Intel is cutting close to 17,000 jobs and suspending its dividend as the chipmaker looks to recover ground lost to rivals and restructure to compete in the field of artificial intelligence (AI).
The job cuts, part of an effort to trim $10 billion (€9.3bn) from costs by the end of next year, were announced alongside second-quarter results that came in below analysts’ projections and with an outlook that also undershot forecasts. Shares dropped 13 per cent in after hours trading on Thursday on the news.
No details of where the axe will fall on jobs was given. However, if the 15 per cent cut in headcount is applied to the company’s Irish operations in Leixlip it will mean the loss of around 735 jobs at the Co Kildare site. The company currently employs around 4.900 people in Ireland.
A majority of the job cuts will be completed by the end of 2024, Intel said.
The $10 billion in targeted savings is on top of a similar amount already pencilled in by the company to be achieved by next year.
Intel only recently invested €17 billion at the Co Kildare site, adding a new cutting-edge chip manufacturing plant – Fab 34 – which doubled the tech giant’s Irish manufacturing space and saw it take on an extra 1,600 staff.
Chief executive Pat Gelsinger said that despite a large spending plan to restore Intel to industry prominence it is struggling to improve the company’s products and technology fast enough to retain customers.
“Revenue is not where we want it to be,” said chief financial officer Dave Zinsner in an interview. “Financials weren’t where we want them to be.” The job cuts were needed “to get us to a place where we have a more sustainable model for the business going forward”.
In the second quarter the company recorded a profit of two US cent a share, excluding certain items, and revenue of $12.8 billion, down 1 per cent. Analysts had estimated a profit of 10 cent a share and sales of $12.95 billion.
Wall Street is projecting a modest increase in overall sales this year, still leaving the company more than $20 billion below its peak in 2021.
Intel also forecast third-quarter revenue below estimates – between $12.5 billion and $13.5 billion compared with analysts’ average estimate of $14.35 billion – as the chipmaker grapples with a pullback in spending on traditional data centre chips and increased competition in the personal computer (PC) market.
A key force in the PC revolution, Intel is now trailing Nvidia in the booming AI processor market, while its data centre business is facing threat from a resurgent AMD. Stumbles in Intel’s manufacturing process have allowed AMD to take business as the latter uses Taiwan Semiconductor Manufacturing Co.
Intel reduced its workforce by about 5 per cent in 2023 to 124,800 by year’s end after announcing job cuts beginning in October 2022. About 130 jobs were cut in Ireland. – Additional reporting Reuters/Bloomberg