Intel Corp. is planning a major cut in staff, likely by the thousands, to cut costs and deal with a surging personal-computer market, according to people familiar with the situation.
The layoffs will be announced as early as this month, and the company plans to make the move around the same time as its third-quarter earnings report on Oct. 27, said the people, who asked not to be identified because the discussions are private. . The chip maker had 113,700 employees in July.
Some divisions, including Intel’s sales and marketing group, could see cuts affecting about 20 percent of the workforce, according to people familiar with the situation.
Intel is facing a sharp decline in demand for computer processors, its core business, and has struggled to regain market share lost to rivals such as Advanced Micro Devices Inc. In July, the company warned that 2022 sales would be about $11 billion lower than ol. it was waiting before. Analysts predict a drop in revenue in the third quarter of almost 20 percent. And Intel’s once-enviable margins have shrunk: They’re about 15 percentage points narrower than historical numbers of about 60 percent.
During its second-quarter earnings call, Intel acknowledged that it could make changes in its business to improve profits. “We are also lowering core expenses in calendar year 2022 and will look to take additional actions in the second half of the year,” CEO Pat Gelsinger said at the time.
Intel, based in Santa Clara, Calif., declined to comment on the layoffs.
Intel’s last big wave of layoffs occurred in 2016, when it cut about 12,000 jobs, or 11 percent of its total. The company has made smaller cuts since then and shuttered several divisions, including its cellular modems and drone units. Like many companies in the technology industry, Intel also froze hiring earlier this year as market conditions worsened and fears of a recession grew.
Gelsinger took the helm at Intel last year and worked to restore the company’s reputation as a Silicon Valley legend. But even before the PC drop, it was an uphill battle. Intel has lost its long-held technological edge, and its own executives acknowledge that the company’s culture of innovation has faded in recent years.
Now a wider slump is adding to those challenges. Intel’s PC, data center and artificial intelligence groups are fighting a tech spending slowdown, weighing on revenue and profit.
PC sales fell 15 percent in the third quarter from a year earlier, according to IDC. HP Inc., Dell Technologies Inc, and Lenovo Group Ltd., which use Intel’s processors in their laptops and desktop computers, all suffered steep declines.
It’s a particularly awkward time for Intel to make cuts. The company has lobbied hard for US$52 billion this year, promising to expand its manufacturing in the US. Gelsinger is planning a construction boom that includes bringing the world’s largest chipmaking center to Ohio.
At the same time, the company is under intense pressure from investors to boost its profits. The company’s stock has fallen more than 50% in 2022, with a 20% plunge in the last month alone.
US tensions with China have also clouded the chip industry’s future. The Biden administration announced new export limits on Friday, limiting what American technology companies can sell to the Asian nation.
David Zinsner, Intel’s chief financial officer, said after the company’s latest quarterly report that “there are great opportunities for Intel to improve and deliver maximum output per dollar.” The chipmaker expected to see restructuring charges in the third quarter, he said, signaling that cuts were looming.
Some chip makers, including Nvidia Corp. and Micron Technology Inc., said they are now avoiding layoffs. But other technology companies, such as Oracle Corp. and Arm Ltd., have already cut jobs.