Information Technology Intel cuts 15 percent of jobs
The struggling semiconductor pioneer Intel is resorting to drastic job cuts in order to reduce costs quickly. Around 15,000 jobs - about 15 percent of the workforce - are to be cut
02.08.2024, 07:16
SDA
This is what Intel boss Pat Gelsinger is writing to employees. In total, he wants to save more than ten billion dollars in the coming year. Intel's press release suggested even higher job losses.
The press release mentioned a reduction of "more than" 15 percent - and the number of employees was given as 116,500 at Intel and a good 125,000 in the group including subsidiaries.
Chip manufacturer for others
Gelsinger's strategy for Intel's survival includes becoming more of a contract manufacturer for other chip developers. The Group is to master the latest production processes in order to compete with established manufacturers such as TSMC from Taiwan.
At the same time, Gelsinger skillfully positioned Intel as a key element in the plans to bring more chip production back to the West from Asia.
The plans also include the construction of a plant in Magdeburg costing around 30 billion euros, in which, according to earlier statements, the most modern production processes will be used.
Intel is still waiting for approvals, including for the billion-euro subsidies that are to cushion the costs. The ground-breaking ceremony has so far been targeted for the end of the year - with production starting in 2027.
Gelsinger emphasized that the contract manufacturer strategy remains in place. However, until there are firm orders, Intel will take care not to build up too much capacity. Investment plans have also been adjusted to the expected market development, said the Intel CEO without providing further details.
At the same time, the Group wants to reap the rewards of its high investments more quickly. Intel also wants to build new factories in the USA and receive billions in subsidies for this.
Intel once dominated the chip industry, but then fell behind. A decisive moment was the lost battle for a place in today's ubiquitous smartphones.
Intel hoped to transfer its strength in the PC business to mobile devices - but more economical processors with architectures from the British chip designer Arm prevailed in cell phones.
Pressure on PC processors and AI
Intel now also has to worry about its position in the PC market. Apple switched the entire model range of its Mac computers to Arm chips developed in-house. This resulted in significantly longer battery life.
In the summer, Microsoft also initially opted for chips with Arm architecture for new Windows PCs with AI functions. Computers with Intel processors are to follow - but these must first come onto the market.
Meanwhile, Intel has had to watch from the sidelines as its once much smaller competitor Nvidia has become the hottest address in the industry thanks to chip systems for training artificial intelligence. Although Intel is also trying to get involved in this business, it is far behind Nvidia.
Intel's cost-cutting program also includes no longer paying a dividend for the time being from the fourth quarter onwards. Capital expenditure is now to be 20 percent lower than originally targeted.
"Costs too high, margins too low."
Gelsinger sounded quite dramatic in the email to employees. Intel's cost structure is "not competitive", he wrote, among other things. "Our costs are too high, our margins are too low."
Last year's turnover was 24 billion dollars lower than in 2020 - but the number of employees was ten percent higher. Decisions took too long and there was too much friction in the system.
In the last quarter, Intel posted a loss of just over 1.6 billion dollars after a profit of 1.48 billion dollars a year earlier. Sales fell by one percent year-on-year to 12.8 billion dollars, missing analysts' expectations.
Gelsinger called the business figures for the past quarter "disappointing". And the situation in the second half of the year will also be more difficult than previously expected.
Intel shares fall by 19 percent
The Intel boss had previously often put investors off until the second half of the year, when an improvement could be expected. They caused Intel shares to fall by around 19 percent in after-hours trading.
