Intel plans to lay off 15,000 workers, or 15% of its workforce, by the end of the year. The chipmaker said it aims to save $10 billion in 2025 after not reporting any profits for the previous three months.
“We plan to achieve $10 billion in cost savings in 2025, which translates to a headcount reduction of approximately 15,000 positions, or 15% of our workforce,” Intel CEO Pat Gelsinger said in a note to employees.
“This is painful news for me to share. I know it will be even harder for you to read. This is an incredibly difficult day for Intel as we embark on some of the most significant changes in the history of our company.”
Gelsinger says the decision is due to the introduction of a fresh operating model that “made it clear that our cost structure was not competitive.”
“For example, our annual revenue in 2020 was about $24 billion higher than the previous year, and yet our current workforce is 10% larger than it was then. There are many reasons for that, but it is not a sustainable path forward,” Gelsinger says.
Intel has been trying to get back on the road to recovery for years; CEO Gelsinger was even part of said proposed recovery plan. Although it wasn’t meant to be. The company faces enormous challenges in trying to transform itself into the profitable enterprise it once was when money was literally pouring in, and it has failed to overcome many of them.
Its foundry has fallen behind the competition and faces huge hurdles to catch up. Only a handful of the silicon inside client processors and graphics processors is actually made by Intel today, and its foundry has posted operating losses of $2.8 billion over the past three months. Many of Intel’s costs have been seen as catching up to rivals like TSMC.
Its processors face stiff competition, not only from AMD but also from ARM—not to mention Intel’s ongoing microcode instability issues. And the fastest-growing computing market, AI, is playing into the hands of another computer company, Nvidia.
Intel’s plan to drastically reduce its workforce will result in massive layoffs that will affect 15,000 employees. That’s the equivalent of nearly half of Nvidia’s entire workforce, or a seriously vast chunk of AMD’s workforce. Intel currently employs more than 120,000 people.
Intel’s CEO outlines some of the ways he plans to prepare for even more challenging times and take “bolder actions,” some of which could impact the products the company decides to make in the future.
One of Gelsinger’s priorities is to simplify the portfolio, which will undoubtedly lead to cutting projects deemed “ineffective.”
It’s uncomplicated to speculate on which ones. Intel’s graphics division has long been the subject of such rumors, but it’s also a key market that’s seen Nvidia’s exponential growth. Either way, nothing’s been confirmed yet, so let’s not make a decision just yet.
Other priorities include suspending dividends or payouts to investors; reducing capital and expenses, eliminating complexity, and further cost savings. In effect, it seems, a move into total money-saving mode and putting an end to the grand plan to spend a lot of cash to get out of a long-term crisis.
