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Intel has announced plans to cut 15,000 jobs, around 15% of its workforce, in a bid to reduce costs and eliminate inefficiencies.
The layoffs come as a part of the chipmaker’s plan to save $10billion in costs in 2025, and follow disappointing financial performance in Q2.
CEO Pat Gelsinger sent a detailed memo to staff Thursday outlining the company’s plans and priorities, indicating difficult times ahead for his workforce.
“This is painful news for me to share. I know it will be even more difficult for you to read,” he wrote. “This is an incredibly hard day for Intel as we are making some of the most consequential changes in our company’s history.”
Why is Intel laying off staff?
Gelsinger called for “bolder actions” to address high costs and low margins, asserting that Intel must “align our cost structure with our new operating model and fundamentally change the way we operate.”
Intel has struggled to keep pace with other industry chipmakers like Nvidia, which has taken advantage of the artificial intelligence boom to achieve a trillion-dollar market valuation.
The heaviest losses for Intel have come in Foundry, its chipmaking division, despite heavy investments in AI.
“Our revenues have not grown as expected – and we’ve yet to fully benefit from powerful trends, like AI,” Gelsinger admitted.
Intel reported a Q2 2024 loss of $1.6billion. “Our Q2 financial performance was disappointing, even as we hit key product and process technology milestones,” Gelslinger admitted in a press release.
Alongside the need to lower costs, Intel’s CEO also highlighted the need to eliminate complexity, which he says employees highlighted in its Employee Experience Survey.
“It takes too long for decisions to be made, so we need to eliminate bureaucracy,” he said. “And there’s too much inefficiency in the system, so we need to expedite workflows.”
Intel promises honesty, transparency, and respect throughout job cuts
In the memo, Intel pledged to create a culture of “honesty, transparency and respect” as the changes unfold in the coming weeks and months.
The company will make multiple changes to reduce operational costs, including simplifying its portfolio and eliminating products which are underperforming.
“We will reduce layers, eliminate overlapping areas of responsibility, stop non-essential work, and foster a culture of greater ownership and accountability,” continued Gelsinger.
Certain departments will be subsumed into others, including Customer Success into Intel’s Sales, Marketing, and Communications Group.
But although changes are underway, Gelsinger believes the journey ahead for Intel staff is not set to get any easier.
“This is a tough day for all of us and there will be more tough days ahead,” he stated. “But as difficult as all of this is, we are making the changes necessary to build on our progress and usher in a new era of growth.”
The CEO reiterated Intel’s IDM 2.0 strategy, which the chip company introduced in 2021, including goals to re-establish its status as a technology leader and to introduce AI across its entire product suite.
Intel will also open an application program from next week for voluntary departures and an enhanced retirement plan for eligible workers.
“I believe that how we implement these changes is just as important as the changes themselves, and we will adhere to Intel values throughout this process,” Intel’s CEO said.
