Chipmaker Intel Corp. is cutting 15% of its massive workforce — about 15,000 jobs — because it tries to show its business around to compete with more successful rivals like Nvidia and AMD.
In a memo to staff, Intel CEO Pat Gelsinger said Thursday the corporate plans to save lots of $10 billion in 2025. “Simply put, we must align our cost structure with our latest operating model and fundamentally change the way in which we operate,” he wrote within the memo published to Intel’s website. “Our revenues haven’t grown as expected – and we’ve yet to completely profit from powerful trends, like AI. Our costs are too high, our margins are too low.”
The job cuts are available in the heels of a disappointing quarter and forecast for the enduring chip maker founded in 1968 in the beginning of the PC revolution.
Next week, Gelsinger wrote, Intel will announce an “enhanced retirement offering” for eligible employees and offer an application program for voluntary departures. Intel had 124,800 employees as of the top of 2023 in line with a regulatory filing.
“These decisions have challenged me to my core, and that is the toughest thing I’ve done in my profession,” he said. The majority of the layoffs are expected to be accomplished this 12 months.
The Santa Clara, California-based company can be suspending its stock dividend as a part of a broader plan to chop costs.
Intel reported a loss for its second quarter together with a small revenue decline, and it forecast third-quarter revenues below Wall Street’s expectations.
The corporate posted a lack of $1.6 billion, or 38 cents per share, within the April-June period. That’s down from a profit of $1.5 billion, or 35 cents per share, a 12 months earlier. Adjusted earnings excluding special items were 2 cents per share.
Revenue slid 1% to $12.8 billion from $12.9 billion.
Analysts, on average, were expecting earnings of 10 cents per share on revenue of $12.9 billion, in line with a poll by FactSet.
“Intel’s announcement of a major cost-cutting plan including layoffs may bolster its near-term financials, but this move alone is insufficient to redefine its position within the evolving chip market,” said eMarketer analyst Jacob Bourne. “The corporate faces a critical juncture because it leverages U.S. investment in domestic manufacturing and the surging global demand for AI chips to ascertain itself in chip fabrication.”
Helped by Gelsinger’s lobbying efforts, Intel has been a significant beneficiary of the 2022 CHIPS and Science Act, which the Biden administration helped shepherd through Congress at a time of concerns after the pandemic that the lack of access to chips made in Asia could plunge the U.S. economy into recession.
In March, President Joe Biden celebrated an agreement to supply Intel with as much as $8.5 billion in direct funding and $11 billion in loans for computer chip plants across the country, talking up the investment within the political battleground state of Arizona and calling it a way of “bringing the long run back to America.” On the time, Gelsinger called the CHIPS Act “probably the most critical industrial policy laws since World War II.”
In September 2022, Biden praised Intel as a job creator with its plans to open a latest plant near Columbus, Ohio. The president praised them for plans to “construct a workforce of the long run” for the $20 billion project, which he said would generate 7,000 construction jobs and three,000 full-time jobs set to pay a median of $135,000 a 12 months.
Shares plunged greater 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 Friday.
