Intel announced it is cutting more than 15% of its workforce, or 17,500 people, to accelerate its 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.
Responding to The Verge, Intel said the number of cuts was “higher than 15,000.” Reuters estimated 15% equal to 17,500 people, while The Verge said the number of employees who had to leave could be up to 19,000.
In a statement late on August 1, Intel said that in addition to reducing its workforce, the company will 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 fever – a field where the company is lagging behind its competitors.
Intel shares plunged 20% after the announcement, wiping out more than $24 billion in market capitalization. Meanwhile, shares of AI chip companies like Nvidia and AMD rose.
“We need fewer people at 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 midst of a restructuring plan focused 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 the response is too late, when 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 will take years. The company is also unlikely to be able to shake TSMC’s lead. In addition, the US revocation of its export license to China in May has also affected Intel’s business in the world’s most populous market.
