Intel Slashes 15,000 Jobs in Major Restructuring Effort
Amsterdam, Friday, 2 August 2024.
Intel announces plans to cut 15% of its workforce, approximately 15,000 jobs, as part of a $10 billion cost-saving strategy by 2025. The move comes as the chipmaker struggles to compete with rivals Nvidia and AMD in the evolving AI-driven market.
Background of Intel’s Struggles
Once a dominant force in the chip market, Intel has faced increasing competition from companies like Nvidia and AMD. The company’s recent financial performance highlights these struggles, with Intel reporting a $1.6 billion loss for Q2 2024, a significant decline from a profit of $1.5 billion in the same period last year. Revenues also fell by 1% to $12.8 billion, missing analysts’ expectations of $12.9 billion[1]. CEO Pat Gelsinger has acknowledged the challenges, stating that Intel has yet to fully benefit from powerful trends, such as AI[1].
Impact on Workforce and Operations
The layoff of 15,000 employees represents about 15% of Intel’s workforce, which totals approximately 134,000 people. This move is part of a broader strategy to reduce costs by $10 billion by 2025. According to sources, Intel plans to cut expenses primarily in marketing and research and development, resulting in annual savings of about 20%[1][2]. The company is also scrutinizing all active projects and equipment to eliminate unnecessary costs[3].
Challenges in AI and Manufacturing
Intel’s competitors have been capitalizing on the growing demand for AI chips, a market where Intel has lagged. This delay has prevented the company from reaping the benefits of the AI boom, unlike its rivals. Additionally, Intel’s manufacturing division, Foundry, has been a significant financial drain. Last year, the division lost $7 billion, and recent quarterly losses amounted to $2.8 billion[1]. Despite these challenges, Gelsinger remains optimistic that Intel’s new AI-capable chips will improve the situation by next year[1].
Global Market and Competitiveness
Intel’s restructuring effort is part of a global trend among tech giants facing similar pressures. Companies like Amazon, IBM, Tesla, Google, and others have also announced significant layoffs in 2024, citing various reasons such as economic uncertainty and the rise of AI replacing human jobs[4]. Intel’s plan to save $10 billion and focus on competitive technologies is seen as a necessary step to regain its footing in the industry. However, analysts like Jacob Bourne emphasize that cost-cutting alone won’t redefine Intel’s position in the evolving chip market[1].
Future Prospects and Innovations
Looking ahead, Intel is banking on its new AI-capable chips and a reinvigorated focus on efficient, low-power laptops to drive future growth. Gelsinger forecasted that AI PCs would grow from less than 10% of the market today to over 50% by 2026[1]. Additionally, Intel has benefited from the 2022 CHIPS and Science Act, which aims to bolster U.S. semiconductor manufacturing. This includes substantial investments in Intel’s chip plants in Arizona and a new facility near Columbus, Ohio, expected to create thousands of jobs[1].