Chipmaker Intel plans to cut 15,000 jobs as it tries to revive its business and compete with rivals

Chipmaker Intel said it is cutting 15% of its massive workforce — about 15,000 positions — as it seeks to turn around and compete with more established rivals such as Nvidia and AMD.

In a memo to employees, Intel Corp. Chief Executive Officer Pat Gelsinger said Thursday that the company plans to save $10 billion by 2025.

“In short, we need to align our cost structure with our new operating model and fundamentally change the way we do things,” he wrote in a note on Intel’s website. “Our revenue hasn’t grown as expected—and we haven’t yet fully benefited from powerful trends like AI. Our costs are too high, and our margins are too low.”

The job cuts follow a disappointing quarter and outlook for the iconic chipmaker, founded in 1968 at the beginning of the personal computer revolution.

Next week, Gelsinger wrote, Intel will announce an “expanded retirement offer” for eligible employees and offer a voluntary separation request program.

“These decisions have challenged me deeply and are the hardest thing I’ve done in my career,” he said. Most of the layoffs are expected to be completed this year.

The Santa Clara, California-based company also suspended its dividend as part of a broader cost-cutting plan.

Intel reported a second-quarter loss and a slight decline in revenue, and forecast third-quarter revenue would fall short of Wall Street expectations.

The company’s shares fell 19% in after-market trading, indicating that Intel could lose about $24 billion in market value when trading opens on Friday.

The company reported a loss of $1.6 billion, or 38 cents a share, in the April-June period, down from a profit of $1.5 billion, or 35 cents a share, a year earlier. Adjusted earnings, excluding special items, were 2 cents a share.

Revenue fell 1% to $12.8 billion from $12.9 billion.

Analysts on average expected earnings of 10 cents per share on revenue of $12.9 billion, according to a FactSet survey.

“Intel’s announcement of a significant cost-cutting plan, including layoffs, could bolster its near-term financial performance, but the move alone won’t be enough to redefine its position in the emerging chip market,” said eMarketer analyst Jacob Bourne. “The company faces a critical juncture as it leverages U.S. investment in domestic manufacturing and growing global demand for AI chips to solidify its position in chipmaking.”

Gelsinger noted on a conference call with analysts that Intel has previously said its investments in the AI ​​PC market will weigh on profit margins in the short term but should benefit the company in the long term.

“We believe the trade-offs are worth it. AI PCs will grow from less than 10% of the market today to more than 50% by 2026,” he said.

Unlike rivals like Nvidia, Intel makes chips in addition to designing them. It has been working to build out its semiconductor foundry business in the U.S., competing with rivals like market leader Taiwan Semiconductor Manufacturing Co., or TSMC.

Thanks to Gelsinger’s lobbying efforts since he took over the company in 2021, Intel is a top beneficiary of the CHIPS and Science Act of 2022. The Biden administration helped steer it through Congress amid post-pandemic concerns that losing access to chips made in Asia could tip the U.S. economy into recession.

In March, President Joe Biden celebrated an agreement to provide Intel with up to $8.5 billion in direct funding and $11 billion in loans for chip manufacturing plants across the country, praising the investment in the Arizona political homestand and calling it a way to “restore America’s future.” At the time, Gelsinger called the CHIPS Act “the most important piece of industrial policy legislation since World War II.”

In September 2022, Biden praised Intel for creating jobs as it plans to open a new facility near Columbus, Ohio. The president praised the company for its plans to “build the workforce of the future” for the $20 billion project, which he said would generate 7,000 construction jobs and 3,000 full-time positions that are expected to pay an average of $135,000 per year.

“The U.S. government wants to revive domestic manufacturing, especially in the area of ​​advanced computer chips,” Bourne said. “And Intel has kind of been given that money. But there’s a lot of infrastructure that goes into that, there’s building these plants that are really highly specialized — and then you have to upskill the local workforce where those plants are located. So that takes time. It’s not something that happens overnight.”

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Associated Press writer Josh Boak contributed to Washington.