Intel has announced it will be reducing its staff by 15% as part of a $10 billion plan to save money by 2025. This means that over 15,000 jobs will be cut. With the company currently employing more than 125,000 people, 19,000 employees could lose their jobs.
Intel Announces Massive Layoffs Amidst Financial Losses and Strategic Cuts
According to The Verge, Intel plans to cut its R&D and marketing budgets by billions annually until 2026. This year, it will decrease capital spending by over 20%. The company will also reorganise to “stop non-essential work,” and it plans to assess “all active projects and equipment” to avoid overspending.
In a memo addressed to employees, the Intel CEO Pat Gelsinger wrote, “This is painful news for me to share. I know it will be even more difficult for you to read.”
The company recently disclosed that it experienced a $1.6 billion loss during the second quarter of 2024, a significant increase from the $437 million loss from the preceding quarter.
In the company's press statement, Gelsinger admitted: “Our Q2 financial performance was disappointing, even as we hit key product and process technology milestones.” “Our revenues have not grown as expected—and we’ve yet to fully benefit from powerful trends, like AI,” he includes in his staff memo.
Revenue for the second quarter was $12.8 billion, marking a slight decline of just 1% compared to the same period last year. Although Intel has been experiencing significant losses in its chip-making Foundry business due to its investments in new extreme ultraviolet (EUV) lithography factories, leading to $7 billion in losses for 2023 and an additional $2.8 billion this quarter, the company’s overall products are still profitable.
Most of the losses over the past two quarters have come from the Foundry division, whereas Intel's overall operations have remained relatively stable, with its PC and server businesses continuing to be successful.
The company is also expecting funding worth $8.5 billion from the US government funding through the CHIPS Act.
However, investors weren't pleased that the company has been in a difficult position for the last two years leading up to this quarterly loss. It has switched between making and losing money, totalling only $1.1 billion from the second quarter of 2022 to the first quarter of 2024.
In the tech landscape, Intel doesn't play a major role in AI server chips in contrast with Nvidia; it's rather a recent entry into graphics has a long way to go, and it has needed to significantly overhaul its flagship laptop chips to cope with the existential threat of Arm chips from Qualcomm and Apple, which can offer longer battery life than Intel.
Like other businesses, the company now counts on TSMC, rather than on its own manufacturing plants, to help construct some of its most advanced chips.
Microsoft recently began its Copilot Plus PC initiative exclusively with Qualcomm, following Apple's lead in ditching Intel chips for its newest line-up of consumer hardware, which includes the Surface Laptop and Surface Pro. The company did not wait for Intel (or AMD) to join them in this move. Intel is now handling two generations of possibly faulty desktop CPUs; yet, the company does not currently have any recall plans and believes it can resolve the matter with a software update.
Regarding server chips, Gelsinger claims Intel is “having to fight to win sockets” from AI chipmakers; nevertheless, Intel's Granite Rapids Xeon server Central Processing Units appear to be “very positive.”
Intel had previously announced significant job cuts back in October 2022, as well as a cost-cutting plan of $8 billion to $10 billion each year until 2025. However, the company did not see significant shrinkage as a result. While headcount fell by almost 5% in 2023 (from 131,900 to 124,800 people), Intel recruited 130,700 workers by March 30th, 2024, according to financial data.
Intel to Unveil Enhanced Retirement Package and Voluntary Layoff Options as Part of Strategic Overhaul
Gelsinger promised that Intel will offer a “companywide enhanced retirement offering for eligible employees” and let employees broadly apply for voluntary layoffs starting next week—nnot every employee departure will come as a painful surprise.
Intel is expected to reveal its improved retirement package for qualified employees next week, as well as an application system to facilitate voluntary departures. Gelsinger underlined that the implementation of these changes will be consistent with Intel's principles, stating, “I believe that how we implement these changes is just as important as the changes themselves.”
To justify the reasons behind these measures, Gelsinger explained: “Since introducing our new operating model, we have taken a clean-sheet view of the business and assessed ourselves against benchmarks for high-performing foundries, fabless product companies and corporate functions. This work made it clear our cost structure is not competitive.”