Intel Corp. is gearing up for a significant reduction in its workforce as part of a broader strategy to cut costs and rejuvenate its business amidst declining earnings and lost market share.
Anticipated Announcement
According to sources familiar with Intel’s plans, an announcement regarding the job cuts could come as soon as this week. Currently, Intel employs approximately 110,000 people, not counting those at units being spun off. The company is scheduled to reveal its second-quarter earnings on Thursday.
Investment in Research and Development
Under CEO Pat Gelsinger’s leadership, Intel has been heavily investing in research and development to boost its technology and reclaim its standing in the semiconductor market. This comes in response to the company’s weakened position as competitors like Advanced Micro Devices Inc. (AMD) have gained significant market share. Intel has not commented on the upcoming layoffs.
The anticipated job cuts have led to a modest rise in Intel’s stock, which climbed around 1% in late trading to $31.11 per share.
Competitive Landscape and Market Challenges
Intel is facing intense competition, particularly from Nvidia Corp., which has made significant strides in developing advanced semiconductors for artificial intelligence applications. Additionally, Intel is dealing with fluctuating demand for its core products—chips used in laptops and desktops.
In a strategic move to bolster its market position, Gelsinger is focusing on improving Intel’s technology and is planning to build new factories dedicated to manufacturing semiconductors for other companies. This initiative is part of Intel’s larger strategy to regain its leadership role in the industry.
New Manufacturing Leadership
Last week, Intel appointed Naga Chandrasekaran from Micron Technology Inc. as its new Chief Global Operations Officer. Chandrasekaran will oversee all manufacturing operations, a key element in Gelsinger’s turnaround strategy.
Previous Workforce Reductions and Cost-Cutting
In 2023, Intel cut about 5% of its workforce, reducing its headcount to 124,800 by the year’s end. This followed job cuts announced in October 2022. The company has also been reducing spending in other areas, with plans to save up to $10 billion by 2025.
Financial Outlook
Analysts predict that Intel will report stable second-quarter revenue compared to the previous year, with modest growth expected in the latter half of 2024. Total sales are projected to rise by 3% to $55.7 billion for the full year, which would be Intel’s first annual revenue increase since 2021.
Despite these projections, Intel has faced severe financial difficulties, reflected in a significant drop in its stock price. On Tuesday, Intel’s shares closed at $30.13, down 2.27% for the day and a sharp 36.5% decline from its January 2 closing price of $47.47.
Revenue Decline and Leadership Changes
In 2023, Intel reported revenues of $54.2 billion, down $8.8 billion or 14% from 2022. The company has experienced financial instability, prompting several leadership changes within its Intel Foundry Services. Earlier this month, Intel announced another leadership overhaul for 2024, bringing in two external executives. Naga Chandrasekaran from Micron replaced long-time Intel veteran Keyvan Esfarjani as head of global manufacturing, while Kevin O’Buckley from Marvell Technologies took over customer service and ecosystem operations.
Ongoing Restructuring
In April, Intel also confirmed layoffs within its Sales and Marketing Group as part of a broader reorganization. These measures are intended to streamline operations and prepare the company for a stronger recovery.
Focus on R&D for Market Leadership
Intel’s significant investment in research and development is central to CEO Pat Gelsinger’s plan to restore the company’s leading position in the semiconductor industry. Gelsinger’s strategy includes countering the advances made by rivals like AMD with substantial R&D efforts.
