Intel to Cut Thousands of Jobs in Bid to Revive Business

Santa Clara, California — Intel, one of the leading companies in the computer chip industry, has announced that it will be laying off a significant portion of its workforce as part of a cost-cutting plan to revive its business. The decision comes as Intel aims to compete with rivals and boost its position in the AI chip market.

In a memo to employees on Thursday, Intel CEO Pat Gelsinger shared the disappointing financial results for the second quarter of 2024, which ended on June 29. The company reported a loss of $1.6 billion, a sharp decline from the previous year’s profit of $1.5 billion. Revenue also slipped by 1% compared to the same period last year, falling short of analysts’ expectations.

To address these challenges, Intel has unveiled a cost-saving plan that includes a reduction of its workforce by more than 15%. This translates to between 15,000 and 19,000 jobs, out of its current workforce of over 116,500 people. The majority of these job cuts are expected to be completed by the end of 2024.

“Simply put, we must align our cost structure with our new operating model and fundamentally change the way we operate,” Gelsinger wrote in the memo. “Our revenues have not grown as expected, and we’ve yet to fully benefit from powerful trends like AI. Our costs are too high, our margins are too low.”

The layoffs are part of a broader effort by Intel to cut costs and boost its financial performance. The company aims to save $10 billion in 2025 by reducing operating expenses and capital expenditure. This includes slashing research and development expenses, marketing costs, and capital investments.

Intel’s finance chief, Dave Zinsser, also revealed that the company is accelerating the transfer of Intel 4 and 3 chip wafer production from its Oregon facility to a plant in Ireland. While this move will increase costs in the short term, it is expected to lead to higher gross margins in the long run.

The job cuts come as Intel struggles to keep up with rivals in the AI chip market, such as Nvidia and Taiwan’s TSMC. While Intel has been investing in developing advanced AI processors, its costs have increased and profit margins have come under pressure. As a result, Intel’s shares have fallen more than 40% so far this year.

Following the announcement, Intel’s share price slumped by 20% in extended trade, resulting in a loss of more than $24 billion in market value. The company’s stock had already closed down 7% on Thursday, amid a broader decline in U.S. chip stocks.

Despite the challenges, Intel remains committed to its turnaround plan. “We believe the trade-offs are worth it,” Gelsinger said during a conference call with analysts. “The AI PC will grow from less than 10% of the market today to greater than 50% in 2026.”

The layoffs and cost-cutting measures are expected to help Intel streamline its operations and improve its financial performance in the coming years. However, analysts believe that turning around the foundry business will take time, and Intel may continue to lag behind its rivals in the AI chip market in the short term.