Intel to axe over 18,000 jobs by 2025 to save $10 billion

Intel said it will downsize more than 15% of its workforce (approx over 18,000 employees) as part of a $10 billion cost reduction plan for 2025. Intel currently employs 1,24,800 workers. This makes it the biggest layoffs by a single tech firm since Facebook-parent Meta revealed plans to cut 10,000 jobs in March 2023.

Intel announced its earnings for the second quarter of 2024 on Thursday, alongside a major restructuring plan aimed at cutting costs and making the firm more competitive.

The chip maker’s overall revenue fell 1% compared to the same period last year to reach $12.8 billion. Revenue from data and AI business fell by 3%, while the foundry business declined by 4%.

“Our Q2 financial performance was disappointing, even as we hit key product and process technology milestones,” said Pat Gelsinger, CEO of Intel.

Intel CFO David Zinsner attributed the dip in performance to headwinds from the accelerated ramp up of AI PC products, which affected the firm’s gross margin. He also mentioned unused capacity (of chip manufacturing facilities) and higher than usual charges on non-core businesses.

In addition to streamlining operations and cutting expenses and headcount, Intel plans to reduce spending on research & development,  marketing, general and administrative tasks to close to $20 billion in 2024 and $17.5 billion in 2025. Intel said it is aiming to complete the majority of the headcount reduction by the end of 2024.

Further, Intel plans to generate $1 billion in savings in non-variable cost of sales, while

cutting gross capital expenditures this year by more than 20% from prior projections. This means the firm will cut back on spending on new factories.

Intel is currently building new chip plants in the US and Germany. In January 2022, Intel announced that it will invest $100 billion by 2027 to build the world’s largest chip-making complex in the US state of Ohio. Around $20 billion of that investment is expected to come from federal funding and loans provided by the US government under the CHIPS and Science Act 2022.

In 2022, Intel also opened its foundry business to other chipmakers, such as Qualcomm and MediaTek that design chips but don’t have their own manufacturing plants.

While Intel has been tinkering with AI chips since acquiring California-based AI processor maker Movidus in 2016, it is yet to fully capitalize on the generative AI boom, which has emerged as a significant growth driver for rival chip companies.

Intel’s arch rival AMD’s overall revenue during second quarter of 2024 grew  9% YoY to $5.8 billion while its data center business registered a record 115% YoY growth in Q2 2024. AMD doubled its data center revenue compared to the same period last year to reach $2.8 billion on the back of strong demand for its AI chip, particularly Instinct MI300.

Taiwanese chipmaker Nvidia has also seen an unprecedented growth, especially after the release of ChatGPT in November 2022 and the subsequent surge in demand for its AI chips, particularly the Hopper H100. In June, it became the world's most valuable company, worth $3.34 trillion, surpassing tech giants Microsoft and Apple.

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