Intel to LAY OFF 15,000 WORKERS, Focus on Chipmaking Recovery With $8.5 Billion in Federal Aid
Intel announced today that it will eliminate 15% of its staff, or more than 15,000 positions, as it attempts to recover from dismal results. In March, the US government announced that it would provide Intel $8.5 billion to assist it rebuild its US chipmaking operations.
Intel reported that its second-quarter revenues were down 1 percent year on year. “We do not take this lightly, and we have carefully considered the impact this will have on the Intel family,” CEO Pat Gelsinger stated on an earnings call today. “These are difficult but necessary decisions. These cutbacks do not influence our capacity to carry out our strategy.”
The job losses would affect sectors such as sales, marketing, and administration, according to Intel, and are part of a larger cost-cutting strategy. Intel announced a 5% job cut last year, and this move follows that. In after-hours trading, the company’s stock plunged more than 17%.
“It is a lot of jobs,” Patrick Moorhead, chief analyst at Moor Insights & Strategy, a chip industry firm, tells WIRED. However, Moorhead believes it is a positive indicator that the potential layoffs are targeted rather than widespread. “Layoffs don’t always mean there’s something wrong with a company, but to me, it’s all about the strategy,” adds the analyst.
Intel is struggling to carry out a difficult recovery strategy that includes focussing on building chips for others through its foundry division and transitioning more quickly to cutting-edge production methods. In February, the business announced that its faster road map for developing cutting-edge chips was on track, promising to become the world’s second-largest foundry company by 2030. Intel stated today that it is still on schedule to achieve these objectives.
The money Intel received in March is the largest grant provided by the US government thus far under the CHIPS Act, 2022 legislation established, which would appropriate $52.7 billion to restore chip manufacturing and invest in chip research and worker training. The corporation will also be eligible for federal loans of up to $11 billion, as well as tax credits of up to 25% on investments of $100 billion.
The $8.5 billion allocated to Intel will be used to create plants in Arizona, New Mexico, Ohio, and Oregon. Intel stated that the investments it is making in these chipmaking plants will produce over 10,000 corporate employment, 20,000 construction jobs, and thousands more roles in supporting industries.
“The money that Intel has brought in is being used to build factories,” says Moorehead of Moor Insights and Strategy. “That isn’t stopping, and it does create a lot of jobs.”
Following decades of success due to the rise of personal computing, Intel failed to capitalize on the smartphone era, losing market share to chips based on Arm designs. More recently, Nvidia, a firm that began by providing graphics chips for gaming, has risen to prominence due to the relevance of its hardware in training AI algorithms. Intel has also slipped behind its manufacturing rivals, TSMC in Taiwan and Samsung in South Korea.
The US government is assisting Intel’s reboot because sophisticated chips are viewed as critical to economic and geopolitical competitiveness. The epidemic emphasized the fragility of the global supply chain that many US firms rely on. Advanced chips are also required for developing AI, which is increasingly viewed as a national priority.
Today, the United States produces 12% of the world’s semiconductors, compared to 37% in the 1990s. McKinsey predicts that the semiconductor industry’s value will increase dramatically this decade, from $600 billion in 2021 to more than $1 trillion by 2030.
According to Dan Hutcheson, an analyst at Tech Insights, Intel’s revenue deficit indicates the continuous transition toward AI-focused data center computing. “It used to be that [Intel] owned the data center,” Hutcheson claims. “What we’ve seen in the last few years is that the big hyperscalers have focused on AI and GPUs—entire AI data centers.”
Hutcheson says Intel’s overarching plan appears to make sense, but the cuts indicate that the business is failing to address the dysfunction that caused it to fall behind in the first place.