Source – evrimagaci.org
Intel has announced significant layoffs as part of a new $10 billion cost savings plan for 2025. The company will reduce its workforce by over 15%, which translates to more than 15,000 roles out of its current 125,000 employees. The layoffs could potentially affect up to 19,000 people.
Cost-Cutting Measures
The chipmaker plans to cut its research and development (R&D) and marketing expenditures by billions each year through 2026. It will also reduce capital expenditures by more than 20% this year, restructure to eliminate non-essential work, and review all active projects and equipment to manage costs better.
Financial Performance
Intel reported a substantial loss of $1.6 billion for Q2 2024, significantly higher than the $437 million loss in the previous quarter. The company’s second-quarter revenue was $12.8 billion, a slight decrease of 1% year-over-year. Most of the financial losses came from Intel’s Foundry business, which reported $7 billion in operating losses in 2023 and an additional $2.8 billion this quarter. Despite this, the company’s PC and server businesses remain profitable, and Intel is set to receive up to $8.5 billion in US government funding from the CHIPS Act.
Challenges and Market Position
Intel has struggled to establish itself in the AI server chip market, lagging behind competitors like Nvidia and AMD. The company’s recent entry into the graphics market has not been impressive, and it has had to significantly overhaul its laptop chips to compete with Arm chips from Qualcomm and Apple. Moreover, Microsoft has moved away from Intel chips for its latest consumer hardware, opting for Qualcomm instead. Intel is also dealing with potential defects in two generations of its desktop CPUs, though it plans to address these issues with a software update.
Future Outlook
Intel’s CFO, David Zinsner, has indicated that the company’s next AI laptop chip, Lunar Lake, will not be enough to significantly turn things around. While the AI PC market is promising, Lunar Lake relies on external wafers manufactured by TSMC and includes purchased memory, limiting its impact. However, Intel’s follow-on product, Panther Lake, which will be internally sourced, is expected to improve the company’s cost structure and performance by 2026.
Restructuring and Layoffs
The company previously announced major layoffs in October 2022 as part of a plan to cut $8 billion to $10 billion in costs annually through 2025. However, the company’s headcount only dipped slightly before increasing again. The new layoffs will be completed by the end of 2024, with Intel offering enhanced retirement packages and voluntary layoff options to employees.
Strategic Focus
Despite the layoffs and cost-cutting measures, Intel aims to maintain its core investments to execute its strategy and build a resilient and sustainable semiconductor supply chain in the U.S. and globally. The company is restructuring and suspending its dividend to focus on long-term growth and stability.
