Intel Announces 15% Workforce Layoff and $10 Billion Cost Reduction Program

Intel, the big chipmaker, recently announced a significant cost-reduction program that includes cutting 15% of its workforce, amounting to approximately 18,795 layoffs by the end of 2024. This move comes as Intel posted lackluster earnings for the second quarter of this year, with revenue down 1% from the previous year. In contrast, rival company Advanced Micro Devices reported a 9% increase in revenues for the same period. Intel’s CEO, Pat Gelsinger, acknowledged that the company’s financial performance was disappointing and that the second half of the year would be more challenging than expected.

To address these challenges, Intel has outlined a cost-reduction plan that focuses on four key priorities. Firstly, the company aims to reduce operating expenses by streamlining operations and cutting spending and headcount. They plan to reduce non-GAAP R&D and marketing, general, and administrative expenses to approximately $20 billion in 2024 and approximately $17.5 billion in 2025. Secondly, Intel plans to reduce capital expenditures by more than 20% in 2024, bringing the total to between $25 billion and $27 billion. They also aim to generate $1 billion in savings in non-variable cost of sales by 2025. Lastly, Intel will maintain core investments to execute its long-term strategy, including investments in process technology, products, and the semiconductor supply chain.

While these cost cuts and restructuring efforts are necessary for Intel’s long-term sustainability, they come with significant challenges and sacrifices. Intel’s CEO acknowledged the difficulty of these decisions and pledged to prioritize a culture of honesty, transparency, and respect during the transition. The company also announced the suspension of dividends starting in the fourth quarter to prioritize liquidity for future investments.

Despite the current challenges, Intel remains committed to its long-term strategy and continues to innovate in key areas. The company has shipped over 15 million AI PCs and aims to ship over 40 million by the end of the year. They have also introduced next-generation processors for data centers and AI accelerators that offer improved performance and efficiency. Additionally, Intel is nearing the completion of its five-nodes-in-four-years strategy and aims to launch its Intel 18A products in 2025.

In conclusion, Intel’s cost-reduction program and restructuring efforts are aimed at creating a sustainable financial engine and driving profitable growth. While these changes may be painful in the short term, they are necessary for Intel to stay competitive in the market and regain its financial strength. The company remains committed to its long-term strategy and continues to invest in innovation and technology leadership.