Chipmaker Intel Corp. is cutting 15% of its massive workforce — about 15,000 jobs — as it tries to turn its business around to compete with more successful rivals such as Nvidia and AMD.
In a memo to staff, Intel CEO Pat Gelsinger said Thursday that the company plans to save $10 billion by 2025. “Simply put, we need to align our cost structure with our new operating model and fundamentally change the way we operate,” he wrote in the memo posted on Intel’s website. “Our revenue has not grown as expected – and we have yet to take full advantage of powerful trends, such as AI. Our costs are too high, our margins are too low.”
The job cuts come at the end of a disappointing quarter and forecast for the iconic chipmaker founded in 1968 at the start of the PC revolution.
Next week, Gelsinger wrote, Intel will announce an “expanded retirement offer” for eligible employees and offer a program to apply for voluntary layoffs. Intel had 124,800 employees at the end of 2023, according to a regulatory filing.
“These decisions have challenged me to the core and it’s the hardest thing I’ve done in my career,” he said. Most of the layoffs are expected to end this year.
The Santa Clara, California-based company is also suspending its stock dividend as part of a broader plan to cut costs.
Intel reported a second-quarter loss along with a slight drop in revenue and forecast third-quarter revenue below Wall Street expectations.
The company posted a loss of $1.6 billion, or 38 cents per share, in the April-June period. That’s down from a profit of $1.5 billion, or 35 cents a share, a year earlier. Adjusted earnings excluding special items were 2 cents per share.
Revenue fell 1% to $12.8 billion from $12.9 billion.
Analysts, on average, had expected earnings of 10 cents a share on revenue of $12.9 billion, according to a survey by FactSet.
“Intel’s announcement of a significant cost-cutting plan, including layoffs, may bolster its near-term finances, but this move alone is insufficient to redefine its position in the emerging chip market,” it said. eMarketer analyst Jacob Bourne. “The company faces a critical juncture as it leverages US investment in domestic manufacturing and growing global demand for AI chips to move into chip fabrication.”
Aided by Gelsinger’s lobbying efforts, Intel has been a major beneficiary of the Science and Chips Act of 2022, which the Biden administration helped push through Congress at a time of post-pandemic concerns that losing access to chips produced in Asia could sink the US. economy in recession.
In March, President Joe Biden celebrated a deal to give Intel up to $8.5 billion in direct financing and $11 billion in loans to computer chip factories across the country, talking up the investment in the political battleground state of Arizona and calling it a way to “Bring the future to America.” At the time, Gelsinger called the CHIPS Act “the most critical piece of industrial policy legislation since World War II.”
In September 2022, Biden praised Intel as a job creator with its plans to open a new factory near Columbus, Ohio. The president praised them for plans to “build a workforce of the future” for the $20 billion project, which he said would create 7,000 construction jobs and 3,000 full-time jobs, set to paid an average of $135,000 per year.
Shares fell more than 20% to $23.82 in after-hours trading, indicating that Intel could lose roughly $24 billion of its market value when the stock market opens on Friday.
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