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Intel’s financial struggles are forcing the US chipmaker to cut 15,000 jobs to help the company control costs.
“This is a tough day for all of us, and there will be more tough days ahead,” Intel CEO Pat Gelsinger told employees in a publicly shared memo.
The job cuts mean a more than 15% reduction to Intel’s overall workforce, with the majority of the layoffs occurring by year’s end. Gelsinger said the changes are necessary, citing a need to revamp Intel’s entire cost structure to maintain financial stability.
“Our revenues have not grown as expected —and we’ve yet to fully benefit from powerful trends, like AI,” he wrote in the memo. "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.”
Intel made the announcement as it reported Q2 earnings, which it said were “disappointing.” During the quarter, Intel’s revenue dropped 1% year-over-year to $12.8 billion while the company posted a $1.6 billion loss in income for the period.
The company is facing high costs as Intel invests billions in R&D and building new chip factories in the US and Europe. Not helping the matter is stagnating demand for PCs amid growing competition from rivals, including Qualcomm, AMD, and Apple. Meanwhile, Nvidia has been dominating the sector for AI-focused GPUs.
To turn things around, Gelsinger announced a cost reduction plan designed to help Intel save over $10 billion in 2025. The plan not only calls for layoffs but also slashes spending in R&D, marketing, and administrative operations starting this year and into 2025 and 2026. Importantly, Intel also plans to reduce its capital expenditures—which have involved building new chip factories—by over 20% for this year.
“There’s too much complexity, so we need to both automate and simplify processes,” Gelsinger said. “It takes too long for decisions to be made, so we need to eliminate bureaucracy.”
Still, the company remains focused on “maintaining core investments” to improve its chip manufacturing technology. In his memo, Gelsinger added: “Next week, we’ll announce a companywide enhanced retirement offering for eligible employees and broadly offer an application program for voluntary departures.”