Intel announced today that it will cut more than 15,000 jobs, or 15% of its staff. This is likely to make some taxpayers scratch their heads as the company tries to recover from disappointing results. In March, the US government said it would give Intel at least $8.5 billion to help it make chips in the US again.
Intel said that its second-quarter sales were 1% lower than the same time last year. “We don’t take this lightly, and we’ve thought a lot about how this will affect the Intel family,” CEO Pat Gelsinger said today on an earnings call. “These choices are tough, but they have to be made.” These cuts don’t affect our ability to carry out our plan.
Based on what Intel said, the job cuts will happen in areas like sales, marketing, and administration. They are part of a larger plan to cut costs. This comes after Intel announced last year that it would be cutting staff by 5%. The company’s stock dropped more than 17% in trades after the market closed.
The chief analyst at Moor Insights & Strategy, a chip industry consulting firm, tells WIRED, “It’s a lot of jobs.” Yet, Moorhead says it’s a good sign that the planned layoffs seem to be targeted and not for everyone. “Firing people doesn’t always mean there’s a problem with a business,” he says. “But for me, it’s all about the strategy.”
Intel is having a hard time carrying out a tough plan to turn things around. It wants to focus on making chips for other companies through its foundry business and speed up the transition to cutting-edge manufacturing methods. The company said in February that its accelerated plan to make cutting-edge chips was on track, and it claimed to be the second-largest foundry company in the world by 2030. Intel said today that these goals will still be met.
Intel got the largest grant from the US government so far in March. It was made possible by the CHIPS Act, 2022, which will give $52.7 billion to bring chip manufacturing back to the US and invest in chip research and training for the workforce. The company can also get up to 25% in tax credits for assets of $100 billion and up to $11 billion in loans from the federal government.
Intel will build plants in Arizona, New Mexico, Ohio, and Oregon with the $8.5 billion that was given to it. Intel said that the money it is putting into these chip-making plants will create over 10,000 jobs for the company, 20,000 jobs in construction, and thousands more jobs in industries that serve the chip-making plants. Moorehead of Moor Insights & Strategy says, “The money Intel has brought in is being used to build factories.” “That’s not going to stop, and it does make a lot of jobs.”
Intel enjoyed decades of success thanks to the rise of personal computers. However, the company failed to capitalize on the smartphone age and lost market share to chips based on Arm’s designs. Nvidia, a company that began by making graphics chips for video games, has become more well-known lately because its hardware is so useful for teaching AI algorithms. TSMC in Taiwan and Samsung in South Korea are two of Intel’s manufacturing rivals that have caught up with it.
Advanced chips are seen as important for economic and military competitiveness, so the US government is helping to pay for Intel’s comeback. The pandemic showed how many US businesses are at risk when the global supply chain isn’t working well. Also, advanced chips are needed to build AI, which is becoming more and more seen as a national priority.
In the 1990s, the US made 37% of the world’s electronics. Now, only 12% are made there. A business consulting group called McKinsey said that the chip industry would grow very quickly this decade, going from $600 billion in 2021 to more than $1 trillion by 2030.
An analyst at Tech Insights named Dan Hutcheson says Intel’s lack of income is due to a continuing shift toward data center computing that focuses on AI. “Intel used to own the data center,” says Hutcheson. “The big hyperscalers have been focusing on AI and GPUs for the last few years. They have even built whole AI data centers.”
In general, Hutcheson thinks Intel’s plan makes sense, but the layoffs show that the company is having a hard time fixing the problems that caused it to fall behind in the first place.
