Intel is launching a massive wave of layoffs as part of its cost-savings plan. The company plans to reduce its workforce by 15% in order to save $10 billion in costs by 2025. This means laying off over 15,000 employees. Considering that the company has over 125,000 employees in total, the layoffs could amount to around 19,000 people.
Intel plans to reduce its research and development (R&D) and marketing spending by billions of dollars each year. The company will reduce capital spending by more than 20% this year and restructure to eliminate unnecessary work. It will also review active projects and equipment to eliminate unnecessary spending.
Intel CEO Pat Gelsinger said in a memo to employees that the decision was difficult for him and will be even harder for employees. “We have to align our cost structure with our new business model and fundamentally change the way we operate. Our revenues have not grown as expected, and we have not yet fully benefited from strong trends, particularly artificial intelligence (AI),” Gelsinger said.
Intel’s financial situation and the reason for the layoffs
Intel reported a $1.6 billion loss for the second quarter of 2024, well above the $437 million loss last quarter. The company’s Q2 revenue was $12.8 billion, a decline of just 1% year over year. However, some of Intel’s businesses continue to do well. Its PC and server businesses are particularly profitable.
While the company has suffered major losses in its chip-making-related Foundry business ($7 billion in 2023 and $2.8 billion this quarter), product sales remain relatively stable, and it will also receive up to $8.5 billion in funding from the U.S. government under the CHIPS Act.
Intel has admitted it’s not a big player in AI server chips, and says it has yet to make any impressive gains in graphics. The company has had to significantly revamp its existing chips to compete with the latest laptop chips, with major customers like Microsoft switching to Qualcomm chips instead of Intel in their new devices.
Intel CFO David Zinsner said the company’s new flagship AI laptop chip, Lunar Lake, won’t be enough on its own, but he noted that the Panther Lake chip, scheduled for release in 2025, will have a better cost structure.
As part of the layoffs, Intel will offer extended retirement benefits to eligible employees and accept voluntary separation applications, in an effort to mitigate the impact of the layoffs. The company will also suspend dividend payments and maintain its core investments.
Intel is taking major steps to adapt its cost structure to its new business model and make its operations more efficient. Although this restructuring process will be challenging, the company aims to grow in the long term. Intel’s new strategy aims to both reduce costs and maintain market leadership with innovative technologies. In this process, the company’s commitment to its employees and customers will be at the forefront.