Intel to lay off nearly 17,500 workers, suspend dividend in turnaround push
Intel said on Thursday it would cut more than 15 per cent of its workforce, some 17,500 people, and suspend its dividend starting in the fourth quarter as the chipmaker pursues a turnaround focused on its money-losing manufacturing business.
It also forecast third-quarter revenue below market estimates, grappling with a pullback in spending on traditional data center semiconductors and a focus on AI chips, where it lags rivals.
The results did not rock the broader chip industry.
AI powerhouse Nvidia and smaller rival AMD ticked up after hours, underscoring how well-positioned they were to take advantage of the AI boom, and Intel’s relative disadvantage.
“I need less people at headquarters, more people in the field, supporting customers,” CEO Pat Gelsinger told Reuters in an interview, talking about the job cuts. On the dividend suspension, he said: “Our objective is to … pay a competitive dividend over time, but right now, focusing on the balance sheet, deleveraging.”
Intel is in the middle of a turnaround plan, focused on developing advanced AI processors and building-out its for-hire manufacturing capabilities, as it aims to recoup the technological edge it lost to Taiwan’s TSMC, the world’s largest contract chipmaker.
The push to energise that contracting foundry business under Gelsinger has increased Intel’s costs and pressured profit margins. More recently, the chipmaker has said it will cut costs.
On Thursday, Intel announced it would cut operating expenses and reduce capital expenditure by more than $10 billion in 2025, more than it initially planned.
“A $10 billion cost reduction plan shows that management is willing to take strong and drastic measures to right the ship and fix problems. But we are all asking, ‘is it enough’ and is it a bit of a late reaction considering that CEO Gelsinger has been at the helm for over three years?” said Michael Schulman, chief investment officer of Running Point Capital.
The company had cash and cash equivalents of $11.29 billion, and total current liabilities of about $32 billion, as of June 29.
Intel’s lagging position in the market for AI chips has sent its shares down more than 40 per cent so far this year.
For the third quarter, Intel expects revenue of $12.5 billion to $13.5 billion, compared with analysts’ average estimate of $14.35 billion, LSEG data showed. It forecast adjusted gross margin of 38 per cent, well short of market expectations of 45.7 per cent.
Cutting capex
Analysts believe Intel’s plan to turn around the foundry business will take years to materialise and expect TSMC to maintain its lead in the coming years, even as Intel has ramped up production of AI chips for personal computers.
