What you need to know
- Chip giant Intel is laying off 15,000 jobs as part of a $10 billion cost-saving plan.
- CEO Pat Gelsinger revealed the news in a memo to staff today, describing the cuts as "the most consequential" in the company's long history.
- Intel has faced incredibly tough competition from rival chip makers, as NVIDIA and others increasingly dictate the market's flow.
- Intel has struggled to find growth in an era increasingly dominated by server tech, GPUs, and AI trends.
Recent updates
Update (August 2, 2024): Investors have begun deserting Intel, with its share price opening to -27% the day after the news. This marks the biggest slide in Intel's market cap for 24 years. Update 2 (August 2, 2024): Intel's share price is now down roughly 32%, wiping billions of its value.
"This is painful news for me to share. I know it will be even more difficult for you to read," the memo reads, shared by Intel CEO Pat Gelsinger earlier today.
Intel is laying off 15,000 employees in unprecedented cuts that will see the chip maker attempt $10 billion in savings through 2025. Intel announced the news on its website earlier today, in a memo penned by Intel CEO Pat Gelsinger, laying out plans for the savings and highlighting areas that Intel continues to struggle in.
Gelsinger blamed Intel's missed growth targets for the cost-cutting measures while lamenting the firm's inability to capitalize on new trends. In recent weeks, the AI boom has seen rival firm NVIDIA become the world's most profitable company. Microsoft also announced that it is partnering with Qualcomm on its AI Copilot+ PC range rather than Intel, for example (although Intel and AMD are expected to join the mix after Qualcomm's exclusivity ends later this year).
"Our revenues have not grown as expected—and we've yet to fully benefit from powerful trends, like AI," Gelsinger said. Our costs are too high, and our margins are too low. We need bolder actions to address both—particularly given our financial results and outlook for the second half of 2024, which is tougher than previously expected."
Intel noted that almost all of its losses revolve around Intel Foundry, which has faced significant challenges. Intel ramped up its Intel Foundry business in 2021 but now doesn't expect to see profitability for this segment until 2027. Manufacturing chips is a complicated and complex industry, which is why so few can do it at scale. The demand for chips is so high that nation-states across Europe and the United States have stepped in to try to help support and diversify the industry, which right now is concentrated on a few companies like Samsung and TSMC (see our earlier coverage on the CHIPS Act and how it relates to US national security).
Intel's traditional businesses continue to do well but are impacted by market demand for laptops and PCs, where the firm faces competition from AMD and now Snapdragon PCs. Intel is working on overhauling its chip range to meet some of these challenges, with Lunar Lake set to arrive in September 2024, in PCs debuting at IFA in Berlin, Germany. Lunar Lake should compete more closely with Qualcomm's Snapdragon range on power efficiency without the compatibility issues ARM occasionally encounters when running programs designed for x86 Windows devices.
Gelsinger signaled a desire to bring greater efficiency to Intel and reduce bureaucracy, which is blamed for decreasing Intel's ability to capitalize on and pivot to new market trends effectively. Intel plans to aggressively cut "underperforming" products and simplify its product line-up in general while also suspending stock dividend payouts to shareholders.
"I have no illusions that the path in front of us will be easy. You shouldn't either," Gelsinger warned in closing. "This is a tough day for all of us and there will be more tough days ahead. But as difficult as all of this is, we are making the changes necessary to build on our progress and usher in a new era of growth."
