Intel, the world’s largest chipmaker, has announced a massive $10 billion cost-cutting plan that includes cutting more than 15,000 jobs, or about 15% of its global workforce, while the administration plans to spend $8.5 billion as part of the CHIPS Act, which aims to create high-tech jobs.
The Verge Reports Intel CEO Pat Gelsinger announced the major reorganization in a memo to employees, acknowledging “painful news” and a difficult road ahead for the company. The job cuts come as Intel grapples with disappointing financial performance, reporting a loss of $1.6 billion in the second quarter of 2024, up sharply from a loss of $437 million in the previous quarter.
Despite hitting key product and process technology milestones, Intel’s revenues have not grown as expected, and the company has not yet fully capitalized on emerging trends such as AI. “Our revenues have not grown as expected, and the company has not yet fully capitalized on powerful trends such as AI,” Gelsinger acknowledged.
As part of its cost-cutting measures, Intel plans to cut billions of dollars in research and development and marketing spending each year through 2026. The company will also cut capital spending by more than 20% this year and restructure to eliminate nonessential operations. Intel will also review all of its ongoing projects and facilities to ensure it is not overspending.
Intel’s chip-making foundry business is a big source of losses, with the company forecasting an operating loss of $7 billion in 2023 and another $2.8 billion in the most recent quarter, but the company’s products themselves are profitable. Nearly all of the recent losses have come from the foundry division, but sales have remained relatively stable and its PC and server businesses remain profitable.
Despite these challenges, Intel is set to receive up to $8.5 billion in funding from the U.S. government through the CHIPS Act. But investors have been unhappy with the company’s performance, and according to CNBC, Intel has been the worst-performing tech stock in the S&P 500 index this year.
Intel’s announcement of 15,000 job cuts, citing “too low profit margins,” came five months after the Biden administration’s CHIPS bill promised to create 10,000 jobs and gave the company $8.5 billion in grants, $11 billion in preferential loans and $25 billion in tax breaks.https://t.co/qB4a2oapAl https://t.co/wWNUZeIXQq pic.twitter.com/5GVtY9M029
— Y Disassembler (@loomdoop) August 2, 2024
Intel faces stiff competition from companies like Nvidia and AMD in the AI server chip market, and its recent forays into the graphics sector have yet to make a big impact. The company has also had to overhaul its flagship laptop chips to counter the threat of Arm chips from rivals like Qualcomm and Apple, which offer longer battery life.
Click here for details The Verge is here.
Lucas Nolan is a reporter for Breitbart News covering free speech and online censorship.
