Intel has announced its plans to lay off 15,000 staff by the end of the year as part of a planned effort to deliver “$10 billion in cost savings in 2025.”
This is part of the software giant’s cost reduction plan that might see as many as 19,000 job losses, around 15% of staff.
Announced in a memo delivered to staff after their second-quarter 2024 earnings call, Intel has stated that they need to “fundamentally change the way we operate,” and acknowledged that “revenues have not grown as expected – and we’ve yet to fully benefit from powerful trends, like AI.”
According to the earnings call, which occurred yesterday (August 1), Intel intends to reduce both operation and capital expenses to meet its cost reduction goals. It hopes to reduce R&D and marketing expenses to $20 billion in 2024, $17.5 billion in 2025, and further in 2026, by consolidating teams and stopping non-essential work. They also plan to reduce capital expenditure by more than 20% in 2024.
What’s behind the Intel layoffs?
Intel reported earlier this year that its chipmaking business saw $7 billion in operating losses in 2023. They have not yet been able to reverse this trend, with a Q2 2024 loss of $1.6 billion.
“Our Q2 financial performance was disappointing, even as we hit key product and process technology milestones,” said Intel CEO, Pat Gelsinger.
In addition to these reported losses, the uncertainty around artificial intelligence (AI) is possibly a driving force behind these cost-cutting measures, with investors and financial forecasters showing concern about the long road ahead to AI profitability.
According to David Zinsner, Intel’s CFO, the “accelerated ramp” of Intel’s AI PC, a type of computer that integrates AI from the hardware level up, has impacted second-quarter results.
Intel is relying heavily on the success of the AI PC, where it is currently the market leader. They have shipped “more than 15 million AI PCs since December 2023, far more than all of Intel’s competitors combined, and on track to ship more than 40 million AI PCs by year-end.”
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