WhatsApp, became popular worldwide. The coronavirus pandemic also supercharged the use of mobile apps, leading to more growth. At its peak last year, Meta had 87,000 full-time employees.But as the global economy soured, and digital advertising markets contracted last year, Mr. Zuckerberg began putting an end to unchecked growth. Meta trimmed employee perks. And after the layoffs in November, which largely affected the business divisions and recruiting teams, Mr. Zuckerberg hinted at further cuts.On an earnings call in February, the chief executive said he did not want the company to be overstuffed with a layer of middle management, or “managers managing managers.” He said he took responsibility for last year’s layoffs, blaming his zeal for staffing up on the surge of use early in the pandemic.Meta’s layoffs are part of a wave of job cuts from the biggest tech companies. In recent months, Amazon, Google, Microsoft, Salesforce and others have also said they are trimming their ranks, and some of the companies have increased the number of people they are letting go after initial announcements. Many of the companies have cited a challenging global economic environment for their actions.But even beyond the macroeconomic conditions, Meta is dealing with many challenges. It is grappling not only with a digital advertising slowdown but also with Apple’s privacy changes to its mobile operating system, which have restricted Meta’s ability to collect data on iPhone users to help target ads. It also faces steep competition from TikTok, which has soared in popularity over the past few years. And regulators have stepped up efforts to rein in the company by pushing for new laws that would limit Meta’s data collection abilities.Meta is also in the midst of a tricky transition to become a “metaverse” company, connecting people to an immersive digital world through virtual-reality headsets and applications. Mr. Zuckerberg sees the metaverse as the next-generation computing platform, so Meta has been spending billions of dollars on the effort and reallocating workers to its Reality Labs division, which is focused on products for the metaverse.Yet it’s unclear if people will want to use metaverse products. In recent months, the public has instead gravitated to chatbots, which are built on artificial intelligence. Meta has invested in A.I. for years but lately has not been at the center of the conversation about the technology.Employees have been bracing for more layoffs for months, watching with anxiety as Mr. Zuckerberg embarked on a quest to dial back what he felt was no longer necessary to run the company, according to current and former employees. But the expectation was that he would take a light touch to his favored project of the metaverse.Some Meta employees who were affected by Tuesday’s announcement of layoffs — especially in the recruiting division — felt “gut-punched,” according to current and former employees who have spoken with those in the organization.“People are entering a job market that is the worst I’ve ever seen,” said Erin Sumner, a global director of human resources at DeleteMe, who was laid off from Facebook in November. She said the staggered nature of Meta’s cuts over the next two months was adding to employee anxiety.“There’s a lot of uncertainty,” Ms. Sumner said. “There’s a lot of anger, and there’s the question many folks are asking: ‘How do you expect me to do work for the next two months while wondering if I will still have a job?’”In his announcement on Tuesday, Mr. Zuckerberg laid out a vision for streamlining the company by removing layers of management, ending lower-priority projects and rebalancing product teams with a focus on engineering.To that end, Mr. Zuckerberg wound down efforts on building NFTs, or nonfungible tokens, a cryptocurrency-based initiative that has dropped out of favor in recent months. Many of Mr. Zuckerberg’s crypto initiatives in general have fallen by the wayside over the past nine months as the public has grown more skeptical of the market after the implosion of FTX, the cryptocurrency exchange.In his note, Mr. Zuckerberg added that the moves were a response to global conditions, including increased regulation, geopolitical instability, higher interest rates and a cooling economy.“The world economy changed, competitive pressures grew and our growth slowed considerably,” he said. “We should prepare ourselves for the possibility that this new economic reality will continue for many years.”Gregory Schmidt More

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    Silicon Valley Bank’s Collapse Causes Strain for Young Companies

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    Young companies raced to get their money out of the bank, which was central to the start-up industry. Some said they could not make payroll.Ashley Tyrner opened an account with Silicon Valley Bank for her company, FarmboxRx, two years ago. She was setting out to raise venture capital and knew the bank was a go-to for the start-up industry.On Thursday, after reading about financial instability at the bank, she rushed to move FarmboxRx’s money into two other bank accounts. Her wire transfers didn’t go through. And on Friday, Silicon Valley Bank collapsed, tying up cash totaling eight figures for her company, which delivers food to Medicare and Medicaid participants.“None of my reps will call me back,” Ms. Tyrner said. “It’s the worst 24 hours of my life.”Her despair was part of the fallout across the start-up ecosystem from the failure of Silicon Valley Bank. Entrepreneurs raced to get loans to make payroll because their money was frozen at the bank. Investors doled out and asked for advice in memos and on emergency conference calls. Lines formed outside the bank’s branches. And many in the tech industry were glued to Twitter, where the collapse of a linchpin financial partner played out in real time.The implosion rattled a start-up industry already on edge. Hurt by rising interest rates and an economic slowdown over the past year, start-up funding — which had been supercharged by low interest rates for years — has shriveled, resulting in mass layoffs at many young companies, cost-cutting and slashed valuations. Investments in U.S. start-ups dropped 31 percent last year to $238 billion, according to PitchBook.On top of that, the fall of Silicon Valley Bank was especially troubling because it was the self-described “financial partner of the innovation economy.” The bank, founded in 1983 and based in Santa Clara, Calif., was deeply entangled in the tech ecosystem, providing banking services to nearly half of all venture-backed technology and life-science companies in the United States, according to its website.Silicon Valley Bank was also a bank to more than 2,500 venture capital firms, including Lightspeed, Bain Capital and Insight Partners. It managed the personal wealth of many tech executives and was a stalwart sponsor of Silicon Valley tech conferences, parties, dinners and media outlets.The bank was a “systemically important financial institution” whose services were “immensely enabling for start-ups,” said Matt Ocko, an investor at the venture capital firm DCVC.On Friday, the Federal Deposit Insurance Corporation took control of Silicon Valley Bank’s $175 billion in customer deposits. Deposits of up to $250,000 were insured by the regulator. Beyond that, customers have received no information on when they will regain access to their money.That left many of the bank’s clients in a bind. On Friday, Roku, the TV streaming company, said in a filing that roughly $487 million of its $1.9 billion in cash was tied up with Silicon Valley Bank. The deposits were largely uninsured, Roku said, and it did not know “to what extent” it would be able to recover them.Josh Butler, the chief executive of CompScience, a workplace safety analytics start-up, said he was unable to get his company’s money out of the bank on Thursday or before the bank’s collapse on Friday. The last day, he said, had been nerve-racking.“Everyone from my investors to employees to my own mother are reaching out to ask what’s going on,” Mr. Butler said. “The big question is how soon will we be able to get access to the rest of the funds, how much if at all? That’s absolutely scary.”CompScience was pausing spending on marketing, sales and hiring until it solved more pressing concerns, like making payroll. Mr. Butler said he had been prepared for a big crunch, given the doom and gloom swirling around the industry.But “did I expect it to be Silicon Valley Bank?” he said. “Never.”Camp, a start-up selling gifts and experiences for children, added a banner to its website on Friday that read: “OUR BANK JUST CLOSED — SO EVERYTHING IS ON SALE!”The site offered 40 percent off with the promo code “bankrun” alongside a meme that included the words “i never liked the bay area” and “how could this happen.” A Camp representative said the sale was related to Silicon Valley Bank’s collapse and declined to comment further.Sheel Mohnot, an investor at Better Tomorrow Ventures, said his venture firm advised its start-ups on Thursday to move money into Treasuries and open other bank accounts out of prudence.“Once a bank run has started, it’s hard to stop,” he said.Some of the start-ups that Mr. Mohnot’s firm has invested in chose not to move their money, while others were unable to act in time before the bank failed, he said. Now their biggest concern was making payroll, followed by figuring out how to pay their bills, he said.Haseeb Qureshi, an investor at Dragonfly, a cryptocurrency-focused venture capital firm, said his firm was counseling several of its start-ups that had funds tied up in Silicon Valley Bank.“The first thing you think about is survival,” he said. “It’s a harrowing moment for a lot of people.”Other start-ups were benefiting from the bank’s collapse. On Friday afternoon, Brex, a provider of financial services to start-ups, unveiled an “emergency bridge line of credit” for new customers migrating from Silicon Valley Bank. The service was aimed at helping those start-ups shore up expenses like payroll.For part of Thursday, Brex received billions of dollars in deposits from several thousand companies, a person with knowledge of the situation said. The company rushed to open accounts as fast as possible to meet demand, with its chief executive reviewing applications, the person said.But by Thursday afternoon, the incoming deposits to Brex slowed to a halt, as founders began reporting that Silicon Valley Bank’s online portal had frozen and customers were no longer able to access their money, the person said.A man trying to enter a Silicon Valley Bank branch in Manhattan on Friday. David Dee Delgado/ReutersMany venture capital firms had also used lines of credit with Silicon Valley Bank to make investments quickly and smoothly, Mr. Ocko of DCVC said. Those lines of credit are now frozen, he said.Mr. Ocko added that he did not foresee systemic collapse among start-ups and tech, but predicted “pain and friction and uncertainty and complexity in the middle of what’s already a painful macro environment for start-ups.”To stave off any taint from Silicon Valley Bank, some venture funds blasted updates to their backers. Sydecar, a service that facilitates venture capital deals, shared a list of the banks it uses that were not affected. Origin Ventures promised to help companies “create contingency plans around working capital.”Another venture firm outlined its exposure to Silicon Valley Bank and apologized in a memo, saying, “This is the worst email I’ve ever had to write to you.” The memo was seen by The New York Times.Entrepreneurs also weighed into group chats with the dollar amounts that they could no longer tap at Silicon Valley Bank or what they had managed to pull out, ranging from hundreds of thousands to tens of millions, according to communications viewed by The Times.A trickle of customers walked up to Silicon Valley Bank’s branch in Menlo Park, Calif., on Friday afternoon and discovered that its doors were locked. Some read an F.D.I.C. notice, taped by the entrance, that said the regulator was in control.One person who tried the doors was carrying a Chick-fil-A bag. A woman in the office cracked a door open, asked who the person was and then took the bag with a smile. Then she pulled the door shut.Reporting was contributed by More

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    The Furniture Hustlers of Silicon Valley

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    As tech companies cut costs and move to remote work, their left-behind office furniture has become part of a booming trade.Brandi Susewitz touched the curved stitching on a pair of bright red Arne Jacobsen Egg Chairs and announced they were worth around $5,000 each. The chairs were in pristine condition, perched in the reception area of the software company Sitecore’s office in downtown San Francisco.Trisha Murcia, Sitecore’s workplace manager, said she was likely the only person who ever sat on them. “It’s really sad,” she said. “They opened this office in 2018 and then Covid happened.”Ms. Murcia led Ms. Susewitz around Sitecore’s office, pointing out bar stools that had never been used, 90-inch flat screens, shiny conference room tables and accent chairs from the retailer Blu Dot. The whiteboard walls, outfitted with markers and erasers, were spotless. And rows upon rows of 30-by-60 inch, height-adjustable Knoll desks with Herman Miller Aeron chairs sat collecting dust.Ms. Susewitz measured and snapped photos, identifying designer brands and models. Her office furniture resale business, Reseat, would take all of it, she declared. “We can find a home for this,” she said. “We have time.”Brandi Susewitz looked at two red Arne Jacobsen Egg Chairs during a visit to the Sitecore office in San Francisco last month.Jason Henry for The New York TimesSitecore was reducing its office space because the pandemic meant more employees worked remotely.Jason Henry for The New York TimesMs. Susewitz, who started Reseat in 2020, is one of an increasing number of behind-the-scenes specialists in the Bay Area who are carving out a piece of the great office furniture reshuffling. There are professional liquidators, Craigslist flippers and start-ups spouting buzzwords like “circular economy.” And a few guys with warehouses full of really nice chairs.All of them are capitalizing on a wave of tech companies that are drastically shrinking their physical footprints in the wake of the pandemic-induced shift to remote work and the recent economic slowdown.Nowhere is the furniture glut stronger than in San Francisco. Tech workers have been slowest to return to the office in the city, where commercial vacancy rates jumped to 28 percent last year, up from 4 percent in 2019, according to the real estate firm CBRE. Occupancy in San Francisco in late January was 4 percent below the average of the top 10 U.S. cities, according to the building security firm Kastle. And companies of all sizes, including PayPal, Block and Yelp, are giving up their expensive downtown headquarters or downsizing their office space.Add to that the tech industry’s recent U-turn from optimistic hypergrowth to fear and penny pinching. That has led tech giants such as Google and Salesforce, along with smaller companies like DoorDash and Wish, to carry out widespread layoffs, cutting more than 88,000 workers in the Bay Area over the last year, according to Layoffs.fyi.Some start-ups have abruptly gone under, including the flying car company Kittyhawk, the autonomous vehicle start-up Argo AI and the interior design start-up Modsy. Others have slashed spending, starting with their dusty, rarely-used offices full of designer furniture.Ms. Susewitz checked out an Aeron chair during her visit to Sitecore. She toured the office with Trisha Murcia, Sitecore’s workplace managerJason Henry for The New York TimesMs. Susewitz measured office furniture at Sitecore’s office in downtown San Francisco.Jason Henry for The New York TimesLast month, Twitter held a public auction for some of its furniture, hawking dry erase boards, conference tables and a three-foot blue statue of its bird logo. The social media company, which is owned by Elon Musk, at one point stopped paying the rent on some of its office leases.Layoffs in Big TechAfter a pandemic hiring spree, several tech companies are now pulling back.A Growing List: Alphabet, Microsoft and Zoom are among the latest tech giants to cut jobs amid concerns about an economic slowdown.Salesforce: The company said it would lay off 10 percent of its staff, a decision that seemed to go against the professed commitment of its co-founder and chief executive, Marc Benioff, to its workers.New Parents Hit Hard: At tech companies that spent recent years expanding paid parental leave, parents have felt the whiplash of mass layoffs in an especially visceral way.Tech’s Generational Divide: The recent cuts have been eye-opening to young workers. But to older employees who experienced the dot-com bust, it has hardly been a shock.Martin Pichinson, a founder of Sherwood Partners, an advisory firm that helps restructure failing start-ups, said he was staffing up to handle increased demand. Today’s reckoning was not as severe as that of the dot-com bust in the early 2000s when dozens of tech companies collapsed, he said, but “everyone is acting as if businesses are falling apart.”That’s led to a lot of expendable furniture, much of it hewing to a specific youthful aesthetic of Instagrammable bright colors and midcentury modern shapes. That look, complemented by plant walls of succulents and kombucha on tap, was a hallmark of the tech talent wars over the past two decades, telegraphing a company’s success and sophistication.Then there’s the Aeron chairs. The $1,805 black roller-wheel desk chairs are a closely-watched barometer of tech excesses. Their sleek design makes them a work of art, according to the Museum of Modern Art. And in the tech industry, where workers are used to being pampered while chained to their desks, they are ubiquitous.When internet companies imploded in 2000, liquidators filled their warehouses with the “dot-com thrones.” Now any whiff of empty Aerons piling up conjures memories of that slump and sets off fears that another is imminent.The Bay Area’s Craigslist currently has gobs of the chairs for sale, photographed in warehouses, lined up in corners of conference rooms and wrapped in plastic outside a storage unit. Some are selling for as cheap as a few hundred bucks.The listings are a reminder: Silicon Valley is a place of booms and busts, with enterprising hustlers who see nothing but opportunity, even in the rubble.Mr. Norbu’s furniture reselling business, called Enliven, has expanded to include a van, three employees and a warehouse.Jason Henry for The New York TimesA trail of Dropbox furnitureFor furniture specialists, it all starts with supplies from tech companies like Dropbox.In 2019, the file storage company moved into its 735,000-square-foot headquarters in San Francisco. Its 15-year lease was the largest in the city’s history at the time. Dropbox’s old office was rented to other companies, and last year, a cache of furniture — futuristic-chic chairs, couches and tables — from that office made its way to a liquidator.The inventory included several emerald green velvet Jean Royère-style Polar Bear chairs that cost roughly $10,000 to custom make in 2016, according to their maker, Classic Design LA.Three of those chairs sold to Tenzin Norbu, a furniture reseller in Richmond, Calif., who paid around $1,000 for each. Mr. Norbu, 25, started buying and selling high-end furniture on online marketplaces early in the pandemic, when people were eager to redecorate the homes they were stuck inside and stymied by supply chain delays on furniture.Since then, his business, called Enliven, has expanded to include a van, three employees, a 4,000-square-foot warehouse and annual revenue in the mid-six figures.The tech talent wars, with companies competing to out-perk one another with the fanciest offices, were good for designer furniture. The retreat from that battle has been just as good for resellers.Last year, Mr. Norbu scored some lounge chairs and couches from Fast, a payments start-up that collapsed in the spring. He also paid “tens of thousands” of dollars, he said, to fill a 20-foot truck of still-in-the-box furniture that WeWork, whose valuation had plummeted, had kept in storage since 2019. The trove included dining chairs, lamps, couches and a chunky red Bollo armchair by the Swedish designer Fogia.Mr. Norbu’s inventory included three green Polar Bear chairs that were custom made for Dropbox.Jason Henry for The New York TimesMr. Norbu said he planned to buy furniture from more tech start-ups as his business grows.Jason Henry for The New York TimesOn a recent tour of his warehouse, Mr. Norbu pointed out a pair of never-used felt poufs from a start-up, two glass coffee tables from Delta Air Lines, some gray lounge chairs that were “probably from Google” and plants from a venture capital firm.Mr. Norbu aims to target more tech start-ups as his business expands. The companies are always acquiring or shedding furniture, since they tend to grow quickly and shut down abruptly. Many of his buyers also work in tech, he said, which means they could find themselves eating dinner at the very conference table they once gathered around for meetings.Last year, Mr. Norbu sold one of the Polar Bear chairs that had been owned by Dropbox to a fellow furniture flipper, Nate Morgan, for $1,400. Mr. Morgan started trading furniture in the fall after he was laid off from a business development job at Meta, which owns Facebook and Instagram. He said he quickly discovered the Bay Area contains “crazy pockets of massive amounts of furniture.”Mr. Morgan’s business, Reclamation, recently worked with a wealthy tech entrepreneur who had bought a second San Francisco home to live in while his main home was being renovated. The entrepreneur furnished the 4,000-square-foot second home with new goods from Restoration Hardware. Nine months later, when the entrepreneur moved into his main home, Mr. Morgan bought all of the second home’s furniture for 10 percent of its retail price.Mr. Morgan, 44, said the furniture business was a welcome shift from the 15 years he spent working in tech. “It feels really good to be building a local community business that’s tied to this geographic area,” he said.Outside Mr. Norbu’s 4,000-square-foot furniture warehouse.Jason Henry for The New York TimesMr. Morgan later sold the Polar Bear chair that had been at Dropbox for a profit to an interior designer in Los Angeles, who then sold it to a client in the Hollywood Hills. From the liquidator, to Mr. Norbu, to Mr. Morgan, to the interior designer, each person in the chain made a little money.Dropbox declined to comment. During the pandemic, the company shifted to remote work and made plans to sublet 80 percent of its headquarters. Takers have been slow; the company recently lowered its expected rate, pushed out its target for finding tenants by two years and recorded a $175 million charge on its real estate holdings in 2022.Dropbox’s remaining space has been converted into what the company calls a “studio” instead of an “office,” designed for meetings and “touchdown spots,” or cafes and libraries for people to sit, chat and work briefly. There are no more desks.‘It was a ghost town’Ms. Susewitz, 49, has worked in office furniture since 1997, when she became a customer service representative at Lindsay-Ferrari, a Bay Area furniture dealer now known as One Workplace.The furniture industry’s wastefulness always bugged her, she said, with companies discarding durable, commercial-grade items that were built to last decades every time they moved. Companies waited until the last minute to deal with the furniture, she said, increasing the odds it wound up in the trash.In the late 1990s dot-com boom, Ms. Susewitz created a business plan to build an online marketplace for used office furniture. She abandoned it when eBay took off, thinking the company would eventually solve the problem. “But that never happened,” she said.Over the next two decades, she worked in sales and business development, outfitting Bay Area businesses with goods from “the big five” of workplace furniture — Steelcase, MillerKnoll, Haworth, Allsteel and Teknion.Before the pandemic, Sitecore was expanding its space so rapidly that it had leased another half of a floor in its office tower.Jason Henry for The New York TimesWhen the pandemic hit, Ms. Susewitz’s livelihood of new office furniture screeched to a halt. She watched with disgust as companies tossed out barely-used desks and chairs.“Perfectly good, brand-new furniture is just being carted off to landfills,” she said. So she created Reseat to help businesses liquidate furniture. The company uses an inventory management system that tracks the items’ “life cycles” so it can quickly share the specifications for the furniture, making the goods easier to sell. Given enough time, sellers can expect 20 cents on the dollar for their furniture, she said. Reseat, which has 14 employees, has worked with more than 100 companies and sold more than eight million pounds of furniture.“Our goal is to sell it standing,” Ms. Susewitz said. “Once it ends up in a warehouse, it loses value and ends up collecting dust.”In December, Reseat was hired to liquidate more than 900 work stations, 96 office chairs, 40 work benches, 24 sofas and 84 file cabinets at an office in Santa Clara, Calif. Analog Devices, the semiconductor company that had moved out, hardly used the space during the pandemic. But Pure Storage, the data storage company moving in, didn’t want those pieces. Reseat had just four weeks to sell the items.“It just ate me up inside,” Ms. Susewitz said. That she found buyers in time was “a miracle,” she added.Pure Storage said it was reusing a “substantial” amount of Analog Devices’s furniture, including desk chairs and conference room items, but it planned to install its existing desks “to better suit how Pure employees work in a more open office environment.” An Analog Devices representative declined to comment.Ms. Susewitz was excited about the furniture at Sitecore because the company had contacted Reseat months ahead of its move, setting it up to easily find a home for its goods. At Sitecore’s office, she showed off how to identify the size of an Aeron chair. Each one has a set of plastic bumps hidden on its back. Two bumps indicate the most common size, a “B.”There were 16 size Bs around a wooden conference table that Sitecore had built using wood from a houseboat that was in Sausalito, Calif. In the center, a basin filled with Legos was flanked by the universal emblems of the pandemic: a bottle of Purell and a package of Clorox wipes.Ms. Susewitz said she would take everything from Sitecore’s kitchen area, except for the plates and silverware.Jason Henry for The New York TimesBefore the pandemic, Sitecore was expanding its space so rapidly that it had leased another half of a floor in its office tower. But “once the pandemic hit, it was a ghost town,” said Brad Hamilton, the company’s head of real estate and facilities.Sitecore plans to downgrade to 30 desks from 170. “We’re paying an outrageous amount of money for a floor that nobody uses,” he said.Toward the end of the office tour, Ms. Susewitz surveyed Sitecore’s empty kitchen area, outfitted with a Ping-Pong table, a Ms. Pac-Man machine and two curved, six-foot privacy coves. Ms. Susewitz said she would take everything, except for the plates and silverware.Chair influencersOne result of the furniture trading is a lot more people logging into Zoom meetings from very nice chairs — and not only in the Bay Area.In January, Gilad Rom, a software engineer in Los Angeles, decided to upgrade his work station at home. He searched Craigslist and found a seller with 500 Aeron chairs — apparently acquired from a SiriusXM office that had shifted to remote work — in Culver City, Calif.When he posted a picture of the chairs gathered in a room, their black foam arms intertwined, the reaction was explosive. Some people wanted to score their own cheap Aeron. Many more wanted to reminisce about what the empty chairs represented — corporate excess gone awry.“I think it brought back a lot of memories,” Mr. Rom, 43, said. “Flashbacks from 2008 and 2000.”The seller, a secondhand furniture shop called Wannasofa, was so overwhelmed with calls after Mr. Rom’s tweet that the store gave him a 25 percent discount. “Apparently I’m a chair influencer now,” he said.The reaction also gave him an idea.“Maybe I should build an app that helps people find cheap luxury furniture,” he said. “Maybe there’s something there.” More

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    Chip Makers Turn Cutthroat in Fight for Share of Federal Money

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    Semiconductor companies, which united to get the CHIPS Act approved, have set off a lobbying frenzy as they argue for more cash than their competitors.WASHINGTON — In early January, a New York public relations firm sent an email warning about what it characterized as a threat to the federal government’s program to revitalize the U.S. semiconductor industry.The message, received by The New York Times, accused Intel, the Silicon Valley chip titan, of angling to win subsidies under the CHIPS and Science Act for new factories in Ohio and Arizona that would sit empty. Intel had said in a recent earnings call that it would build out its facilities with the expensive machinery needed to make semiconductors when demand for its chips increased.The question, the email said, was whether officials would give funding to companies that outfitted their factories from the jump “or if they will give the majority of CHIPS funding to companies like Intel.”The firm declined to name its client. But it has done work in the past for Advanced Micro Devices, Intel’s longtime rival, which has raised similar concerns about whether federal funding should go to companies that plan to build empty shells. A spokesman for AMD said it had not reviewed the email or approved the public relations firm’s efforts to lobby for or against any specific company receiving funding.“We fully support the CHIPS and Science Act and the efforts of the Biden administration to boost domestic semiconductor research and manufacturing,” the spokesman said.Rival semiconductor suppliers and their customers pulled together last year as they lobbied Congress to help shore up U.S. chip manufacturing and reduce vulnerabilities in the crucial supply chain. The push led lawmakers to approve the CHIPS Act, including $52 billion in subsidies to companies and research institutions as well as $24 billion or more in tax credits — one of the biggest infusions into a single industry in decades.President Biden with Intel’s chief executive, Patrick Gelsinger, at an Intel semiconductor facility under construction in New Albany, Ohio, in September.Pete Marovich for The New York TimesBut that unity is beginning to crack. As the Biden administration prepares to begin handing out the money, chief executives, lobbyists and lawmakers have begun jostling to make their case for funding, in public and behind closed doors.In meetings with government officials and in a public filing, Intel has called into question how much taxpayer money should go to its competitors that have offshore headquarters, arguing that American innovations and other intellectual property could be funneled out of the country.“Our I.P. is here, and that’s not insignificant,” said Allen Thompson, Intel’s vice president of U.S. government relations. “We are the U.S. champion.”The Global Race for Computer ChipsA Ramp-Up in Spending: Amid a tech cold war with China, U.S. companies have pledged nearly $200 billion for chip manufacturing projects since early 2020. But the investments have limits.Crackdown on China: The United States has been aiming to prevent China from becoming an advanced power in chips, issuing sweeping restrictions on the country’s access to advanced technology.Arizona Factory: Internal doubts are mounting at Taiwan Semiconductor Manufacturing Company, the world’s biggest maker of advanced chips, over its investment in a new factory in Phoenix.CHIPS Act: The sprawling $280 billion bill passed by U.S. lawmakers last year gives the federal government new sway over the chips industry.States, cities and universities have also gotten into the act, hoping to lure subsidies and jobs expected to be generated by manufacturing sites and new research and development.Purveyors of chips, their suppliers and the trade associations that represent them together spent $59 million on lobbying last year, according to tracking from OpenSecrets, up from $46 million in 2021 and $36 million in 2020, as they tried to ensure that Congress approved their funding.Some of those activities have now shifted to making sure companies snag the biggest portion.“Everybody wants their piece of the pie,” said Willy Shih, a management professor at Harvard Business School who follows semiconductor issues. He said it wasn’t surprising that companies would be raising tough questions about competitors, which could be helpful for the Commerce Department in setting policies.“We haven’t done something of this scale in the U.S. in a long time,” he said. “There is a lot at stake.”How the Biden administration distributes the funding in coming months could shape the future of an industry that is increasingly seen as a driver of both economic prosperity and national security. It may also influence how vulnerable the United States remains to foreign threats — particularly the possibility of a Chinese invasion of Taiwan, where more than 90 percent of the world’s advanced chips are made.Since American researchers invented the integrated circuit in the late 1950s, the U.S. manufacturing share has dwindled to around 12 percent. Most American chip companies, including AMD, focus on designing cutting-edge products while outsourcing the costly manufacturing to overseas foundries, most of which are in Asia.AMD’s chief executive, Lisa Su, at a technology trade show last month. AMD and Intel have been fierce competitors.David Becker/Getty ImagesTaiwan Semiconductor Manufacturing Company developed the foundry concept in the 1980s and dominates that market, followed by Samsung Electronics. Intel, which both designs and makes its own chips, fell behind TSMC and Samsung in manufacturing technology but has vowed to catch up and build its own foundry business to make chips for customers.The industry’s concentration has left it particularly vulnerable to supply chain disruptions. During the pandemic, shortages of lower-end “legacy” chips that are used in cars forced automakers to repeatedly close factories, sending prices soaring.The CHIPS Act aims to rectify some of these shortcomings by allocating $39 billion in grants for new or expanded U.S. factories. The Commerce Department has indicated that about two-thirds of the money will be steered toward makers of leading-edge semiconductors, a category that includes TSMC, Samsung and Intel. All three companies have already broken ground on major expansions of their U.S. facilities.The remaining third is expected to go toward legacy chips, which are heavily used in cars, appliances and military equipment.Another $11 billion of funding is expected to go toward building a handful of chip research centers around the country. Government and academic institutions in Texas, Arizona, Georgia, Indiana, Florida and Ohio have filed documents describing why they should be considered for funding. Even tiny Guam has raised its hand.One challenge for the Commerce Department will be to distribute the money widely enough across the nation to create several thriving “ecosystems” that can bring together raw materials, research and manufacturing capacity, but not undermine the effort by spreading it too thinly. With dozens of companies, universities and other players interested in snagging a share, the funding could go fast.Commerce Secretary Gina Raimondo told reporters on Wednesday that the goal was to create “at least two” new clusters of manufacturing capacity for leading-edge chips, in addition to facilities producing other kinds of semiconductors. Each cluster would employ thousands of workers and support a web of businesses supplying the raw materials and services they need.“We have very clear national security goals, which we must achieve,” Ms. Raimondo said, noting that not every chip maker will get what it wants. “I suspect there will be many disappointed companies who feel that they should have a certain amount of money, and the reality is the return on our investment here is the achievement of our national security goal. Period.”The competition has intensified as the Biden administration prepares to release the ground rules for applications next week. The grants, which can range up to $3 billion or more per project, could start going out this spring.Executives say huge spending by governments in South Korea, Taiwan, China and elsewhere has helped shape the chip industry globally. And the current U.S. policy push could again alter the market, by giving some companies advantages that allow them to edge out competitors.Most chip companies, in publicly discussing the subsidies, have stressed the common goal of bolstering U.S. production. But clear differences among them have emerged. Many are outlined in the more than 200 filings that companies, organizations, universities and others submitted to the Commerce Department last March.Beyond extolling the merits of their own manufacturing plans, some applicants made the case that rival projects deserved less funding or should face strict limits on how they operated, though few companies mentioned their competitors by name.Intel, along with other U.S.-based firms like GlobalFoundries and SkyWater Technology, expressed concerns about foreign-owned companies, including whether their U.S. factories could continue operating in the event of a crisis in their home country.Taiwan Semiconductor Manufacturing Company, which is building a factory site in Phoenix, has objected to “preferential treatment based on the location of a company’s headquarters.”Adriana Zehbrauskas for The New York TimesIntel has argued that foreign investment is welcome, but that its longtime concentration of chip design, research and manufacturing in the United States meant that it should get special consideration.But competitors argue that investing heavily in Intel could be a risky bet for the U.S. government, and some Biden administration officials have questioned whether Intel can follow through on its plans to catch up to its competitors technologically. The company has suffered from a severe drop in sales and announced on Wednesday that it would cut its stock dividend.U.S. officials have also stressed the need to support a U.S. expansion by TSMC, in part because it produces leading-edge chips crucial to the military.TSMC, which has broken ground on a $40 billion investment in two advanced factories in Arizona, countered in its filing that “preferential treatment based on the location of a company’s headquarters” would not be an effective or efficient use of U.S. money. AMD, one of TSMC’s largest customers, has advocated its U.S. expansion.AMD and Intel, both based in Santa Clara, Calif., have competed fiercely for the market for microprocessor chips.In its filing in March, AMD expressed concerns about whether certain unnamed competitors had proved that they could operate effectively as a foundry and make leading-edge chips. Intel has struggled on both counts. And AMD highlighted the risk that grant recipients would not immediately spend that money to outfit their factories with equipment.“Any facility receiving federal assistance must be operational upon completion of construction,” AMD wrote. “A facility that sits idle or is held in reserve for demand increases should immediately forfeit any federal funds.”Mr. Thompson of Intel declined to comment on the email. But he defended the “smart capital” strategy articulated by Patrick Gelsinger, Intel’s chief executive, which has stressed building factory shells and then investing to equip them in accordance with market demand.Intel is continuing to follow that strategy with construction projects in Arizona, New Mexico and Ohio, to ensure that its new facilities are built out “in alignment with the market,” Mr. Thompson said. But Intel has no intention of using the government money for “basically just building shells,” he said. “The goal is to ensure that we have the capacity to support our customers.”Ana Swanson reported from Washington, and Don Clark from San Francisco. More

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    How Arizona Is Positioning Itself for $52 Billion to the Chips Industry

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    The state has become a hub for chip makers including Intel and TSMC, as the government prepares to release a gusher of funds for the strategic industry.In recent weeks, Gina Raimondo, the commerce secretary, has talked with Senator Mark Kelly of Arizona, spent time with the president of Arizona State University and appeared at a conference with the mayor of Phoenix.Their discussions centered on one main topic: chips.Ms. Raimondo is in charge of handing out $52 billion for semiconductor manufacturing and research under the CHIPS Act, a funding package intended to expand domestic production of the foundational technology, which acts as the brains of computers. The legislation, which passed in August, is a prime piece of President Biden’s industrial policy and part of a push to ensure America’s economic and technology leadership over China.Arizona wants to make sure it is in position for a portion of that once-in-a-generation gusher of federal funding, for which the Commerce Department will begin taking applications after Thursday. As a result, Arizona officials have inundated Ms. Raimondo to promote the state’s growing chip industry and talked with the chief executives of giant chip companies such as Intel and Taiwan Semiconductor Manufacturing Company.Arizona, which is vying for subsidies along with Texas, New York and Ohio, may have a head start on the action. The state has been home to semiconductor makers since the 1940s and has 115 chip-related companies, whereas there is one major manufacturer in Ohio.Arizona has also led the nation in chip investments since 2020, with the announcements of two new chip-making plants by TSMC and two additional factories from Intel that will cost a combined $60 billion. State leaders had helped persuade the companies to open the facilities by offering big tax breaks and water and other infrastructure grants. They also promised to expand technical and engineering education in the state.State officials and chip companies also acted as a lobbying bloc in Washington. They helped shape the CHIPS Act to include federal tax credits, subsidies, and research and work force grants. TSMC expanded its lobbying staff to 19 people from two in two years, and Intel spent more than $7 million in lobbying efforts last year, the most it had spent in two decades. Arizona State University spent $502,000 on lobbying last year, also the most in two decades.“It has been an intentional and an all-hands-on-deck effort,” said Sandra Watson, president of the Arizona Commerce Authority, a nonprofit economic development organization that has helped lead state efforts to attract chip companies and push for the CHIPS Act.Sandra Watson, president of the Arizona Commerce Authority, hosted more than 20 chief executives of chip companies at the Super Bowl this month.Caitlin O’Hara for The New York TimesThe Commerce Department is expected to soon begin handing out $39 billion in subsidies to semiconductor makers, later opening the process to companies, universities and others to apply for $13.2 billion in research and work force development subsidies. The CHIPS Act also provides an investment tax credit for up to 25 percent of a manufacturer’s capital expenditure costs.Ms. Raimondo has described the process as a “race” among states. “Every governor, every state legislature, every president of public universities in every state ought to be now putting their plan of attack together,” she said in August during a visit to Arizona State University’s tech research and development center. “This is going to be a competitive process.”The Commerce Department declined to comment.Arizona’s history with chip manufacturing stretches back to 1949, when the telecom hardware and services provider Motorola opened a lab in Phoenix that later developed transistors. In 1980, Intel built a semiconductor plant in Chandler, a suburb southeast of Phoenix, drawn by the state’s low property taxes, relative proximity to its Silicon Valley headquarters and stable geology. (Earthquakes are rare in Arizona.)During President Donald J. Trump’s administration, he pushed an “America First” policy agenda. That opened an opportunity for Doug Ducey, a Republican who was then Arizona’s governor, and other state officials to transform their economy into a tech hub.Arizona’s governor at the time, Doug Ducey, and Commerce Secretary Gina Raimondo while touring the TSMC construction site in December.T.J. Kirkpatrick for The New York TimesIn 2017, Mr. Ducey and other Arizona officials traveled to Taiwan to meet with executives of TSMC, the world’s biggest maker of leading-edge chips. They promoted the state’s low taxes, its business-friendly regulatory environment and Arizona State University’s engineering school of more than 30,000 students.Mr. Ducey, who was close to Mr. Trump, also had calls with Commerce Secretary Wilbur Ross, Defense Secretary Mark Esper and Secretary of State Mike Pompeo on financial incentives to expand domestic production of chips.“My job is to sell Arizona,” Mr. Ducey said. “In this case, it was to sell Arizona to TSMC but also to the administration.”In 2019, Mr. Ducey helped set up calls between the cabinet secretaries and TSMC’s executives to lock in a deal to open manufacturing plants in Arizona. The state promised tax credits and other financial incentives to help offset costs for the company to move production to the United States from Taiwan.In May 2020, TSMC announced plans to build a $12 billion factory in Phoenix. Later that year, the city provided TSMC with $200 million in infrastructure incentives, including water lines, sewage and roads. One traffic light would cost the city $500,000.“TSMC appreciates the support from our dedicated partners on the state, local and federal levels,” said Rick Cassidy, the chief executive of TSMC Arizona, adding that the CHIPS Act funds will enable the company and its suppliers to expand “for years to come.”The CHIPS Act is a prime piece of President Biden’s industrial policy. He toured TSMC’s Arizona plant in December.T.J. Kirkpatrick for The New York TimesIn early 2021, Pat Gelsinger, Intel’s chief executive, announced a sweeping strategy to increase U.S. production of chips. States began soliciting the company. Arizona officials highlighted their long relationship with Intel and perks, such as the state’s low property and business taxes.Intel soon announced a $20 billion expansion in Chandler, with two additional factories that would bring 3,000 new jobs to the state. Chandler also approved $30 million in water and road improvements for the new plants.“The Arizona government has been a great collaborator,” said Bruce Andrews, Intel’s chief government affairs officer. “By investing in semiconductors early, they created an ecosystem that has had a jobs multiplier effect and massive economic benefits.”But some of the tax breaks have rankled Arizona residents, who say the moves have hurt funding for public schools. The state ranks 47th in per-student spending.“We need to bring business to our state, but we need to look at balance,” said Beth Lewis, the executive director of Save Our Schools in Arizona. “Corporations are choosing not to settle in Arizona because of our devastated public education system.”Arizona pressed ahead with pushing Congress to create legislation for chip subsidies. In March 2021, Senator Kelly joined Senators John Cornyn, Republican of Texas, and Mark Warner, Democrat of Virginia, the authors of legislation that would become the CHIPS Act, in a call with the new Biden administration to push for the White House’s support of funding.Mr. Kelly, an early sponsor of the CHIPS Act, became a chief negotiator on the legislation in Congress. He negotiated the inclusion of a four-year 25 percent investment tax credit in the bill, including a provision that ensured Intel and TSMC would get the tax credits even though their Arizona factory projects were announced before the bill would go into effect.Mr. Kelly also helped the president of Arizona State University, Michael Crow, lobby for the inclusion of more than $13 billion in grants for research and development and work force training. And Mr. Kelly and state leaders hosted administration officials at events to showcase the state’s semiconductor efforts as part of the White House’s manufacturing strategy.Senator Mark Kelly of Arizona at TSMC’s factory in December.Adriana Zehbrauskas for The New York Times“We have the potential to lead the nation in microchip production,” Mr. Kelly said in a statement. “I was honored to lead this effort, and now I’m working to maximize it for Arizona”Mr. Ducey, who left office when his term ended in January, pushed for more tech-friendly policies, including an income-tax cut. He also said he would use $100 million that the state had received from federal Covid grants to attract more chip companies and help them apply for funds provided by the CHIPS Act.In December, TSMC announced a second factory that would bring its total investment in Arizona to $40 billion. Mr. Biden and Ms. Raimondo traveled to Phoenix to speak at the announcement, with Mr. Kelly accompanying them on Air Force One.Arizona officials continue to pitch semiconductor companies to open factories in the state.This month, Ms. Watson hosted more than 20 chief executives of chip companies at the Super Bowl in Glendale. Katie Hobbs, Arizona’s new governor and a Democrat, and Mr. Kelly heralded how the state could benefit from the CHIPS Act.“There’s a robust pipeline,” Ms. Watson said. More

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    Tech Layoffs Continue as Shares Fall and Interest Rates Rise

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    Eighteen months ago, the online used car retailer Carvana had such great prospects that it was worth $80 billion. Now it is valued at less than $1.5 billion, a 98 percent plunge, and is struggling to survive.Many other tech companies are also seeing their fortunes reverse and their dreams dim. They are shedding employees, cutting back, watching their financial valuations shrivel — even as the larger economy chugs along with a low unemployment rate and a 3.2 percent annualized growth rate in the third quarter.One largely unacknowledged explanation: An unprecedented era of rock-bottom interest rates has abruptly ended. Money is no longer virtually free.For over a decade, investors desperate for returns sent their money to Silicon Valley, which pumped it into a wide range of start-ups that might not have received a nod in less heady times. Extreme valuations made it easy to issue stock or take on loans to expand aggressively or to offer sweet deals to potential customers that quickly boosted market share.It was a boom that seemed as if it would never end. Tech piled up victories, and its competitors wilted. Carvana built dozens of flashy car “vending machines” across the country, marketed itself relentlessly and offered very attractive prices for trade-ins.“The whole tech industry of the last 15 years was built by cheap money,” said Sam Abuelsamid, principal analyst with Guidehouse Insights. “Now they’re getting hit by a new reality, and they will pay the price.”Cheap money funded many of the acquisitions that substitute for organic growth in tech. Two years ago, as the pandemic raged and many office workers were confined to their homes, Salesforce bought the office communications tool Slack for $28 billion, a sum that some analysts thought was too high. Salesforce borrowed $10 billion to do the deal. This month, it said it was cutting 8,000 people, about 10 percent of its staff, many of them at Slack.Even the biggest tech companies are affected. Amazon was willing to lose money for years to acquire new customers. It is taking a different approach these days, laying off 18,000 office workers and shuttering operations that are not financially viable.Carvana, like many start-ups, pulled a page out of Amazon’s old playbook, trying to get big fast. Used cars, it believed, were a highly fragmented market ripe for reinvention, just the way taxis, bookstores and hotels had been. It strove to outdistance any competition.The company, based in Tempe, Ariz., wanted to replace traditional dealers with, Carvana said grandly, “technology and exceptional customer service.” In what seemed to symbolize the death of the old way of doing things, it paid $22 million for a six-acre site in Mission Valley, Calif., that a Mazda dealer had occupied since 1965.More on Big TechLayoffs: Some of the biggest tech companies, including Alphabet and Microsoft, have recently announced tens of thousands of job cuts. But even after the layoffs, their work forces are still behemoths.A Generational Divide: The industry’s recent job cuts have been eye-opening to young workers. But to older employees who experienced the dot-com bust, it has hardly been a shock.Supreme Court Cases: The justices are poised to reconsider two crucial tenets of online speech under which social media networks have long operated.In the Netherlands: Dutch government and educational organizations have spurred changes at Google, Microsoft and Zoom, using a European data protection law as a lever.Where traditional dealerships were literally flat, Carvana built multistory car vending machines that became memorable local landmarks. Customers picked up their cars at these towers, which now total 33. A corporate video of the building of one vending machine has over four million views on YouTube.In the third quarter of 2021, Carvana delivered 110,000 cars to customers, up 74 percent from 2020. The goal: two million cars a year, which would make it by far the largest used car retailer.An eye-catching Carvana car vending machine in Uniondale, N.Y.Tony Cenicola/The New York TimesThen, even more quickly than the company grew, it fell apart. When used car sales rose more than 25 percent in the first year of the pandemic, that created a supply problem: Carvana needed many more vehicles. It acquired a car auction company for $2.2 billion and took on even more debt at a premium interest rate. And it paid customers handsomely for cars.But as the pandemic waned and interest rates began to rise, sales slowed. Carvana, which declined to comment for this article, did a round of layoffs in May and another in November. Its chief executive, Ernie Garcia, blamed the higher cost of financing, saying, “We failed to accurately predict how all this will play out.”Some competitors are even worse off. Vroom, a Houston company, has seen its stock fall to $1 from $65 in mid-2020. Over the past year, it has dismissed half of its employees.“High rates are painful for almost everyone, but they are particularly painful for Silicon Valley,” said Kairong Xiao, an associate professor of finance at Columbia Business School. “I expect more layoffs and investment cuts unless the Fed reverses its tightening.”At the moment, there is little likelihood of that. The market expects two more rate increases by the Federal Reserve this year, to at least 5 percent.In real estate, that is trouble for anyone expecting a quick recovery. Low rates not only pushed up house prices but also made it irresistible for companies such as Zillow as well as Redfin, Opendoor Technologies and others, to get into a business that used to be considered slightly disreputable: flipping houses.In 2019, Zillow estimated it would soon have revenue of $20 billion from selling 5,000 houses a month. That thrilled investors, who pushed the publicly traded Seattle company to a $45 billion valuation and created a hiring boom that raised the number of employees to 8,000.Zillow’s notion was to use artificial intelligence software to make a chaotic real estate market more efficient, predictable and profitable. This was the sort of innovation that the venture capitalist Marc Andreessen talked about in 2011 when he said digital insurgents would take over entire industries. “Software is eating the world,” he wrote.In June 2021, Zillow owned 50 homes in California’s capital, Sacramento. Five months later, it had 400. One was an unremarkable four-bedroom, three-bath house in the northwest corner of the city. Built in 2001, it is convenient to several parks and the airport. Zillow paid $700,000 for it.Zillow put the house on the market for months, but no one wanted it, even at $625,000. Last fall, after it had unceremoniously exited the flipping market, Zillow unloaded the house for $355,000. Low rates had made it seem possible that Zillow could shoot for the moon, but even they could not make it a success.Ryan Lundquist, a Sacramento appraiser who followed the house’s history closely on his blog, said Zillow realized real estate was fragmented but perhaps did not quite appreciate that houses were labor-intensive, deeply personal, one-to-one transactions.“This idea of being able to come in and change the game completely — that’s really difficult to do, and most of the time you don’t,” he said.Zillow’s market value has now shrunk to $10 billion, and its employee count to around 5,500 after two rounds of layoffs. It declined to comment.The dream of market domination through software dies hard, however. Zillow recently made a deal with Opendoor, an online real estate company in San Francisco that buys and sells residential properties and has also been ravaged by the downturn. Under the agreement, sellers on Zillow’s platform can request to have Opendoor make offers on their homes. Zillow said sellers would “save themselves the stress and uncertainty of a traditional sale process.”That partnership might explain why the buyer of that four-bedroom Sacramento house, one of the last in Zillow’s portfolio, was none other than Opendoor. It made some modest improvements and put the house on the market for $632,000, nearly twice what it had paid. A deal is pending.“If it were really this easy, everyone would be a flipper,” Mr. Lundquist said.An Amazon bookstore in Seattle in 2016. The store is now permanently closed.Kyle Johnson for The New York TimesThe easy money era had been well established when Amazon decided it had mastered e-commerce enough to take on the physical world. Its plans to expand into bookstores was a rumor for years and finally happened in 2015. The media went wild. According to one well-circulated story, the retailer planned to open as many as 400 bookstores.The company’s idea was that the stores would function as extensions of its online operation. Reader reviews would guide the potential buyer. Titles were displayed face out, so there were only 6,000 of them. The stores were showrooms for Amazon’s electronics.Being a showroom for the internet is expensive. Amazon had to hire booksellers and lease storefronts in popular areas. And letting enthusiastic reviews be one of the selection criteria meant stocking self-published titles, some of which were pumped up with reviews by the authors’ friends. These were not books that readers wanted.Amazon likes to try new things, and that costs money. It took on another $10 billion of long-term debt in the first nine months of the year at a higher rate of interest than it was paying two years ago. This month, it said it was borrowing $8 billion more. Its stock market valuation has shrunk by about a trillion dollars.The retailer closed 68 stores last March, including not only bookstores but also pop-ups and so-called four-star stores. It continues to operate its Whole Foods grocery subsidiary, which has 500 U.S. locations, and other food stores. Amazon said in a statement that it was “committed to building great, long-term physical retail experiences and technologies.”Traditional book selling, where expectations are modest, may have an easier path now. Barnes & Noble, the bricks-and-mortar chain recently deemed all but dead, has moved into two former Amazon locations in Massachusetts, putting about 20,000 titles into each. The chain said the stores were doing “very well.” It is scouting other former Amazon locations.“Amazon did a very different bookstore than we’re doing,” said Janine Flanigan, Barnes & Noble’s director of store planning and design. “Our focus is books.” More

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    For Tech Companies, Years of Easy Money Yield to Hard Times

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    Eighteen months ago, the online used car retailer Carvana had such great prospects that it was worth $80 billion. Now it is valued at less than $1.5 billion, a 98 percent plunge, and is struggling to survive.Many other tech companies are also seeing their fortunes reverse and their dreams dim. They are shedding employees, cutting back, watching their financial valuations shrivel — even as the larger economy chugs along with a low unemployment rate and a 3.2 annualized growth rate in the third quarter.One largely unacknowledged explanation: An unprecedented era of rock-bottom interest rates has abruptly ended. Money is no longer virtually free.For over a decade, investors desperate for returns sent their money to Silicon Valley, which pumped it into a wide range of start-ups that might not have received a nod in less heady times. Extreme valuations made it easy to issue stock or take on loans to expand aggressively or to offer sweet deals to potential customers that quickly boosted market share.It was a boom that seemed as if it would never end. Tech piled up victories, and its competitors wilted. Carvana built dozens of flashy car “vending machines” across the country, marketed itself relentlessly and offered very attractive prices for trade-ins.“The whole tech industry of the last 15 years was built by cheap money,” said Sam Abuelsamid, principal analyst with Guidehouse Insights. “Now they’re getting hit by a new reality, and they will pay the price.”Cheap money funded many of the acquisitions that substitute for organic growth in tech. Two years ago, as the pandemic raged and many office workers were confined to their homes, Salesforce bought the office communications tool Slack for $28 billion, a sum that some analysts thought was too high. Salesforce borrowed $10 billion to do the deal. This month, it said it was cutting 8,000 people, about 10 percent of its staff, many of them at Slack.Even the biggest tech companies are affected. Amazon was willing to lose money for years to acquire new customers. It is taking a different approach these days, laying off 18,000 office workers and shuttering operations that are not financially viable.Carvana, like many start-ups, pulled a page out of Amazon’s old playbook, trying to get big fast. Used cars, it believed, were a highly fragmented market ripe for reinvention, just the way taxis, bookstores and hotels had been. It strove to outdistance any competition.The company, based in Tempe, Ariz., wanted to replace traditional dealers with, Carvana said grandly, “technology and exceptional customer service.” In what seemed to symbolize the death of the old way of doing things, it paid $22 million for a six-acre site in Mission Valley, Calif., that a Mazda dealer had occupied since 1965.More on Big TechLayoffs: Some of the biggest tech companies, including Alphabet and Microsoft, have recently announced tens of thousands of job cuts. But even after the layoffs, their work forces are still behemoths.A Generational Divide: The industry’s recent job cuts have been eye-opening to young workers. But to older employees who experienced the dot-com bust, it has hardly been a shock.Supreme Court Cases: The justices are poised to reconsider two crucial tenets of online speech under which social media networks have long operated.In the Netherlands: Dutch government and educational organizations have spurred changes at Google, Microsoft and Zoom, using a European data protection law as a lever.Where traditional dealerships were literally flat, Carvana built multistory car vending machines that became memorable local landmarks. Customers picked up their cars at these towers, which now total 33. A corporate video of the building of one vending machine has over four million views on YouTube.In the third quarter of 2021, Carvana delivered 110,000 cars to customers, up 74 percent from 2020. The goal: two million cars a year, which would make it by far the largest used car retailer.An eye-catching Carvana car vending machine in Uniondale, N.Y.Tony Cenicola/The New York TimesThen, even more quickly than the company grew, it fell apart. When used car sales rose more than 25 percent in the first year of the pandemic, that created a supply problem: Carvana needed many more vehicles. It acquired a car auction company for $2.2 billion and took on even more debt at a premium interest rate. And it paid customers handsomely for cars.But as the pandemic waned and interest rates began to rise, sales slowed. Carvana, which declined to comment for this article, did a round of layoffs in May and another in November. Its chief executive, Ernie Garcia, blamed the higher cost of financing, saying, “We failed to accurately predict how all this will play out.”Some competitors are even worse off. Vroom, a Houston company, has seen its stock fall to $1 from $65 in mid-2020. Over the past year, it has dismissed half of its employees.“High rates are painful for almost everyone, but they are particularly painful for Silicon Valley,” said Kairong Xiao, an associate professor of finance at Columbia Business School. “I expect more layoffs and investment cuts unless the Fed reverses its tightening.”At the moment, there is little likelihood of that. The market expects two more rate increases by the Federal Reserve this year, to at least 5 percent.In real estate, that is trouble for anyone expecting a quick recovery. Low rates not only pushed up house prices but also made it irresistible for companies such as Zillow as well as Redfin, Opendoor Technologies and others, to get into a business that used to be considered slightly disreputable: flipping houses.In 2019, Zillow estimated it would soon have revenue of $20 billion from selling 5,000 houses a month. That thrilled investors, who pushed the publicly traded Seattle company to a $45 billion valuation and created a hiring boom that raised the number of employees to 8,000.Zillow’s notion was to use artificial intelligence software to make a chaotic real estate market more efficient, predictable and profitable. This was the sort of innovation that the venture capitalist Marc Andreessen talked about in 2011 when he said digital insurgents would take over entire industries. “Software is eating the world,” he wrote.In June 2021, Zillow owned 50 homes in California’s capital, Sacramento. Five months later, it had 400. One was an unremarkable four-bedroom, three-bath house in the northwest corner of the city. Built in 2001, it is convenient to several parks and the airport. Zillow paid $700,000 for it.Zillow put the house on the market for months, but no one wanted it, even at $625,000. Last fall, after it had unceremoniously exited the flipping market, Zillow unloaded the house for $355,000. Low rates had made it seem possible that Zillow could shoot for the moon, but even they could not make it a success.Ryan Lundquist, a Sacramento appraiser who followed the house’s history closely on his blog, said Zillow realized real estate was fragmented but perhaps did not quite appreciate that houses were labor-intensive, deeply personal, one-to-one transactions.“This idea of being able to come in and change the game completely — that’s really difficult to do, and most of the time you don’t,” he said.Zillow’s market value has now shrunk to $10 billion, and its employee count to around 5,500 after two rounds of layoffs. It declined to comment.The dream of market domination through software dies hard, however. Zillow recently made a deal with Opendoor, an online real estate company in San Francisco that buys and sells residential properties and has also been ravaged by the downturn. Under the agreement, sellers on Zillow’s platform can request to have Opendoor make offers on their homes. Zillow said sellers would “save themselves the stress and uncertainty of a traditional sale process.”That partnership might explain why the buyer of that four-bedroom Sacramento house, one of the last in Zillow’s portfolio, was none other than Opendoor. It made some modest improvements and put the house on the market for $632,000, nearly twice what it had paid. A deal is pending.“If it were really this easy, everyone would be a flipper,” Mr. Lundquist said.An Amazon bookstore in Seattle in 2016. The store is now permanently closed.Kyle Johnson for The New York TimesThe easy money era had been well established when Amazon decided it had mastered e-commerce enough to take on the physical world. Its plans to expand into bookstores was a rumor for years and finally happened in 2015. The media went wild. According to one well-circulated story, the retailer planned to open as many as 400 bookstores.The company’s idea was that the stores would function as extensions of its online operation. Reader reviews would guide the potential buyer. Titles were displayed face out, so there were only 6,000 of them. The stores were showrooms for Amazon’s electronics.Being a showroom for the internet is expensive. Amazon had to hire booksellers and lease storefronts in popular areas. And letting enthusiastic reviews be one of the selection criteria meant stocking self-published titles, some of which were pumped up with reviews by the authors’ friends. These were not books that readers wanted.Amazon likes to try new things, and that costs money. It took on another $10 billion of long-term debt in the first nine months of the year at a higher rate of interest than it was paying two years ago. This month, it said it was borrowing $8 billion more. Its stock market valuation has shrunk by about a trillion dollars.The retailer closed 68 stores last March, including not only bookstores but also pop-ups and so-called four-star stores. It continues to operate its Whole Foods grocery subsidiary, which has 500 U.S. locations, and other food stores. Amazon said in a statement that it was “committed to building great, long-term physical retail experiences and technologies.”Traditional book selling, where expectations are modest, may have an easier path now. Barnes & Noble, the bricks-and-mortar chain recently deemed all but dead, has moved into two former Amazon locations in Massachusetts, putting about 20,000 titles into each. The chain said the stores were doing “very well.” It is scouting other former Amazon locations.“Amazon did a very different bookstore than we’re doing,” said Janine Flanigan, Barnes & Noble’s director of store planning and design. “Our focus is books.” More

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    U.S. Pours Money Into Chips, but Even Soaring Spending Has Limits

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    In September, the chip giant Intel gathered officials at a patch of land near Columbus, Ohio, where it pledged to invest at least $20 billion in two new factories to make semiconductors.A month later, Micron Technology celebrated a new manufacturing site near Syracuse, N.Y., where the chip company expected to spend $20 billion by the end of the decade and eventually perhaps five times that.And in December, Taiwan Semiconductor Manufacturing Company hosted a shindig in Phoenix, where it plans to triple its investment to $40 billion and build a second new factory to create advanced chips.The pledges are part of an enormous ramp-up in U.S. chip-making plans over the past 18 months, the scale of which has been likened to Cold War-era investments in the Space Race. The boom has implications for global technological leadership and geopolitics, with the United States aiming to prevent China from becoming an advanced power in chips, the slices of silicon that have driven the creation of innovative computing devices like smartphones and virtual-reality goggles.Today, chips are an essential part of modern life even beyond the tech industry’s creations, from military gear and cars to kitchen appliances and toys.Across the nation, more than 35 companies have pledged nearly $200 billion for manufacturing projects related to chips since the spring of 2020, according to the Semiconductor Industry Association, a trade group. The money is set to be spent in 16 states, including Texas, Arizona and New York on 23 new chip factories, the expansion of nine plants, and investments from companies supplying equipment and materials to the industry.The push is one facet of an industrial policy initiative by the Biden administration, which is dangling at least $76 billion in grants, tax credits and other subsidies to encourage domestic chip production. Along with providing sweeping funding for infrastructure and clean energy, the efforts constitute the largest U.S. investment in manufacturing arguably since World War II, when the federal government unleashed spending on new ships, pipelines and factories to make aluminum and rubber.“I’ve never seen a tsunami like this,” said Daniel Armbrust, the former chief executive of Sematech, a now-defunct chip consortium formed in 1987 with the Defense Department and funding from member companies.Sanjay Mehrotra, Micron Technology’s chief executive, at Onondaga Community College in Syracuse, N.Y., in October. The company is building a new manufacturing site nearby.Kenny Holston for The New York TimesWhite House officials have argued that the chip-making investments will sharply reduce the proportion of chips needed to be purchased from abroad, improving U.S. economic security.Kenny Holston for The New York TimesPresident Biden has staked a prominent part of his economic agenda on stimulating U.S. chip production, but his reasons go beyond the economic benefits. Much of the world’s cutting-edge chips today are made in Taiwan, the island to which China claims territorial rights. That has caused fears that semiconductor supply chains may be disrupted in the event of a conflict — and that the United States will be at a technological disadvantage.More on ChinaA Messy Pivot: As Beijing casts aside many Covid rules after nationwide protests, it is also playing down the threat of the virus. The move comes with its own risks.Space Program: Human spaceflight achievements show that China is running a steady space marathon rather than competing in a head-to-head space race with the United States.A Test for the Economy: China’s economy is entering a delicate period when it will face unique challenges, amid the prospect of rising Covid cases and wary consumers.New Partnerships: A trip by the Chinese leader Xi Jinping to Saudi Arabia showcased Beijing’s growing ties with several Middle Eastern countries that are longstanding U.S. allies and signaled China’s re-emergence after years of pandemic isolation.The new U.S. production efforts may correct some of these imbalances, industry executives said — but only up to a point.The new chip factories would take years to build and might not be able to offer the industry’s most advanced manufacturing technology when they begin operations. Companies could also delay or cancel the projects if they aren’t awarded sufficient subsidies by the White House. And a severe shortage in skills may undercut the boom, as the complex factories need many more engineers than the number of students who are graduating from U.S. colleges and universities.The bonanza of money on U.S. chip production is “not going to try or succeed in accomplishing self-sufficiency,” said Chris Miller, an associate professor of international history at the Fletcher School of Law and Diplomacy at Tufts University, and the author of a recent book on the chip industry’s battles.White House officials have argued that the chip-making investments will sharply reduce the proportion of chips needed to be purchased from abroad, improving U.S. economic security. At the TSMC event in December, Mr. Biden also highlighted the potential impact on tech companies like Apple that rely on TSMC for their chip-making needs. He said that “it could be a game changer” as more of these companies “bring more of their supply chain home.”U.S. companies led chip production for decades starting in the late 1950s. But the country’s share of global production capacity gradually slid to around 12 percent from about 37 percent in 1990, as countries in Asia provided incentives to move manufacturing to those shores.Today, Taiwan accounts for about 22 percent of total chip production and more than 90 percent of the most advanced chips made, according to industry analysts and the Semiconductor Industry Association.The new spending is set to improve America’s position. A $50 billion government investment is likely to prompt corporate spending that would take the U.S. share of global production to as much as 14 percent by 2030, according to a Boston Consulting Group study in 2020 that was commissioned by the Semiconductor Industry Association.“It really does put us in the game for the first time in decades,” said John Neuffer, the association’s president, who added that the estimate may be conservative because Congress approved $76 billion in subsidies in a piece of legislation known as the CHIPS Act.Still, the ramp-up is unlikely to eliminate U.S. dependence on Taiwan for the most advanced chips. Such chips are the most powerful because they pack the highest number of transistors onto each slice of silicon, and they are often held up a sign of a nation’s technological progress.Intel long led the race to shrink the number of transistors on a chip, which is usually described in nanometers, or billionths of a meter, with smaller numbers indicating the most cutting-edge production technology. Then TSMC surged ahead in recent years.But at its Phoenix site, TSMC may not import its most advanced manufacturing technology. The company initially announced that it would produce five-nanometer chips at the Phoenix factory, before saying last month that it would also make four-nanometer chips there by 2024 and build a second factory, which will open in 2026, for three-nanometer chips. It stopped short of discussing further advances.Morris Chang, founder of Taiwan Semiconductor Manufacturing Company, at the company’s site in Phoenix in December. The company said it would triple its investment there to $40 billion.Adriana Zehbrauskas for The New York TimesAt the TSMC event last month, President Biden highlighted the potential impact on tech companies that rely on TSMC for their chip-making needs.Adriana Zehbrauskas for The New York TimesIn contrast, TSMC’s factories in Taiwan at the end of 2022 began producing three-nanometer technology. By 2025, factories in Taiwan will probably start supplying Apple with two-nanometer chips, said Handel Jones, chief executive at International Business Strategies.TSMC and Apple declined to comment.Whether other chip companies will bring more advanced technology for cutting-edge chips to their new sites is unclear. Samsung Electronics plans to invest $17 billion in a new factory in Texas but has not disclosed its production technology. Intel is manufacturing chips at roughly seven nanometers, though it has said its U.S. factories will turn out three-nanometer chips by 2024 and even more advanced products soon after that.The spending boom is also set to reduce, though not erase, U.S. reliance on Asia for other kinds of chips. Domestic factories produce only about 4 percent of the world’s memory chips — which are needed to store data in computers, smartphones and other consumer devices — and Micron’s planned investments could eventually raise that percentage.But there are still likely to be gaps in a catchall variety of older, simpler chips, which were in such short supply over the past two years that U.S. automakers had to shut down factories and produce partly finished vehicles. TSMC is a major producer of some of these chips, but it is focusing its new investments on more profitable plants for advanced chips.“We still have a dependency that is not being impacted in any way shape or form,” said Michael Hurlston, chief executive of Synaptics, a Silicon Valley chip designer that relies heavily on TSMC’s older factories in Taiwan.The chip-making boom is expected to create a jobs bonanza of 40,000 new roles in factories and companies that supply them, according to the Semiconductor Industry Association. That would add to about 277,000 U.S. semiconductor industry employees.But it won’t be easy to fill so many skilled positions. Chip factories typically need technicians to run factory machines and scientists in fields like electrical and chemical engineering. The talent shortage is one of the industry’s toughest challenges, according to recent surveys of executives.The CHIPS Act contains funding for work force development. The Commerce Department, which is overseeing the doling out of grant money from the CHIPS Act’s funds, has also made it clear that organizations hoping to obtain funding should come up with plans for training and educating workers.Intel, responding to the issue, plans to invest $100 million to spur training and research at universities, community colleges and other technical educators. Purdue University, which built a new semiconductor laboratory, has set a goal of graduating 1,000 engineers each year and has attracted the chip maker SkyWater Technology to build a $1.8 billion manufacturing plant near its Indiana campus.Yet training may go only so far, as chip companies compete with other industries that are in dire need of workers.“We’re going to have to build a semiconductor economy that attracts people when they have a lot of other choices,” Mitch Daniels, who was president of Purdue at the time, said at an event in September.Since training efforts may take years to bear fruit, industry executives want to make it easier for highly educated foreign workers to obtain visas to work in the United States or stay after they get their degrees. Officials in Washington are aware that comments encouraging more immigration could invite political fire.But Gina Raimondo, the commerce secretary, was forthright in a speech in November at the Massachusetts Institute of Technology.Attracting the world’s best scientific minds is “an advantage that is America’s to lose,” she said. “And we’re not going to let that happen.” More