In a recent memo to employees, Intel announced plans to lay off more than 15% of its workforce, totaling 15,000 employees. This significant reduction is part of a strategy to cut costs by $10 billion by 2025, in response to a disappointing second quarter financial report.
CEO Pat Gelsinger stated in the memo, “Our revenues have not met expectations and we are yet to fully capitalize on emerging technologies like AI. Our expenses are too high and our profitability too low. Bold actions are needed to address this, especially given our financial performance and outlook for the remainder of 2024, which is more challenging than previously anticipated.”
Gelsinger acknowledged that Intel has struggled to keep pace with competitors like Nvidia in the AI sector. While Intel was once a leader in CPU chips, it has been slow to adapt to new trends in computing such as AI and smartphones. Despite a 10% increase in workforce between 2020 and 2023, Intel saw a $24 billion drop in revenue during the same period, contrasting sharply with the success of other chipmakers in the AI market.
For the second quarter, Intel reported a 1% decline in revenue compared to the previous year, citing challenges with gross margins related to AI PC products. The company will also halt shareholder dividends from the fourth quarter of 2024 onwards, and anticipates a more demanding second half of the year than initially projected.
In addition to the layoffs, Intel will make available a voluntary departure program for employees next week. The company also plans to introduce an enhanced retirement option for eligible staff members.
