According to individuals familiar with the issue, Intel Corp. is considering a significant decrease in headcount, potentially in the thousands, to cut costs and cope with the failing personal computer industry.
Intel Cutting off Thousands of Jobs
According to the people, who asked not to be identified because the discussions are private, the layoffs will be disclosed as early as this month, with the corporation expecting to make the move around the same time as its third-quarter earnings announcement on Oct. 27. As of July, the chipmaker employed 113,700 people.
Furthermore, some departments, including comapny’s sales and marketing group, could suffer workforce cutbacks of up to 20%. Intel is facing a severe decrease in demand for its primary business, PC CPUs, and has failed to reclaim market share lost to rivals such as Advanced Micro Devices Inc. In July, the business cautioned that sales in 2022 would be nearly $11 billion lower than previously anticipated.
Analysts estimate a 15% reduction in revenue in the third quarter. And Intel’s once-enviable margins have shrunk: they’re around 15% narrower than previous figures of around 60%.
The company stated on its second-quarter earnings call that it may make changes to increase profits. At the time, Chief Executive Officer Pat Gelsinger stated that they are also reducing core spending in the calendar year 2022 and would try to take additional actions in the second half of the year. Intel, which is headquartered in Santa Clara, California, declined to comment on the layoffs.
About the Previous Layoffs
The corporation’s last major round of layoffs happened in 2016 when it cut over 12,000 positions or 11% of its total workforce. Since then, the corporation has made lesser layoffs and closed other divisions, including its cellular modem and drone units. Intel, like many other companies in the technology industry, suspended recruiting earlier this year as market conditions deteriorated and fears of a recession intensified.
According to Bloomberg Intelligence analyst Mandeep Singh in a research note, the recent cuts are likely intended to decrease Intel’s fixed expenses by 10% to 15%. He believes that the expenses will be in the $25 billion to $30 billion range.
Gelsinger became the CEO of the corporation last year and has worked tirelessly to restore the company’s reputation as a Silicon Valley legend. But it was an uphill battle even before the PC slump. The corporation has lost its long-held technological advantage, and its own officials admit that the company’s culture of innovation has deteriorated in recent years.
A larger slump is now adding to those difficulties. Intel’s PC, data center, and artificial intelligence divisions are dealing with a drop in tech investment, which is dragging on revenue and earnings.
PC sales Dropped
According to IDC, PC sales fell 15% year on year in the third quarter. HP Inc., Dell Technologies Inc., and Lenovo Group Ltd., all of which use Intel processors in their laptops and desktop PCs, saw their stock prices plummet.
With PC prices stagnant and demand weakening, Intel may need to decrease its payout to overcome cash-flow difficulties, according to Singh. However, he believes that Intel’s decision to sell shares of its Mobileye self-driving technology business in an initial public offering will alleviate such fears.
The corporation’s decision to cut back comes at an awkward time. This year, the business fought hard for a $52 billion chip-stimulus bill, promising to expand its manufacturing in the United States. Gelsinger is proposing a construction boom that will bring the world’s largest chipmaking hub to Ohio.
Simultaneously, the corporation is under great pressure from investors to increase profits. In 2022, the company’s stock has dropped more than 50%, with a 20% drop in the previous month alone. On Tuesday, the stock fell 0.6% to $25.04 in New York.
Chip Industry Future at Risk
The conflict between the United States and China had cast a shadow on the chip industry’s future. On Friday, the Biden administration unveiled new export restrictions, limiting what US technology businesses might sell to the Asian nation. The revelation sent chipmaker shares sliding once again, with Intel losing 5.4% that day.
Intel has been attempting to reclaim its market position by delivering new PC processors and graphics chips. Selling more chips to the data-center industry, where competitors AMD and Nvidia Corp. have made inroads, is a critical component of their strategy. Google announced new Intel-powered server farm technologies on Tuesday that would assist accelerate artificial intelligence workloads. Intel is currently attempting to achieve those objectives as a leaner organization.
Intel’s chief financial officer, David Zinsner, stated following the company’s most recent quarterly report that there are numerous chances for Intel to improve and maximize output per dollar. He predicted that the chipmaker would incur restructuring charges in the third quarter, implying that layoffs were imminent.
Some chipmakers, including Nvidia and Micron Technology Inc., have stated that they will avoid layoffs for the time being. However, other technology firms, like Oracle Corp. and Arm Ltd., have already begun to lay off employees.
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