Intel to Cut 15% of Workforce Amid Struggles with AI and Market Shifts
Intel announced a major restructuring effort on Thursday, which includes laying off 15% of its workforce as part of a $10 billion cost-reduction plan. The company, once a leader in the chipmaking industry, is attempting to realign its operations and cut expenses amid ongoing challenges.
CEO Pat Gelsinger outlined the changes in a memo, citing the need to adjust the company’s cost structure to its new operating model. He acknowledged that Intel’s revenue growth has lagged behind expectations and that the company has yet to capitalize fully on emerging technologies such as artificial intelligence (AI). “Our costs are too high, and our margins are too low,” Gelsinger stated.
In the second quarter, Intel reported $12.8 billion in revenue, a 1% decrease compared to the previous year, alongside a net loss of $1.6 billion. The company has seen its dominance in the semiconductor market erode over recent years, particularly in the face of rising competitors like Qualcomm and Texas Instruments in mobile computing, as well as Nvidia in the AI sector.
The company’s Foundry business, where it has invested significantly to catch up in the AI race, suffered substantial losses. This division is a critical part of Intel’s strategy to transition into a major player in AI chip manufacturing, an area currently dominated by Nvidia.
Intel’s restructuring also includes a bold strategy shift: the company aims to manufacture chips for other companies, including rivals like Apple, which designs its own processors but relies on external manufacturers like Taiwan’s TSMC. This transition, while potentially lucrative, involves considerable financial risk and is expected to result in significant job cuts.
As part of the financial overhaul, Intel plans to reduce its operating expenses and cut 15,000 jobs, aiming to save $10 billion by 2025. The company also announced the suspension of its dividend payments starting in the fourth quarter of 2024, a move that has contributed to a 19% drop in its stock price during after-hours trading.
Intel’s announcement comes amid broader challenges in the tech sector, where companies like Amazon have also reported mixed financial results. Despite a 10% increase in sales and a near doubling of operating profit, Amazon’s guidance disappointed investors, causing its stock to fall 5% in after-hours trading. Analysts, such as Neil Saunders from GlobalData Retail, suggest that while Amazon remains profitable, its growth pace is slowing.
