According to individuals with knowledge of the situation, Intel Corporation is reportedly contemplating a significant reduction in its workforce; Intel is planning tens of thousands of layoffs during a PC slowdown.
According to the sources, who asked not to be identified because the discussions are private, the layoffs will be disclosed as early as this month. The corporation expects to make a move approximately around the same time as it announces the results of its third quarter on October 27. The sources asked not to be identified because the discussions are private. As of July, the chip manufacturer had employed 113,700 individuals.
Intel’s sales and marketing operation may be one of the areas that undergo staff reductions of up to twenty per cent, as the insiders claim to have heard.
Intel is seeing a significant reduction in demand for its primary business, which is the production of computer central processing units (CPUs). It has been unable to recoup the market share lost to competitors such as Advanced Micro Devices Inc. In July, the company warned that initial projections for revenues in 2022 would be about $11 billion lower than what would be achieved. In the third quarter, analysts anticipate a decline in revenue of around 15%. And Intel’s once-enviable margins have dropped to the point that they are now about 15% lower than their prior estimates, which were approximately 60%.
During the conference call to discuss its results for the second quarter, Intel said that the company might make specific tweaks to boost its profitability.
According to statements by Chief Executive Officer Pat Gelsinger, “In 2022, we are also cutting core expenditure and will aim to take further measures in the second half of the year.”
The most recent significant wave of layoffs at Intel occurred in 2016 when the company eliminated nearly 12,000 workers, accounting for 11% of its workforce. Since then, the company has conducted fewer large-scale layoffs and shut down several divisions, including those dealing with cellular modems and drones. At the beginning of this year, as market circumstances worsened and concerns about a recession increased, Intel and many other enterprises operating in the technology sector halted their recruitment efforts.
In a research note published by Bloomberg Intelligence, analyst Mandeep Singh said that the latest cutbacks would probably result in a reduction of 10% to 15% of Intel’s fixed expenditures. According to his estimation, the costs will be in the region of $25 billion to $30 billion.
Since taking over as CEO of Intel a year ago, Gelsinger has been putting in a lot of effort to restore the company’s reputation as a Silicon Valley institution. But even before the PC market dropped, it was already an uphill struggle. In recent years, Intel has seen a decline in its culture of invention, which corporate executives concede has contributed to the firm’s loss of a technical advantage for a long time.
A more severe downturn has now compounded these challenges. The personal computer, data centre, and artificial intelligence businesses of Intel are all seeing a decline in technology investment, which is hurting sales and profitability.
IDC reports that during the third quarter, sales of personal computers dropped by 15%. The share prices of companies such as HP Inc., Dell Technologies Inc., and Lenovo Group Ltd., which use Intel CPUs in their laptops and desktop computers, fell precipitously.
According to Singh, Intel may need to reduce its payment to address cash-flow challenges since computer prices have remained the same and demand has decreased. On the other hand, he thinks that Intel’s intention to sell shares of its Mobileye self-driving technology business via an initial public offering would restate such concerns.
The timing of Intel’s plan to reduce its workforce couldn’t have been worse. This year, the company pledged to increase its manufacturing inside the United States of America if a chip-stimulus package of 52 billion dollars was passed. Gelsinger suggests a building boom that will bring the world’s most important centre for chip manufacturing to the state of Ohio.
Concurrently, the company is being put under significant pressure to boost its profitability by many investors. The firm’s stock has declined by more than fifty per cent since the beginning of 2022, with the most recent month alone seeing a decline of twenty per cent.
The future of the semiconductor business has also been hampered by the tensions between the United States and China. On Friday, the administration of Vice President Joe Biden disclosed new export limitations, which limit the kind of technological goods that US companies may sell to Asian countries. The news sent the shares of chipmakers tumbling once further, with Intel’s decline that day coming in at 5.4%.
By releasing updated central processing units (CPUs) and graphics processors for personal computers, Intel has been working to recapture the market position it once had. The sale of extra chips to the data centre business, an area in which rival companies AMD and Nvidia Corp. have made inroads, is an essential part of their goal. On Tuesday, Google announced new server farm technologies powered by Intel that would aid in increasing the workloads associated with artificial intelligence.
A few major chipmakers, including Nvidia and Micron Technology Inc., have said they would not be initiating any layoffs shortly. However, some technological companies, such as Oracle Corporation and Arm Ltd., have already begun eliminating jobs.
