Intel Cuts 18000 Jobs

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Intel has announced a significant restructuring plan resulting in job cuts for 18,000 workers in the company. The news follows a troubling quarterly earnings report, which disclosed a massive $1.6 billion loss in the latest quarter.

Intel Corporation is undergoing its most significant restructuring efforts in the last four decades. The company has announced a 15% reduction in its workforce to reduce its expenditures by $10 billion. The cut will account for up to 19,000 employees of its 125,000-strong workforce. This measure comes amid growing financial uncertainty, including a reported loss of $1.6 billion in its latest quarterly report. The layoffs are expected to be completed by the end of 2024.

The company also announced a 20% cut in capital expenditures compared to previous estimates. While NVIDIA has exploited the AI boom, AMD has seen a 115% YoY growth. Intel’s cuts have come despite $8.5 billion being gained in grants and an $11 billion loan given by the Biden administration. Following this, Intel’s capex will be at only 50% of tech giants such as Microsoft and Amazon. The company is expected to cut R&D, marketing, and non-essential work costs.

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Financial Pressures

Intel has been struggling financially, as disclosed in an underwhelming Q2 report that fell short of Wall Street expectations. The company reported a per-share loss of 38 cents, compared to the 35 cents per-share profit of the previous year. Revenues fell by 1%. Despite adjusted earnings, analysts had expected a 10 cents per share. This restructuring is part of Intel’s strategy to regain its market share from rival firms like Nvidia and AMD.

While the sales of PC and server businesses remain profitable, most of the company’s losses came from its foundry business. Like most competitors, the company relies partially on TSMC to produce some of its most advanced chips. This worsened as Microsoft followed Apple in abandoning Intel chips and launching a new collaboration with Qualcomm. However, the company has some positive news with its Lunar Lake and Panther Lake projects, which will improve its cost structure.

The chip giant’s share price crashed by 25% after the quarterly earnings report was revealed, owing to challenging market conditions and the high costs associated with increased AI chip manufacturing. However, the new cost-cutting measures will save $10 billion in 2025.

Mitigation Measures

Intel plans to reduce its expenditures by simplifying its product portfolio and cutting its underperforming products from the production line. In addition to the layoffs, Intel has also announced its intentions to halt dividend distributions to improve liquidity and facilitate economic stability. The company is set to focus its US investments on domestic production capabilities and meeting the demand for AI chips to support chip fabrication facilities.

Takeaways

While such measures are likely to improve the company’s financial performance in the short term, substantial uncertainty remains concerning the company’s position in the chip market. These decisions will likely be pivotal for Intel as it seeks to balance economic growth with the need for innovation for the foreseeable future.

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