Intel to cut about 30% of workforce and reduce spending on foundry projects

Intel Corporation announced today a significant reduction in its workforce, with plans to lay off almost a third of its employees by the end of the year. This move is part of Intel’s broader initiative to streamline its operations and become a more agile organization.

The decision to downsize comes as Intel released its second-quarter financial results, revealing a loss before certain costs and falling short of Wall Street’s profit expectations. The company reported a net loss of $2.9 billion, underscoring its urgent need to cut costs and improve profitability.

Intel’s Chief Executive, Lip-Bu Tan, who took over the reins earlier this year, emphasized the importance of enhancing the company’s competitive position and creating long-term shareholder value. Tan outlined a plan to reduce operating expenses to $17 billion by the end of fiscal 2025 and further to $16 billion by 2025, with layoffs being a key component of this strategy.

In addition to the layoffs, Intel also announced a scaling back of its foundry investments. The company has decided to halt the construction of new chip fabs in Germany and Poland, as well as consolidate its testing and assembly operations in Costa Rica with existing facilities in Malaysia and Vietnam. Furthermore, the construction of a new chip fab in Ohio will be slowed down to align with market demand.

Tan justified these measures by acknowledging that Intel had previously invested too much without sufficient demand, resulting in an underutilized and fragmented factory footprint. The company’s struggles in recent years, particularly in failing to capitalize on the mobile device and artificial intelligence markets, have necessitated these drastic actions to turn its fortunes around.

While Intel’s stock initially rose on news of the layoffs, it quickly reversed course and is currently down in extended trading. However, despite these challenges, the stock remains up for the year, indicating investor confidence in Tan’s leadership.

The decision to reduce the workforce and scale back investments is a bold but necessary move for Intel as it seeks to address its financial challenges and reposition itself for future growth. The road ahead may be rocky, but with a clear focus on cost reduction and operational efficiency, Intel aims to emerge stronger and more competitive in the long run.