Intel plans to lay off up to 20% of its manufacturing sector employees starting next month according to a media report, suggesting the company is running out of options as it seeks a return to profitability.
The cuts will be made around the world, but some of the layoffs will be closer to home, according to a report in The Oregonian citing an internal company memo from Intel manufacturing Vice President Naga Chandrasekaran.
The report said the job cuts will affect Intel’s chip fabs in the US state of Oregon: The company employs 20,000 there, making it the state’s largest employer.
Scott Bickley, advisory fellow at Info-Tech Research Group, said it is unsurprising that Intel’s new CEO, Lip-Bu Tan, walked right into the business and made the decision to reduce head count as the company sees “demand faltering for its next generation AI PC chips, a struggling foundry business, and seemingly all hope being placed on next generation chip designs such as Gaudi 3 AI Accelerator and the forthcoming Sierra Forest and Granite Rapids CPUs set to compete with AMD’s Epyc chip.”
He added, “on one hand, customers are delaying AI upgrades, while on the other, [they] are stockpiling legacy chips in light of the global trade turmoil and tariffs. While Intel’s share of data center sales is down to [an estimated] 65%, this business is still fairly steady.”
However, said Bickley, “with overall PC and DC [data center] demand trends soft for the products Intel offers, the path ahead demands further cost rationalization. Combine this with the investment-heavy nature of their foundry business, which seeks to compete with TSMC, and is also struggling to attract business from the likes of AMD and Nvidia, and Intel seems to be stuck between a rock and a hard place.”
Matt Kimball, principal analyst at Moor Insights & Strategy, said, “While I’m sure tariffs have some impact on Intel’s layoffs, this is actually pretty simple — these layoffs are largely due to the financial challenges Intel is facing in terms of declining revenues.”
The move, he said, “aligns with what the company had announced some time back, to bring expenses in line with revenues. While it is painful, I am confident that Intel will be able to meet these demands, as being able to produce quality chips in a timely fashion is critical to their comeback in the market.”
Intel, said Kimball, “started its turnaround a few years back when ex-CEO Pat Gelsinger announced its five nodes in four years plan. While this was an impressive vision to articulate, its purpose was to rebuild trust with customers, and to rebuild an execution discipline. I think the company has largely succeeded, but of course the results trail a bit.”
Asked if a combination of layoffs and the moving around of jobs will affect the cost of importing chips, Kimball predicted it will likely not have an impact: “Intel (like any responsible company) is extremely focused on cost and supply chain management. They have this down to a science and it is so critical to margins. Also, while I don’t have insights, I would expect Intel is employing AI and/or analytics to help drive supply chain and manufacturing optimization.”
The company’s number one job, he said, “is to deliver the highest quality chips to its customers — from the client to the data center. I have every confidence it will not put this mandate at risk as it considers where/how to make the appropriate resourcing decisions. I think everybody who has been through corporate restructuring (I’ve been through too many to count) realizes that, when planning for these, ensuring the resilience of these mission critical functions is priority one.”
Added Bickley, “trimming the workforce, delaying construction of the US fab plants, and flattening the decision structure of the organization are prudent moves meant to buy time in the hopes that their new chip designs and foundry processes attract new business.”
Source:: Network World