Intel, the chip manufacturing company, is taking drastic measures to regain its competitive edge in the artificial intelligence industry. This involves eliminating nearly 17,000 jobs and halting dividend payouts. The job cuts form a component of Intel’s strategy to reduce costs by around £8.7 billion by the end of the forthcoming year. The announcement coincided with the release of the company’s below-expectation second quarter results, which triggered a decline in shares by 13 percent after Thursday’s trading.
The exact locations where job losses will occur were not specified. However, if the announced 15 percent headcount reduction is applied to Intel’s operations at Leixlip in Ireland, it suggests a loss of approximately 735 jobs at the County Kildare site, where the chip-producer currently employs nearly 4,900 individuals.
By the final quarter of 2024, Intel anticipates a majority of the cuts will be implemented. The planned £8.7 billion cost-saving target is in addition to a similar amount the company has planned for realisation in the next year.
In spite of a recent investment of around £14.8 billion in a new chip manufacturing plant (Fab 34) at the County Kildare site, Intel is still battling to upgrade its products and technology quickly enough to retain its client base. The new facility doubled the production space in Ireland and resulted in the employment of an additional 1,600 people.
CEO Pat Gelsinger and CFO Dave Zinsner both expressed discontent with the company’s current revenue and financial standing, asserting that the workforce reductions are a necessary move for a resilient business model in the future.
In the previous quarter, the company made a profit of two US cents per share, barring some particular elements, with an earnings of $12.8 billion, a decrease of 1 per cent. Predictions had been made for a profit of 10 cents per share and a turnover of $12.95 billion. Despite suggestions of a slight uplift in total annual sales from Wall Street, the firm still lags more than $20 billion behind its zenith in 2021.
For the following quarter, Intel has indicated expectations of a turnover beneath forecasted levels, situated between $12.5 billion and $13.5 billion, against the mean forecast of $14.35 billion given by market analysts. This comes as the corporation faces a contraction in traditional data centre chip expenditure and heightened competition in the personal computer (PC) market.
Once a pivotal player in the PC sphere, Intel now tails Nvidia in the flourishing AI processor market. Concurrently, its data centre enterprise is under threat from AMD, re-emerging as a significant competitor. Intel’s manufacturing hiccups have opened opportunities for AMD, which has been utilising Taiwan Semiconductor Manufacturing Company, to seize business.
Intel has reduced its workforce by roughly 5 per cent in 2023 to 124,800 by the end of the year. This followed the disclosure of job reductions in October 2022. Approximately 130 positions were slashed in Ireland. This data has been corroborated by additional reports from Reuters/Bloomberg.