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Layoffs announced by Intel last summer are now underway as the company works to cut 15,000 jobs across its business, the biggest downsizing in its history, starting with the loss of 2,000 jobs.
The layoffs come as the firm grapples with shrinking revenues, which have dropped by nearly a third since 2021. Despite being a leader in chip manufacturing for decades, Intel has struggled to keep pace with competitors in the rapidly growing market for artificial intelligence (AI) technology, a sector that rivals like Nvidia and AMD are leading in. To address its financial challenges, the company aims to reduce costs by $10 billion in the coming year, part of a broader strategy to re-establish its leadership.
In a statement issued Tuesday, Intel emphasized the "hard but necessary" nature of the cuts.
"As part of the broad-based cost savings plan we announced in August, we are making the hard but necessary decisions to reduce the size of our workforce. These are the most difficult decisions we ever make, and we are treating people with care and respect," the company said. The company is positioning itself to become a "leaner, simpler, and more agile company" as it navigates the competitive semiconductor landscape.
Intel redundancy packages
The layoffs are being managed through a combination of voluntary early retirement packages, buyout offers, and compulsory redundancies. Workers who accepted buyout packages were offered 13 weeks of pay, plus an additional 1.5 weeks of pay for each year they worked at the company, along with a year’s worth of healthcare benefits. Severance packages for laid-off employees are expected to be similar. The layoffs will be completed by November 15.
The decision has been taken in spite of significant federal and state subsidies. The company was awarded $8.5billion in federal funding earlier this year as part of the 2022 CHIPS Act, a government initiative aimed at boosting domestic semiconductor production and reducing reliance on foreign technology.
Additionally, the state of Oregon provided Intel with $115million in subsidies to help fund an expansion of its manufacturing campus at Gordon Moore Park in Hillsboro. The company also has large-scale construction projects underway in Arizona and Ohio, but it remains unclear how spending cuts will affect the timing of these initiatives.
Pat Gelsinger, Intel’s CEO since 2021, has been at the helm of the company’s attempt to turn around its fortunes by investing heavily in manufacturing and engineering. While Intel has made progress under Gelsinger’s leadership, the rapid advances by competitors and the firm’s dependence on the weakening PC market have limited its ability to fully recover. Its struggles in AI and data center technology have only exacerbated its challenges.
Oregon tech economy
The workforce reduction also has wider implications for Oregon’s economy, where the company employs around 23,000 people. Though the job cuts will not significantly impact the state’s broader economy, which has approximately two million workers, Intel’s ongoing troubles could have long-term consequences for the region’s semiconductor industry, a key driver of economic growth.
The company has suggested that it may split its chip design and manufacturing divisions into separate businesses in the future, a move that could further affect its operations in Oregon. Additionally, it is reportedly exploring the sale of smaller business units, with internal speculation that the company’s networking division could be next on the block.
Meanwhile, Oregon remains a top contender for one of three semiconductor research hubs set to be awarded by the US Department of Commerce, which could bring $900million in federal investment to the state. As other states like New York, California, and Arizona vie for the same opportunity, Intel’s performance could play a role in the Commerce Department’s decision on where to locate the research facilities.
