Intel is reportedly planning to lay off thousands of its employees as it is facing a financial crunch.
The decision comes right before Intel's scheduled quarterly earnings announcement.
There are multiple factors leading to this layoff.
Intel is set to take away thousands of jobs as the race for AI chips intensifies. While Intel is still a key chipmaker, it seems like the US-based company is struggling with its finances. As a result, Intel is planning to lay off thousands of its employees as it is facing a financial crunch, owing to its declining market shares and inability to meet the growing demand for chips, as per a report by Bloomberg. So far, Intel shares have gone down by nearly 40 percent, even though there was a marginal 1 percent gain in the extended trading.
The decision comes right before Intel’s scheduled quarterly earnings announcement. The company currently employs about 110,000 people and may officially announce the job cuts during its earnings call on Thursday. There are multiple factors leading to this layoff.
What’s making Intel do this?
The sudden boom of AI has seen an increased demand for AI PCs, henceforth the AI chipsets. However, Intel has not been able to keep up with the growing demand, giving an advantage to competitors like AMD and Nvidia. And, it is not only with AI chip development but Intel is also struggling to meet the demand for its traditional central processing units (CPUs) that power PCs, laptops, and data centre servers.
To keep up with the competition, Intel has invested heavily in building advanced chip factories in the US, Europe, and Israel. It even secured significant funding through grants and selling stakes in its new fabs to private equity firms. It even launched the Intel Foundry subsidiary last year to manufacture semiconductors for other companies. Even though it is trying to cut down costs, it continues to strategically invest, such as a recent $15 million investment in AI-focused construction technology startup Buildots Ltd.
All of this led to additional expenses which the company now plans to reduce.
Additionally, there seems to be more competition between PC chipmakers than before. Apple has started making and using its own chips in the last few years, and now Qualcomm is eating into everyone’s share in the Windows space with its Copilot+PCs while both AMD and Nvidia continue to build on their AI capabilities. In fact, Nvidia briefly became the world’s most valuable company earlier this year.
Meanwhile, back in October 2022, Intel unveiled a cost-reduction plan that included workforce reductions and targeted annual cost savings of $3 billion in 2023. Because of this move, Intel’s headcount dropped to 124,800 by the end of 2023 from 131,900 in 2024. A similar move is expected now, and the company aims to achieve annual cost savings between $8 billion and $10 billion by 2025, as stated in February last year.
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