Intel says it intends to reduce employment to cut costs

US chipmaker Intel said on Thursday it plans to lay off more than 15% of its workforce in a bid to streamline operations.

The plan to cut expenses by about $20 billion this year comes after Intel reported a loss of $1.6 billion in the recently ended quarter.

“Our second-quarter financial results were disappointing even as we reached key product and process technology milestones,” Intel CEO Pat Gelsinger said in a press release.

“Trends in the second half of the year are more difficult than we expected.”

Second-quarter profits were hurt by “headwinds” hampering Intel’s expansion of AI PC production and unused capacity at its plants, according to Chief Financial Officer David Zinsner.

“By implementing our expense reductions, we are taking proactive steps to increase our earnings and strengthen our balance sheet,” Zinsner said.

Intel said it had 124,800 employees at the end of last year, meaning the layoffs could affect about 18,000 positions.

In June, Intel announced it was suspending the expansion of a large factory in Israel that was expected to add $15 billion to the chip factory.

Intel stated at the time that “managing large-scale projects, especially in our industry, often involves adapting to changing schedules.”

“Decisions are made based on business conditions, market dynamics and responsible capital management,” the American company added.

The belt-tightening comes just a month after Intel struck a defiant tone in the face of stiff challenges from rivals Nvidia, AMD and Qualcomm by unveiling technologies it says will spearhead a revolution in artificial intelligence.

For decades, Intel has dominated the market for chips that power everything from laptops to data centers. But in recent years, its competitors—most notably Nvidia—have leapfrogged in specialized AI processors.

In a keynote speech at Computex in Taiwan, Gelsinger introduced Intel’s latest Xeon 6 processors for servers and shared more about Intel’s next-generation Lunar Lake processors for AI computing.

“Artificial intelligence is driving one of the most important eras of innovation the industry has ever seen,” Gelsinger said.

“The magic of silicon is once again enabling exponential advances in computing that will push the boundaries of human potential and power the global economy for years to come.”

Gelsinger said Intel’s latest hardware provides the best combination of performance, power efficiency and affordability available.

His presentation followed earlier keynotes by Nvidia CEO Jensen Huang, AMD CEO Lisa Su and Qualcomm’s Cristiano Amon, which were full of claims and counterclaims about which company has the best AI products.

In June, Microsoft unveiled Copilot+ AI computers that will have artificial intelligence capabilities built into the Windows operating system.

In addition to Microsoft, some of the world’s largest computer makers, including Dell, HP, Samsung, and Lenovo, will add these features, bringing AI capabilities directly to the device rather than just via the internet.

Intel, citing Boston Consulting Group, forecasts that by 2028 computers with artificial intelligence will account for 80% of the personal computer market.