Amazon layoffs could boost third-party hardware for Alexa, analyst says

Amazon is reportedly laying off 10,000 workers, including a big portion of its Alexa voice assistant unit  and the  company’s larger hardware unit which makes Echo devices and other products.

The impact of the cuts could result in Amazon reducing its focus on making its own hardware and, instead, working with third party hardware makers through its Works with Alexa initiative, CCS Insight analyst Ben Wood told Fierce Electronics on Tuesday. Amazon’s Works with Alexa for Matter device certification would be an avenue for third parties to be involved.

The job impact on voice assistants broadly and Amazon’s hardware products is described in a report by Business Insider which relies on comments from unnamed former and current Amazon employees, including one who called Alexa a “colossal failure of imagination.”

One unnamed Amazon employee also claimed the company is on pace to lose about $10 billion on Alexa and other devices in 2022 after losing $5 billion in 2018.  Internal data obtained by Insider showed Amazon’s Worldwide Digital unit (including Echo smart speakers, Alexa voice tech and Prime Video streaming) had an operating loss of more than $3 billion in first quarter 2022.

The comments from sources who spoke to Insider come in stark contrast to a statement provided by Amazon to Fierce Electronics (as well as Insider) from David Limp, senior vice president for devices and services at Amazon: “We are as committed as ever to Echo and Alexa and will continue to invest heavily in them.” Amazon would not comment further on the report of billions of dollars lost, however, following a request by Fierce Electronics.

Limp’s comment comes after CEO Andy Jassy wrote to employees Nov. 17 about elimination of a number of positions across Devices and Books businesses, while also propping up Alexa, among other products: “We have big opportunities ahead…in our newer initiatives that we’ve been working on for a number of years and have conviction in persuing.”

Just a day earlier, Jassy sent a note to workers saying the company would “lose talented Amazonians from the Devices & Services org.”

The specifics of what’s happening with Alexa are not clear. The picture that emerges is one affecting workers’ jobs, but also about the future of voice assistant technology, not only at Amazon Alexa, but also for Google Assistant and Apple Siri.  And, of course, the AI used in software for such voice assistants, depends on hardware—devices like Echo-- that act as the interface between users and the services behind the hardware.

In Amazon’s case, Insider notes that Alexa was a pet project of Amazon founder Jeff Bezos and when first launched in 2014 was considered a product intended to be sold to the masses via low-cost hardware while the main revenues would come from products sold through Echo by placing orders via the voice assistant. In its early years, however, Alexa was getting a billion interactions a week from users but mostly to play music or ask about the weather, offering fewer chances for Amazon to monetize.

Matter as a consequential matter

Even if there is less incentive to keep workers in its devices organization, Amazon has been active in support of Matter as a founding member of the specification devoted to smart home openness and collaboration.  The ultimate goal of Matter, all parties agree, is wider adoption of smart Internet of Things devices for smart homes and eventually for industrial uses.

On Nov. 3, Amazon blogged, “Matter will help simplify development and fuel innovation while lowering adoption barriers for our shared customers.”  Matter will help smart home customers to “mix and match devices and services regardless of the brand and protocol.”

Amazon is bringing Matter to more than 100 million devices across 30 Echo and eero devices, “an effort unprecedented in scale and complexity.”

The company also announced certification required for Works with Alexa for Matter devices to give customers “confidence they will work with their smart home.” 

Notably, Amazon also announced in the Nov. 3 blog that Amazon and Samsung would work together to simplify the Matter setup experience. In doing so, Amazon confirmed it had teamed up with Samsung SmartThings to make it easy for customers to use Alexa or SmartThings to set up Matter devices once and control them by using both smart home systems.

 Wood, the analyst at CCS Insight, said Amazon deserves credit for much of the work required to get the first iteration of Matter implemented. However, he added, “the bigger question is whether the recent [job] changes at Amazon will affect the level of investment it can make into developing products for future iterations of the Matter standard.”

Wood told FE he does not know independently where Amazon’s job cuts will hit hardest but said there could be a greater focus by Amazon to work with third party hardware makers instead of developing its own hardware.

 “I have little doubt that Amazon will continue investing [in Alexa], but it could be that we see it slightly defocusing its efforts on its own hardware and working more closely with third party hardware makers through initiatives such as Works with Alexa,” Wood added.

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