Intel introduced in a memo to staff on Thursday that it will lay off greater than 15% of its workforce, or 15,000 staff. The large layoffs are half of a bigger plan to chop $10 billion in spending by 2025, following a dismal second-quarter earnings report and outlook.
“Our income is just not rising as anticipated, and we have now not absolutely benefited from highly effective traits corresponding to synthetic intelligence,” Chief Government Pat Gelsinger mentioned in a memo to staff. “Our prices are too excessive and margins are too low. We have to take bolder motion to handle each of those points – particularly given our monetary efficiency and outlook for the second half of 2024, which is harder than beforehand anticipated.
As Gelsinger describes it, Intel has been attempting to capitalize on the synthetic intelligence growth like different {hardware} firms like Nvidia. Intel led the expertise trade’s revolution round CPU chips about 25 years in the past however has been gradual to embrace new waves of computing corresponding to smartphones and synthetic intelligence. Gelsinger mentioned Intel’s annual income fell by $24 billion between 2020 and 2023, whilst its headcount elevated by 10% throughout the identical interval. That is a tricky contract for different chipmakers in the course of the synthetic intelligence growth, which has seen income and valuations soar to astronomical figures.
Intel reported second-quarter income fell 1% from the identical interval final 12 months. The corporate attributed the loss to gross margin headwinds associated to its AI PC merchandise. The corporate has additionally suspended shareholder dividends beginning within the fourth quarter of 2024 and expects second-half traits to be “tougher” than beforehand anticipated.
Along with layoffs, Intel will make functions for a “voluntary separation” program broadly out there to firm staff subsequent week, the memo mentioned. The corporate additionally introduced an enhanced pension plan companywide for eligible staff.
