Intel is laying off over 15,000 employees and will cut $10 billion in costs
Illustration by Alex Castro / The Verge
Intel’s on a long, long road to recovery, and over 15,000 workers will likely no longer be coming along for the ride. The chipmaker just announced it’s downsizing its workforce by over 15 percent as part of a new $10 billion cost savings plan for 2025, which Intel says will mean a headcount reduction of greater than 15,000 roles. The company currently employs over 125,000 people, so layoffs could be as many as 19,000 people.
Intel will reduce its R&D and marketing spend by billions every year; it will reduce capital expenditures by more than 20 percent this year; it restructure to “stop non-essential work,” and review “all active projects and equipment” to make sure it’s not spending too much.
“This is painful news for me to share. I know it will be even more difficult for you to read,” reads part of a memo from Intel CEO Pat Gelsinger to staff, which you can also read in full at the bottom of this post.
The company just reported a loss of $1.6 billion for Q2 2024, substantially more than the $437 million it lost last quarter. “Our Q2 financial performance was disappointing, even as we hit key product and process technology milestones,” admitted Gelsinger in the company’s press release. “Our revenues have not grown as expected – and we’ve yet to fully benefit from powerful trends, like AI,” he writes in his employee memo.
It’s not like all Intel’s businesses are failing; while Intel has absolutely been losing money on its chipmaking Foundry business as it invests in new factories and extreme ultraviolet (EUV) lithography, to the tune of $7 billion in operating losses in 2023, the company products themselves aren’t unprofitable.
Almost all the losses this quarter and last quarter came from Foundry, while its sales continue to stay relatively stable and its PC and server businesses stay profitable. (The PC sales slump ended earlier this year.)
But investors didn’t seem happy that the company kept itself on a knife’s edge: over the past two years before this quarterly loss, it had continued to swing between losses and profits overall, for just $1.1 billion in profit between Q2 2022 and Q1 2024. “Intel is now the worst-performing tech stock in the S&P 500 this year,” CNBC wrote in April.
From a tech leadership perspective, Intel’s not yet a big growing player in AI server chips like Nvidia (maybe not even a notable small one like AMD), its relatively recent entry into graphics has yet to impress, and it had to overhaul its flagship laptop chips significantly to address the existential threat of Arm chips from the likes of Qualcomm and Apple, which can offer more battery life than Intel. Like competitors, the company now partially relies on TSMC, not just its own foundries, to help produce some of its most advanced chips.
Microsoft recently followed Apple’s lead in ditching Intel chips for its latest slate of consumer hardware, including the Surface Laptop and Surface Pro, and launched its Copilot Plus PC initiative exclusively with Qualcomm, without waiting for Intel (or AMD)’s new flagship laptop chips to join them.
Intel previously had a big round of layoffs in October 2022, when it also announced it would cut between $8 billion and $10 billion in costs every year through 2025. But the company didn’t shrink all that much as a result. While headcount dipped roughly 5 percent in 2023 (from 131,900 employees to 124,800 employees), Intel hired its way back to 130,700 employees as of March 30th, 2024, its financial records show.
Intel says it’ll complete the majority of the layoffs it’s announcing today by the end of 2024, and spokesperson Penelope Bruce confirms that they are new layoffs — the 4 percent dip from 130,700 employees in March to 125,300 employees in June is not included in the total.
Gelsinger writes that Intel will offer a “companywide enhanced retirement offering for eligible employees” and let employees broadly apply for voluntary layoffs starting next week — not every employee departure will come as a painful surprise.
Intel says it’s now restructuring, suspending its dividend, and spending less, period, but will “maintain its core investments to execute its strategy and build a resilient and sustainable semiconductor supply chain in the U.S. and around the world.”
Here’s the full memo from Gelsinger:
Team,
We have moved our All Company Meeting to today, following our earnings call, as we are announcing significant actions to reduce our costs. We plan to deliver $10 billion in cost savings in 2025, and this includes reducing our head count by roughly 15,000 roles, or 15% of our workforce. The majority of these actions will be completed by the end of this year.
This is painful news for me to share. I know it will be even more difficult for you to read. This is an incredibly hard day for Intel as we are making some of the most consequential changes in our company’s history. When we meet in a few hours, I’ll talk about why we’re doing this and what you can expect in the coming weeks. In advance of that, I wanted to preview some of what’s on my mind.
Simply put, we must align our cost structure with our new operating model and fundamentally change the way we operate. Our revenues have not grown as expected – and we’ve yet to fully benefit from powerful trends, like AI. Our costs are too high, our margins are too low. We need bolder actions to address both – particularly given our financial results and outlook for the second half of 2024, which is tougher than previously expected.
These decisions have challenged me to my core, and this is the hardest thing I’ve done in my career. My pledge to you is that we will prioritize a culture of honesty, transparency and respect in the weeks and months to come.
Next week, we’ll announce a companywide enhanced retirement offering for eligible employees and broadly offer an application program for voluntary departures. 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.
Why Now?
Since introducing our new operating model, we have taken a clean-sheet view of the business and assessed ourselves against benchmarks for high-performing foundries, fabless product companies and corporate functions. This work made it clear our cost structure is not competitive.
For example, our annual revenue in 2020 was about $24 billion higher than it was last year, yet our current workforce is actually 10% larger now than it was then. There are a lot of reasons for this, but it’s not a sustainable path forward.
Beyond our costs, we need to change the way we operate – something many of you shared as part of our Employee Experience Survey. There’s too much complexity, so we need to both automate and simplify processes. It takes too long for decisions to be made, so we need to eliminate bureaucracy. And there’s too much inefficiency in the system, so we need to expedite workflows.
Key Priorities
The actions we are taking will make Intel a leaner, simpler and more agile company. Let me highlight our areas of focus:
Reducing Operational Costs: We will drive companywide operational and cost efficiencies, including the cost savings and head count reductions mentioned above.
Simplifying Our Portfolio: We will complete actions this month to simplify our businesses. Each business unit is conducting a portfolio review and identifying underperforming products. We are also integrating key software assets into our business units so we accelerate our shift to systems-based solutions. And we will narrow our incubation focus on fewer, more impactful projects.
Eliminating Complexity: We will reduce layers, eliminate overlapping areas of responsibility, stop non-essential work, and foster a culture of greater ownership and accountability. For example, we will consolidate Customer Success into the Sales, Marketing and Communications Group to streamline our go-to-market motions.
Reducing Capital and Other Costs: With the completion of our historic five-nodes-in-four-years roadmap clearly in sight, we will review all active projects and equipment so we begin to shift our focus toward capital efficiency and more normalized spending levels. This will reduce our 2024 capital expenditures by more than 20%, and we plan to reduce our non-variable cost of goods sold by roughly $1 billion in 2025.
Suspending Our Dividend: We will suspend our stock dividend beginning next quarter to prioritize investments in the business and drive more sustained profitability.
Maintaining Growth Investments: Our IDM2.0 strategy is unchanged. Having fought hard to reestablish our innovation engine, we will maintain the key investments in our process technology and core product leadership.
The Future
I have no illusions that the path in front of us will be easy. You shouldn’t either. This is a tough day for all of us and there will be more tough days ahead. 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.
When we began this journey, we set our sights high, knowing that Intel is a place where big ideas are born and the power of what’s possible triumphs over the status quo. After all, our mission is to create world-changing technologies that improve the lives of every person on the planet. And at our best, we have exemplified these ideals more than any company in the world.
To live up to this mission, we must continue to drive our IDM 2.0 strategy, which remains the same: re-establish process technology leadership; invest in at-scale, globally resilient supply chain by expanding manufacturing capacity in the U.S. and EU; become a world-class, leading-edge foundry for internal and external customers; rebuild product portfolio leadership; and deliver AI Everywhere.
Over the past few years, we have rebuilt a sustainable innovation engine that is largely in place and on track. It’s now time to focus on building the sustainable financial engine needed to drive our performance. We must improve our execution, adapt to new market realities and operate as a more agile company. That’s the spirit of the actions we are taking – knowing that the choices we make today, as difficult as they are, will strengthen our ability to serve our customers and grow our business for years to come.
As we take these next steps in our journey, let’s not forget that there has never been a greater need for what we do. The world will increasingly run on silicon – and the world needs a healthy and vibrant Intel. That’s why the work we are doing is so consequential. Not only are we remaking a great company, but we are also creating technology and manufacturing capabilities that will reshape the world for decades to come. And this is something we should never lose sight of as we push forward in pursuit of our goals.
We’ll talk more in a few hours. Please come with your questions so we can have an open and honest discussion about what comes next.
Developing… we’re adding more, and will add more context from Intel’s earnings call soon as well.
Illustration by Alex Castro / The Verge
Intel’s on a long, long road to recovery, and over 15,000 workers will likely no longer be coming along for the ride. The chipmaker just announced it’s downsizing its workforce by over 15 percent as part of a new $10 billion cost savings plan for 2025, which Intel says will mean a headcount reduction of greater than 15,000 roles. The company currently employs over 125,000 people, so layoffs could be as many as 19,000 people.
Intel will reduce its R&D and marketing spend by billions every year; it will reduce capital expenditures by more than 20 percent this year; it restructure to “stop non-essential work,” and review “all active projects and equipment” to make sure it’s not spending too much.
“This is painful news for me to share. I know it will be even more difficult for you to read,” reads part of a memo from Intel CEO Pat Gelsinger to staff, which you can also read in full at the bottom of this post.
The company just reported a loss of $1.6 billion for Q2 2024, substantially more than the $437 million it lost last quarter. “Our Q2 financial performance was disappointing, even as we hit key product and process technology milestones,” admitted Gelsinger in the company’s press release. “Our revenues have not grown as expected – and we’ve yet to fully benefit from powerful trends, like AI,” he writes in his employee memo.
It’s not like all Intel’s businesses are failing; while Intel has absolutely been losing money on its chipmaking Foundry business as it invests in new factories and extreme ultraviolet (EUV) lithography, to the tune of $7 billion in operating losses in 2023, the company products themselves aren’t unprofitable.
Almost all the losses this quarter and last quarter came from Foundry, while its sales continue to stay relatively stable and its PC and server businesses stay profitable. (The PC sales slump ended earlier this year.)
But investors didn’t seem happy that the company kept itself on a knife’s edge: over the past two years before this quarterly loss, it had continued to swing between losses and profits overall, for just $1.1 billion in profit between Q2 2022 and Q1 2024. “Intel is now the worst-performing tech stock in the S&P 500 this year,” CNBC wrote in April.
From a tech leadership perspective, Intel’s not yet a big growing player in AI server chips like Nvidia (maybe not even a notable small one like AMD), its relatively recent entry into graphics has yet to impress, and it had to overhaul its flagship laptop chips significantly to address the existential threat of Arm chips from the likes of Qualcomm and Apple, which can offer more battery life than Intel. Like competitors, the company now partially relies on TSMC, not just its own foundries, to help produce some of its most advanced chips.
Microsoft recently followed Apple’s lead in ditching Intel chips for its latest slate of consumer hardware, including the Surface Laptop and Surface Pro, and launched its Copilot Plus PC initiative exclusively with Qualcomm, without waiting for Intel (or AMD)’s new flagship laptop chips to join them.
Intel previously had a big round of layoffs in October 2022, when it also announced it would cut between $8 billion and $10 billion in costs every year through 2025. But the company didn’t shrink all that much as a result. While headcount dipped roughly 5 percent in 2023 (from 131,900 employees to 124,800 employees), Intel hired its way back to 130,700 employees as of March 30th, 2024, its financial records show.
Intel says it’ll complete the majority of the layoffs it’s announcing today by the end of 2024, and spokesperson Penelope Bruce confirms that they are new layoffs — the 4 percent dip from 130,700 employees in March to 125,300 employees in June is not included in the total.
Gelsinger writes that Intel will offer a “companywide enhanced retirement offering for eligible employees” and let employees broadly apply for voluntary layoffs starting next week — not every employee departure will come as a painful surprise.
Intel says it’s now restructuring, suspending its dividend, and spending less, period, but will “maintain its core investments to execute its strategy and build a resilient and sustainable semiconductor supply chain in the U.S. and around the world.”
Here’s the full memo from Gelsinger:
Team,
We have moved our All Company Meeting to today, following our earnings call, as we are announcing significant actions to reduce our costs. We plan to deliver $10 billion in cost savings in 2025, and this includes reducing our head count by roughly 15,000 roles, or 15% of our workforce. The majority of these actions will be completed by the end of this year.
This is painful news for me to share. I know it will be even more difficult for you to read. This is an incredibly hard day for Intel as we are making some of the most consequential changes in our company’s history. When we meet in a few hours, I’ll talk about why we’re doing this and what you can expect in the coming weeks. In advance of that, I wanted to preview some of what’s on my mind.
Simply put, we must align our cost structure with our new operating model and fundamentally change the way we operate. Our revenues have not grown as expected – and we’ve yet to fully benefit from powerful trends, like AI. Our costs are too high, our margins are too low. We need bolder actions to address both – particularly given our financial results and outlook for the second half of 2024, which is tougher than previously expected.
These decisions have challenged me to my core, and this is the hardest thing I’ve done in my career. My pledge to you is that we will prioritize a culture of honesty, transparency and respect in the weeks and months to come.
Next week, we’ll announce a companywide enhanced retirement offering for eligible employees and broadly offer an application program for voluntary departures. 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.
Why Now?
Since introducing our new operating model, we have taken a clean-sheet view of the business and assessed ourselves against benchmarks for high-performing foundries, fabless product companies and corporate functions. This work made it clear our cost structure is not competitive.
For example, our annual revenue in 2020 was about $24 billion higher than it was last year, yet our current workforce is actually 10% larger now than it was then. There are a lot of reasons for this, but it’s not a sustainable path forward.
Beyond our costs, we need to change the way we operate – something many of you shared as part of our Employee Experience Survey. There’s too much complexity, so we need to both automate and simplify processes. It takes too long for decisions to be made, so we need to eliminate bureaucracy. And there’s too much inefficiency in the system, so we need to expedite workflows.
Key Priorities
The actions we are taking will make Intel a leaner, simpler and more agile company. Let me highlight our areas of focus:
Reducing Operational Costs: We will drive companywide operational and cost efficiencies, including the cost savings and head count reductions mentioned above.
Simplifying Our Portfolio: We will complete actions this month to simplify our businesses. Each business unit is conducting a portfolio review and identifying underperforming products. We are also integrating key software assets into our business units so we accelerate our shift to systems-based solutions. And we will narrow our incubation focus on fewer, more impactful projects.
Eliminating Complexity: We will reduce layers, eliminate overlapping areas of responsibility, stop non-essential work, and foster a culture of greater ownership and accountability. For example, we will consolidate Customer Success into the Sales, Marketing and Communications Group to streamline our go-to-market motions.
Reducing Capital and Other Costs: With the completion of our historic five-nodes-in-four-years roadmap clearly in sight, we will review all active projects and equipment so we begin to shift our focus toward capital efficiency and more normalized spending levels. This will reduce our 2024 capital expenditures by more than 20%, and we plan to reduce our non-variable cost of goods sold by roughly $1 billion in 2025.
Suspending Our Dividend: We will suspend our stock dividend beginning next quarter to prioritize investments in the business and drive more sustained profitability.
Maintaining Growth Investments: Our IDM2.0 strategy is unchanged. Having fought hard to reestablish our innovation engine, we will maintain the key investments in our process technology and core product leadership.
The Future
I have no illusions that the path in front of us will be easy. You shouldn’t either. This is a tough day for all of us and there will be more tough days ahead. 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.
When we began this journey, we set our sights high, knowing that Intel is a place where big ideas are born and the power of what’s possible triumphs over the status quo. After all, our mission is to create world-changing technologies that improve the lives of every person on the planet. And at our best, we have exemplified these ideals more than any company in the world.
To live up to this mission, we must continue to drive our IDM 2.0 strategy, which remains the same: re-establish process technology leadership; invest in at-scale, globally resilient supply chain by expanding manufacturing capacity in the U.S. and EU; become a world-class, leading-edge foundry for internal and external customers; rebuild product portfolio leadership; and deliver AI Everywhere.
Over the past few years, we have rebuilt a sustainable innovation engine that is largely in place and on track. It’s now time to focus on building the sustainable financial engine needed to drive our performance. We must improve our execution, adapt to new market realities and operate as a more agile company. That’s the spirit of the actions we are taking – knowing that the choices we make today, as difficult as they are, will strengthen our ability to serve our customers and grow our business for years to come.
As we take these next steps in our journey, let’s not forget that there has never been a greater need for what we do. The world will increasingly run on silicon – and the world needs a healthy and vibrant Intel. That’s why the work we are doing is so consequential. Not only are we remaking a great company, but we are also creating technology and manufacturing capabilities that will reshape the world for decades to come. And this is something we should never lose sight of as we push forward in pursuit of our goals.
We’ll talk more in a few hours. Please come with your questions so we can have an open and honest discussion about what comes next.
Developing… we’re adding more, and will add more context from Intel’s earnings call soon as well.