Intel announced it is cutting more than 15% of its workforce, or 17,500 people, as part of a restructuring plan.
Intel had 116,500 employees worldwide as of June 29, excluding some subsidiaries. The layoffs are expected to be largely complete by the end of the year.
Intel told The Verge that the number of layoffs would be “well above 15,000.” Reuters estimated 15% would be 17,500 people, while The Verge said the number of layoffs could be as high as 19,000.
In a statement late on August 1, Intel said that in addition to the layoffs, it would also suspend its dividend starting in the fourth quarter of fiscal 2024 to focus on its loss-making manufacturing businesses. The US chipmaker forecast lower-than-expected third-quarter 2024 revenue, as market demand for traditional data center chips is trending down amid the AI chip craze - an area where the company is lagging behind rivals.
Intel logo at MWC exhibition, February 2023.
Intel shares plunged 20% after the announcement, wiping out more than $24 billion in market value. Meanwhile, shares of AI chip companies like Nvidia and AMD rose.
"We need fewer people in our headquarters, more people out in the field supporting customers," Intel CEO Pat Gelsinger told Reuters after the job cuts were announced.
Intel is "in the middle" of a restructuring plan, focusing on developing AI processors. The company is also ramping up semiconductor production to regain the technological advantage it lost to TSMC - the world's largest contract chipmaker. However, the strategy of ramping up manufacturing plants has increased costs, putting pressure on profits.
In an August 1 announcement, Intel plans to cut spending and operating expenses by about $10 billion between now and 2025. "This plan shows that Intel's leadership is willing to take strong and drastic measures to address the problem. But I wonder if it is enough and whether it is too late, given that Gelsinger has been in charge for more than three years," said Michael Schulman, chief investment officer at Running Point Capital.
Other analysts say Intel's restructuring plan will take years. The company is also not capable of shaking TSMC's leading position. In addition, the US revocation of its export license to China in May also affected Intel's business in the world's most populous market.
