Under the leadership of CEO Pat Gelsinger, Intel is focusing on Research and Development to regain its competitive edge in the semiconductor industry with companies like AMD and Nvidia. To reduce costs, the company plans to lay off its 15,000 thousand employees. Mr. Gelsinger informed Intel workers about the company’s next phase transformation plan via a letter to the workers.
In his memo to the employees, Intel CEO wrote, “We are announcing significant actions to reduce our costs. We plan to deliver $10 billion in cost savings in 2025, and this includes reducing our headcount by roughly 15,000 roles, or 15% of our workforce. The majority of these actions will be completed by the end of this year.”
Owing to the second-quarter revenue of $12.8 billion, which was down by 1% year over year (YoY), as a major reason behind cross-cutting, the letter read, “We must align our cost structure with our new operating model and fundamentally change the way we operate. Our revenues have not grown as expected – and we’ve yet to fully benefit from powerful trends, like AI. Our costs are too high, 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.”
The annual revenue of the company in 2020 was around 24% higher than last year, yet the current workforce is 10% larger than then. While unmasking the company’s strategy, the message further said, “To live up to this mission, we must continue to drive our IDM 2.0 strategy, which remains the same: re-establish process technology leadership; invest in at-scale, globally resilient supply chain by expanding manufacturing capacity in the U.S. and EU; become a world-class, leading-edge foundry for internal and external customers; rebuild product portfolio leadership; and deliver AI Everywhere.”
Mr. Gelsinger acknowledged the difficulty in deciding “the hardest thing I’ve done in my career.” Intel plans to propound a voluntary departure program and enhanced retirement options for eligible employees.
However, industry experts are skeptical about the move that will alone be enough to bring Intel ahead in the line with rapidly evolving semiconductor business. Intel has faced challenges staying competitive with companies like Nvidia, particularly in the AI chip market. Unlike its competitors, Intel manufactures its chips, which has strained its margins as it heavily invests in developing U.S. foundry operations.
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