- Intel plans to lay off over 15% of its workforce, amounting to 15,000 employees, as part of a strategy to reduce spending by $10 billion by 2025.
- The decision follows a disappointing second-quarter earnings report and a grim outlook for the second half of 2024.
OUR TAKE
Intel’s drastic measures reflect its struggle to remain competitive amid rapid technological advancements. While layoffs and cost reductions may stabilise the company in the short term, the challenge will be regaining its position in the evolving tech landscape, especially as rivals thrive in the AI sector.
— Zoey Zhu, BTW reporter
What happened
Intel announced significant layoffs, affecting more than 15% of its workforce, equivalent to 15,000 employees. This move, disclosed in a memo to staff on Thursday, is part of a broader strategy to cut costs by $10 billion by 2025. The decision comes after a disappointing second-quarter earnings report and a bleak forecast for the remainder of 2024.
CEO Pat Gelsinger acknowledged the company’s financial struggles in the memo, citing high costs, low margins, and missed revenue growth expectations. He emphasised the need for bolder actions to address these issues, particularly given the company’s underwhelming financial results and challenging outlook for the latter half of the year.
Also read: Intel confirms launch for ‘Lunar Lake’ laptop chips on September 3
Also read: Intel cuts thousands of jobs to help finance recovery
Why it’s important
Intel’s layoffs signal a critical juncture for the company, which has struggled to capitalise on the AI boom compared to rivals like Nvidia. Historically a leader in CPU chip innovation, Intel has lagged in embracing newer technologies, such as smartphones and AI. The company’s annual revenues declined by $24 billion between 2020 and 2023, despite a 10% increase in its workforce during the same period.
The second-quarter earnings report highlighted a 1% decline in revenues year-over-year, attributed to gross margin challenges related to AI PC products. In response, Intel is also suspending its shareholder dividend starting in the fourth quarter of 2024 and anticipates tougher financial conditions ahead.
In addition to layoffs, Intel is offering a “voluntary departure” program and an enhanced retirement package for eligible employees. These measures aim to further reduce costs and streamline operations as the company navigates a difficult period.
