Intel is reportedly planning to cut thousands of jobs around the world. The US chipmaker has been investing heavily in infrastructure projects over the last 18 months, but is now set to reduce its workforce as the market for PCs contracts.
News of the Intel job cuts was first reported Bloomberg, which says the layoffs could be announced as early as next month. They will affect about the 20% of the company’s workforce, including departments such as sales and marketing, says the report, citing people with knowledge of the situation.
Intel employs over 100,000 people around the world. Tech Monitor has approached the company for comment on the report.
Intel job cuts could hit company’s growth plan
Intel has been trying to regain ground in the semiconductor market, having fallen behind Taiwan’s TSMC and South Korea’s Samsung when it comes to the production of advanced chips, and seen previously significant customers like Apple move to start developing their own silicon. Meanwhile its dominance in the server market is being eaten into by AMD, as well as Arm-based chips from the likes of Ampere Computing.
Since CEO Pat Gelsinger returned to the company in 2021, Intel has been pursuing a strategy known as IDM 2.0, which will see it manufacture chips for third parties in bulk for the first time. This is a bid to take on TSMC, which currently rules the roost when it comes to contract chip manufacturing.
To back these plans, Intel has announced it wants to build a series of new chip foundries, or fabs, in the US, as well as making a major investment in Europe, with a leading edge chip production plant planned for Germany. The company has benefited from semiconductor legislation in the US and Europe, which could see it and its rivals in line for generous subsidies.
Gelsinger told staff in a memo on Monday that the company would be adopting an “internal foundry” model for the production of its own chips and those it makes for third parties. He said a “IDM 2.0 acceleration office” was being formed within the company to bring this new operating model to life.
“Embracing an internal foundry model will enable us to deliver the competitive cost structure and predictable cadence of leadership products essential to our success,” Gelsinger wrote.
Slowdown in the PC market hits chipmakers
Intel is not the only company which announced major fab-building plans in the wake of the global chip shortage, with TSMC and Samsung also plotting expansions. But the war in Ukraine, the wider economic downturn, and falling demand for chips could see these schemes scaled back.
With budgets tightening around the world, demand for PCs is falling. As reported by Tech Monitor yesterday, Gartner says computer shipments dropped 19.5% in the third quarter of 2022, the steepest decline since the mid-1990s.
Intel is not the only company to have suffered - AMD last week reported quarterly revenue of $5.6bn, well below the expected $6.7bn, with the company blaming “weaker than expected PC market and significant inventory correction actions across the PC supply chain”.
Daniel Newman, principal analyst at Futurum Research, said: "With economic activity slowing, fed tightening, and a mass of PC purchases already made in the past 1-2 years both by consumers and businesses, it shouldn’t be surprising to see a steep, but likely short downturn in PC demand—highlighted not just by this research but recent results shared by AMD."