Intel to Cut 15% of Workforce Amid $1.6 Billion Loss and Intensified AI Competition

San Francisco: Intel Corporation announced on Thursday that it will be reducing its workforce by more than 15% as part of a major restructuring effort aimed at streamlining its operations. This decision comes as the company grapples with a substantial financial setback, having reported a loss of $1.6 billion for the recently concluded quarter.

Streamlining Operations Amidst Financial Loss

The cost-cutting plan, which aims to slash approximately $20 billion in expenses this year, underscores the severity of Intel’s financial woes. Intel CEO Pat Gelsinger acknowledged the company’s disappointing financial performance, despite achieving significant product and process technology milestones. He noted that the trends for the second half of the year are proving to be more challenging than initially anticipated.

Chief Financial Officer David Zinsner attributed the poor second-quarter earnings to several factors, including “headwinds” related to the ramp-up of Intel’s artificial intelligence PC product and the underutilisation of its facilities. To counter these issues, Zinsner stated that the company is taking proactive steps by implementing spending reductions to enhance profitability and fortify its balance sheet.

Impact of Layoffs and Recent Decisions

Intel’s workforce stood at approximately 124,800 employees at the end of last year, which means that the planned layoffs could affect about 18,000 positions. This significant reduction is part of a broader strategy to address the financial strain the company is under.

In June, Intel had already begun scaling back on its major factory expansion project in Israel, which was intended to inject an additional $15 billion into a new chip plant. The company cited the need to adapt to changing timelines and manage large-scale projects responsibly, reflecting broader business conditions and market dynamics.

Competitive Challenges and Technological Advancements

The announcement of these layoffs comes on the heels of a bold stance Intel took last month, presenting new technologies designed to advance the artificial intelligence (AI) revolution. Despite strong competition from rivals such as Nvidia, AMD, and Qualcomm, Intel unveiled its latest technologies, including the Xeon 6 processors for servers and upcoming Lunar Lake chips aimed at AI PCs.

During a keynote at Taiwan’s Computex expo, Gelsinger emphasised the transformative impact of AI on the industry. He highlighted Intel’s new equipment as offering the best blend of performance, energy efficiency, and affordability. This presentation followed similar showcases by Nvidia’s Jensen Huang, AMD’s Lisa Su, and Qualcomm’s Cristiano Amon, each touting their own AI advancements.

The Growing AI Market and Intel’s Position

In June, Microsoft also made headlines by unveiling its Copilot+ AI PCs, which will integrate AI features directly into the Windows operating system. This move is part of a broader trend where major computer manufacturers such as Dell, HP, Samsung, and Lenovo are incorporating AI capabilities directly into their devices.

Intel has projected that AI computers will dominate the PC market, constituting 80% of it by 2028, according to data from the Boston Consulting Group. This projection underscores the significant shift towards AI-driven technology in computing, highlighting the intense competition in this rapidly evolving sector.