Intel to Lay Off 15,000 Workers, Cut US$10 Billion in Costs

Intel will cut over 15,000 jobs and US$10 billion in costs by 2025, addressing recent financial losses and streamlining operations. The move includes slashing R&D and marketing budgets, reducing capital expenditures, and suspending its dividend. This major restructuring aims to stabilize the company and improve efficiency amid ongoing financial challenges, states the company press release. 

The semiconductor giant, with over 125,000 employees, plans to lay off more than 15,000 workers, about 15% of its workforce. The company will also significantly reduce its R&D and marketing expenditures through 2026, cut capital expenditures by over 20% this year, and conduct a comprehensive review of all active projects and equipment to ensure cost efficiency, reports The Verge. 

Intel reported a loss of US$1.6 billion for 2Q24, a notable increase from the US$437 million loss reported in the previous quarter. Revenue for 2Q24 was US$12.8 billion, down just 1% year over year. While Intel's PC and server businesses remain profitable, the company has been struggling with significant losses in its Foundry business due to heavy investments in new factories and advanced technology.

"Simply put, we must align our cost structure with our new operating model and fundamentally change the way we operate. Our revenues have not grown as expected – and we have yet to fully benefit from powerful trends, like AI. Our costs are too high, our margins are too low. We need bolder actions to address both – particularly given our financial results and outlook for the second half of 2024, which is tougher than previously expected,” wrote Pat Gelsinger, CEO, Intel, in a letter to Intel’s workforce. 

Despite these challenges, Intel continues to receive support through up to US$8.5 billion in US government funding from the CHIPS Act. However, the company has faced criticism for its inconsistent financial performance, with its stock being the worst-performing tech stock in the S&P 500 this year.

Intel's new strategy includes reducing operational costs and simplifying its portfolio by eliminating non-essential projects and streamlining processes. The company will also suspend its stock dividend to prioritize investments in its core technology and manufacturing capabilities.

Looking ahead, Intel plans to introduce its Lunar Lake AI laptop chip in September, with the Panther Lake chip expected to ramp up in the latter half of 2025, reports The Verge. While Lunar Lake is anticipated to provide only modest improvements, Panther Lake, which will be manufactured using Intel's 18A process, is expected to offer significant benefits in terms of cost structure and volume.

 Gelsinger acknowledged the painful nature of these decisions and emphasized the need for bold actions to address the company's financial challenges and adapt to new market realities. “These decisions have challenged me to my core, and this is the hardest thing I have  done in my career. My pledge to you is that we will prioritize a culture of honesty, transparency and respect in the weeks and months to come, " he added.