Intel will lay off more than 15,000 employees

Intel is launching a massive wave of layoffs as part of its cost-savings plan. The company plans to reduce its headcount by 15%, with the aim of achieving cost savings of $10 billion by 2025. This means laying off more than 15,000 employees. Considering that the company has more than 125,000 employees in total, layoffs could total around 19,000 people.

Intel plans to reduce research and development (R&D) and marketing spending by billions of dollars each year. The company will cut capital expenditures by more than 20% this year and restructure to cut redundant business. Additionally, active projects and equipment will be reviewed to prevent unnecessary expenses.

In a memo sent to employees, Intel CEO Pat Gelsinger stated that this decision was difficult for him and will be even more difficult for employees. “We must align our cost structure with our new business model and fundamentally change the way we operate,” Gelsinger said. “Our revenues have not grown as expected and we have not yet fully benefited from the strong trends, especially artificial intelligence (AI),” he said.

Intel’s financial situation and the reason for layoffs

Intel announced a loss of $1.6 billion for the second quarter of 2024. That’s well above last quarter’s $437 million loss. The company’s second-quarter revenue was $12.8 billion, representing a decline of just 1% year-over-year. However, some of Intel’s businesses continue to be successful. Especially the PC and server business lines are profitable.

Although the company is experiencing major losses in its Foundry business related to chip production ($7 billion in 2023 and $2.8 billion this quarter), product sales remain relatively stable. It will also receive up to $8.5 billion in funding from the U.S. government under the CHIPS Act.

Intel admits that it is not a major player in AI server chips and notes that it has not yet achieved impressive success in the graphics field. The company had to heavily revamp its existing chips to compete with the latest laptop chips. Large customers such as Microsoft began to prefer Qualcomm chips instead of Intel in their new devices.

Intel CFO David Zinsner said Lunar Lake, the company’s new flagship AI laptop chip, won’t be enough on its own. However, 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 expanded retirement offers to eligible employees and accept voluntary separation applications. In this way, the impact of layoffs will be tried to be reduced. 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 prioritized.