Intel has announced its plans to lay off approximately 15% of its workforce as part of a cost reduction programme, targeting savings of more than $10bn in 2025 in an effort “to increase efficiency and market competitiveness”.
The mass job cuts will impact nearly 15,000 employees of the American semiconductor company.
Intel conveyed its decision as part of the company’s financial results for the second quarter of 2024 (Q2 2024).
The company intends to complete the majority of layoffs by the end of this year.
Intel to begin process of retirement and redundancy offerings
Intel plans to announce a company-wide enhanced retirement package for eligible employees and introduce a voluntary redundancy programme in the coming week.
Additional measures in the cost reduction plan include company-wide restructuring, operational realignment, and cuts to operating expenses and capital expenditures.
According to Intel, these initiatives will provide a clear path toward a sustainable business model, ensuring the financial resources and liquidity necessary to support the company’s long-term strategy.
Through the actions, Intel aims to cut non-GAAP research and development (R&D) and marketing, general, and administrative (MG&A) expenses to approximately $20bn this year and further reduce them to about $17.5bn in 2025.
Costs too high, margins too low
Intel CEO Pat Gelsinger said: “Simply put, we must align our cost structure with our new operating model and fundamentally change the way we operate. Our revenues have not grown as expected – and we’ve yet to fully benefit from powerful trends, like AI.
“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.”
For Q2 2024, Intel reported a loss of $1.65bn, compared to net income of $1.47bn in the same quarter of the previous year.
The net revenue of the semiconductor giant in the reported quarter ended 29 June 2024 was $12.83bn, a decrease of 1% compared to $12.95 in the corresponding quarter of 2023.
Intel chief financial officer David Zinsner said: “Second-quarter results were impacted by gross margin headwinds from the accelerated ramp of our AI PC product, higher than typical charges related to non-core businesses and the impact from unused capacity.
“By implementing our spending reductions, we are taking proactive steps to improve our profits and strengthen our balance sheet. We expect these actions to meaningfully improve liquidity and reduce our debt balance while enabling us to make the right investments to drive long-term value for shareholders.”
Intel’s client computing group (CCG) reported revenues of $7.4bn in Q2 2024, a 9% growth compared to Q2 2023. Its data centre and AI (DCAI) unit and network and edge (NEX) unit had revenues of $3bn and $1.3bn, respectively.
In the Q2 2024, the company generated $2.3bn in cash from operations.
Intel expects its Q3 2024 total revenue to be in the range of $12.5bn and $13.5bn.
Earlier this week, Intel prevailed in the UK segment of a global patent dispute with American rival R2 Semiconductor, following a legal battle over claims of infringement related to chips and processors with fully integrated voltage regulators.
In another recent development, Intel in July, pinpointed the source of widespread instability issues impacting its 13th and 14th Generation Core processors. The chipmaking company confirmed that the problem stems from “elevated operating voltage” in these CPUs, which results from a microcode algorithm that triggers incorrect voltage requests to the processor.
