Intel (NASDAQ: INTC) is undergoing a major shift, cutting over 15,000 jobs in an effort to save $10 billion by 2025. This decision follows disappointing financial results, including a $1.6 billion loss in Q2 2024.
Pat Gelsinger, CEO at Intel, emphasized the need for bolder actions to align the company’s cost structure with its evolving operational model, especially as Intel struggles to gain momentum in emerging markets like AI.
The company’s shift involves cutting research and development, marketing, and capital expenditures while focusing on simplifying its portfolio and reducing layers of management. Despite the challenges, Intel remains committed to its IDM 2.0 strategy, aiming to reestablish its leadership in process technology and maintain critical investments in innovation.
Why It Matters: Intel’s downsizing reflects a larger trend in the tech industry where major companies are grappling with economic pressures and shifting market dynamics. As Intel navigates this challenging period, the company’s ability to execute its strategy and remain competitive in key areas like AI and semiconductor manufacturing will be critical.
- Workforce Reduction: Intel announced a reduction of over 15,000 roles, accounting for more than 15% of its workforce, as part of a $10 billion cost-saving plan aimed at 2025. These layoffs will be completed by the end of 2024, following a smaller reduction last year.
- Financial Performance: Intel reported a significant loss of $1.6 billion in Q2 2024, a sharp increase from the $437 million loss in the previous quarter. The company has struggled with inconsistent revenues and profitability, contributing to its decision to cut costs aggressively.
- Product and Market Challenges: Intel’s Foundry business has been a significant drain on resources, with losses totaling $7 billion in 2023 alone. Although Intel’s PC and server businesses remain profitable, the company faces intense competition, particularly in AI and graphics, where it has yet to establish a strong market presence.
- Future Outlook: Despite current struggles, Intel plans to continue its IDM 2.0 strategy, focusing on reestablishing process technology leadership and expanding manufacturing capacity. The company’s next-generation products, like the Lunar Lake and Panther Lake chips, are expected to play a crucial role in its recovery, though substantial improvements are not anticipated until 2025 and beyond.
