Intel Bleeds Red, Plans 15% Workforce Layoff and $10B Cuts For 2025
by Ryan Smith on August 1, 2024 7:15 PM EST
Amidst the backdrop of a weak quarterly earnings report that saw Intel lose money for the second quarter in a row, Intel today has announced that the company will be cutting costs by $10 billion in 2025 in an effort to bring Intel back to profitability. The cuts will touch almost every corner of the company in some fashion, with Intel planning to cut spending on R&D, marketing, administration, and capital expenditures. The most significant of these savings will come from a planned 15% reduction in force, which will see Intel lay off 15,000 employees over the next several months – thought to be one of Intel’s biggest layoffs ever.
In an email to Intel’s staff, which was simultaneously published to Intel’s website, company CEO Pat Gelsinger made the financial stakes clear: Intel is spending an unsustainable amount of money for their current revenues. Citing the company’s current costs, Gelsinger wrote that “our costs are too high, our margins are too low,“ and that “our annual revenue in 2020 was about $24 billion higher than it was last year, yet our current workforce is actually 10% larger now than it was then.” Consequently, Intel will be enacting a series of painful cuts to bring the company back to profitability.
Intel is not publicly disclosing precisely where those cuts will come from, but in the company’s quarterly earnings release, the company noted that it was targeting operating expenses, capital expenditures, and costs of sales alike.
For operating expenses, Intel will be cutting “non-GAAP R&D and marketing, general and administrative” spending, with a goal to trim that from $20 billion in 2024 to $17.5 billion in 2025. Meanwhile gross capital expenditures, a significant expense for Intel in recent years as the company has built up its fab network, are projected to drop from $25 billion to $27 billion for 2024, to somewhere between $20 billion and $23 billion in 2025. Compared to Intel’s previous plans for capital expenditures, this would reduce those costs by around 20%. And finally, the company is expecting to save $1 billion on the cost of sales in 2025.
| Intel 2025 Spending Cuts | |||
| 2024 Projected Spending | 2025 Projected Spending | Projected Reduction | |
| Operating Expenses (R&D, Marketing, General, & Admin) |
$20B | $17.5B | $2.5B |
| Capital Expenditures (Gross) | $25B - $27B | $20B - $23B | $2B - $7B |
| Cost of Sales | N/A | $1B Savings | $1B |
Separately, in Intel’s email to its employees, Gelsinger outlined that these cuts will also require simplifying Intel’s product portfolio, as well as the company itself. The six key priorities for Intel will include cutting underperforming product lines, and cutting back Intel’s investment in new products to “fewer, more impactful projects”. Meanwhile on the administrative side of efforts, Intel is looking to eliminate redundancies and overlap there, as well as stopping non-essential work.
- Reducing Operational Costs: We will drive companywide operational and cost efficiencies, including the cost savings and head count reductions mentioned above.
- Simplifying Our Portfolio: We will complete actions this month to simplify our businesses. Each business unit is conducting a portfolio review and identifying underperforming products. We are also integrating key software assets into our business units so we accelerate our shift to systems-based solutions. And we will narrow our incubation focus on fewer, more impactful projects.
- Eliminating Complexity: We will reduce layers, eliminate overlapping areas of responsibility, stop non-essential work, and foster a culture of greater ownership and accountability. For example, we will consolidate Customer Success into the Sales, Marketing and Communications Group to streamline our go-to-market motions.
- Reducing Capital and Other Costs: With the completion of our historic five-nodes-in-four-years roadmap clearly in sight, we will review all active projects and equipment so we begin to shift our focus toward capital efficiency and more normalized spending levels. This will reduce our 2024 capital expenditures by more than 20%, and we plan to reduce our non-variable cost of goods sold by roughly $1 billion in 2025.
- Suspending Our Dividend: We will suspend our stock dividend beginning next quarter to prioritize investments in the business and drive more sustained profitability.
- Maintaining Growth Investments: Our IDM2.0 strategy is unchanged. Having fought hard to reestablish our innovation engine, we will maintain the key investments in our process technology and core product leadership.
The bulk of these cuts, in turn, will eventually come down to layoffs. As previously noted, Intel is planning to cut about 15% of its workforce. Just how many layoffs this will entail remains to be seen; Gelsinger’s letter puts it at roughly 15,000 employees, while Intel’s most recent published headcount would put this figure at closer to 17,000 employees.
Whatever the number, Intel is expecting to have most of the reductions completed by the end of this year. The company will be using a combination of early retirement packages and buy-outs, or what the company terms as “an application program for voluntary departures.”
Intel’s investors will be taking a hit, as well. The company’s generous quarterly dividend, a long-time staple of the chipmarker and one of the key tools to entice long-term investors, will be suspended starting in Q4 of 2024. With Intel losing money over multiple quarters, Intel cannot afford (or at least, cannot justify) paying out cash in the forms of dividends when that money could be getting invested in the company itself. Though as the long-term health of the company is still reliant on offering dividends, Intel says that the suspension will be temporary, as the company reiterated its “long-term commitment to a competitive dividend as cash flows improve to sustainably higher levels.” For Q2 2024, Intel paid out $0.125/share in dividends, or a total of roughly $0.5B.
Ultimately, the message coming from Intel today is that it is continuing (if not accelerating) its plans to slim down the company; to focus on a few areas of core competencies that suit the company’s abilities and its financial goals. Intel is throwing everything behind its IDM 2.0 initiative to regain process leadership and serve as a world-class contract foundry, and even with Intel’s planned spending cuts for 2025, that initiative will continue to move forward as planned.
On that note, cheering up investors in what’s otherwise a brutal report from the company, Intel revealed that they’ve achieved another set of key milestones with their in-development 18A process. The company released the 1.0 process design kit (PDK) to customers last month, and Intel has successfully powered-on their first Panther Lake and Clearwater Forest chips. 18A remains on track to be “manufacturing-ready” by the end of this year, with Intel looking to start wafer production in the first half of 2025. 18A remains a make-or-break technology for Intel Foundry, and the company as a whole, as this is the node that Intel expects to return them to process leadership – and from which they can improve upon to continue that leadership.
Sources: Intel Q2'24 Earnings, Intel Staff Letter
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puplan - Wednesday, August 7, 2024 - link
Poor Intel. Perhaps they shouldn't have spent over $30G over the last 5 years on stock buybacks, see https://ycharts.com/companies/INTC/stock_buyback.twtech - Friday, August 9, 2024 - link
I don't know if it's considered appropriate to say here, but I anticipated this coming years ago when Intel "went woke", even though they were still on top at the time. You just can't prioritize both having the most skilled/competent possible workforce, and something else, at the same time.Oxford Guy - Sunday, August 11, 2024 - link
My understanding is that research demonstrates that workplace diversity improves corporate performance. That is the opposite of the dominant narrative of current ‘conservative’ populism.The quality of sociological research is questionable, according to some researchers who say, for instance, that peer review is both broken and inadequate to fulfill the general oversight role most seem to think it occupies and should. They also cite failure to adequately replicate, due to newness bias.
My anecdotal experience and observation has suggested that it is a mixed bag. Bringing women into the workforce beyond the old third-tier roles, though, unquestionably improves the quality of the labor pool. It is irrefutable that one gains more talent to choose from when 50% of a population is added to the game. That works out well for corporations/business but how well it works out in the big picture is arguable. Productivity has increased far beyond wages so what women gained in independence they arguably lost in time to live life (for the majority who, contrary to corporate mythology, don’t have the opportunity to find a job that they would rather do versus having more of their life for ‘hobbies’ — work they self-direct and thus prefer to do, as it seems more fulfilling). Giving women the choice to become higher-ranking wage slaves, therefore, is a mixed bag. Personally, I would choose to have more life rather than more work under duress but the system we live in is overwhelmingly duress-based. Women, in general, were not given enough agency/latitude to fully live life in a system in which they didn’t have the full ability to participate in the forced labor game. Watch Mr. Skeffington for a refresher on that.
I have an unconventional moderate approach. I think owner-operator business should be able to grow a bit more (in terms of size), via more legal stability/protection. For those businesses, I think the owners should be able to hire and retain the employees they prefer to have work there, regardless of how homogeneous the owner prefers the employees to be. For corporations and public entities, though, DEI measures should be mandatory.
I think this approach is more balanced. Few expect to see ugly, unkempt, awkward, and old runway models of either sex. Similarly, some smaller businesses should have the ability to have more specific employee types, even if that means discriminating on the basis of ‘protected’ attributes such as sex and age. Why should beautyism, ableism, and ageism be allowed in the modeling industry but other forms of discrimination not? It is arbitrary. It is also arbitrary to favor female-owned businesses, particularly when public entities are doing that, and simultaneously claim that it is wrong to have a male-only small business. Freedom of association should, in my view, encompass small business, in terms of employees. In terms of serving the public, however, I do not agree with barring customers for bigoted reasons.
Blaming poor corporate performance on DEI is so common lately that it seems to be reflexive and robotic — even meme-grade. I think it’s far more likely that the vastly disproportionate compensation model of corporations is the first real problem that should be remedied. Invest more into more employees and see better returns.
GeoffreyA - Monday, August 12, 2024 - link
I agree with some points. As for the problem, it goes deeper, and there is no simple answer.Complaints about diversity and "wokeness" are not, as one might think, about economics. It is about something older and more primitive, and the shifts we are seeing across the world, going backwards, such as the rise of the RN in France, the UK riots, or MAGA, are a symptom of it. Today's post-WW2 world is not as progressive, fair, or rational as one would like to think, but is built on the rotten foundations of the 19th century and the past. Most of the time, this is hidden, but recent events, such as present wars, have brought the double standards into daylight for all to see. We realise that what politicians, governments, and corporations say is talk, but when it comes down to it, owing to peculiar circumstances, they tend to show where they stand. Also, many countries claim democracy, but are oligarchies or despotisms in disguise; the "world country" as a whole---West and Global South---is unequal and undemocratic. How can it be fixed? I don't know: the foundations are worse than Windows ME or Bulldozer, and there is no XP or Zen forthcoming.
As for the brainwashing that makes people work themselves to death, with the boss as worshipped monarch, it is part of the system, making all "higher-ranking wage slaves," as you pointed out. We work our whole lives for a broken system, retire, and then die shortly afterwards. Don't mistake me; I believe everyone should work or contribute, and labour is excellent for our mental and physical health; but we are being misused, usually for the benefit of billionaires, and half the world's wealth is held by a small percentage of people. As for the modelling and beauty industry: we shouldn't look for fairness there; it is a manipulative industry, draining purses, and the harm it does to women is massive, regarding false standards and body image.
Oxford Guy - Friday, August 16, 2024 - link
Thanks for the thoughtful reply. I wrote a lengthy one but these posts have already veered from the expected lane of this site. I will only make a few very brief notes. 1) I wasn't suggesting that modeling is an overall good thing. However, society currently agrees that business discrimination based on type is necessary, given the existence of modeling and other businesses that do so. 2) Totalitarianism has been marked by the notion of the melting pot/assimilation. There is a debate about the value of culture/subculture and maintaining subculture requires discrimination. The early Soviets had peasants live with the intelligentsia (although not the leaders, of course) and Merkel told Germans to open their homes to immigrants but when a reporter finally asked her when she was going to have them live with her she said 'I can't imagine it.' 3) It's hard to separate economics from most everything in human life, as greed is so foundational. 4) I agree that people should contribute to the welfare of one another and the perpetuation of the species of flora/fauna that were here before we were. However, a large portion of that work could be voluntary (intrinsic motivation not extrinsic) instead of supplied via the cudgel. Automation should be used to reduce the yoke but instead it's used to further extract/destroy life from ordinary people and the biosphere. 5) Since people are forced to spend the majority of their time at work, it would be nice, I think, for people to be able to associate with those who share their values enough for compatibility. Research shows that the 'opposites attract' belief is unfounded, that people select mates primarily based on similarity. Similarly, forcing people together who don't respect one another does not sound like a recipe for happiness. This is why I am inclined to believe that small business should have much greater latitude when it comes to freedom of association, versus corporations. However, the line must be drawn at customer service. Business owners should not discriminate against customers for any reason related to prejudice. I think the difference should be that smaller businesses are less lucrative and that is the tradeoff for having more latitude when it comes to those one works with. Want the big bucks? Then, go into corporate and have DEI. I think DEI is important to combat unfairness is employment but I don't think it should apply to small business. I, for instance, don't want to hire someone who won't shake hands with female clients because his religion tells him he can't. I don't want to be the slave of someone's organized irrationality. That's not freedom in my view; it's insanity. (I am not a supporter of religious oppression, which means the oppression of rational people by religions.) Not all employment discrimination is based on irrationality, therefore.GeoffreyA - Sunday, August 18, 2024 - link
Thanks for your thoughts. I have quite a few things to say, but will do so when I get a moment.GeoffreyA - Thursday, August 22, 2024 - link
For now, let me tackle number five. While people have the right to associate with whom they want, I reject that businesses, small or big, should be allowed to hire based on external characteristics. The world is riddled with this sort of discrimination at all scales. It should be merit- and character-based (though of course, meritocracies also lead to unfairness because not everyone has equal talent). Indeed, if such a thing were possible, hiring should be "blind," such as when testing lossy compression, not knowing whether a file is the MP3 or reference. I don't agree with quotas; but when it comes to hiring, one standard should apply to all, regardless of the size of the business. Simply put, one should not get a job, or fail to do so, because of outward, accidental characteristics.Touching on the example of shaking hands. That, too, is an accident of custom, not necessarily tied to religion, and varying from country to country. In some places, such as here in South Africa and not owing to religion in the least, people aren't fond of shaking hands and it's got worse since Covid. So, if we were to take someone from a place where shaking hands is not customary and make them shake hands on the job, it might be uncomfortable. The solution: during the interview, they should be asked, "You will shake hands with clients, women as well as men. Is that all right?" The custom of the French to kiss as greeting brings this point out well. To them, it is similar to shaking hands, with no funny connotation at all, but others may find it too close for comfort. Should an American in France be discriminated against for a job because they find kissing as greeting odd? Perhaps! So, it is a matter of recognising what is customary in one place may not be a universal standard; indeed, it may be positively odd elsewhere. Therefore, tolerance is key, solving a host of problems.
Unrelated, but on the point about opposites not attracting, I agree that those with similar lives and interests tend to come together. However, the key factor is actually "attachment," and it is overwhelmingly seen that those with opposite attachment styles end up in relationships. The anxious is drawn to the avoidant and vice versa. Both are diametrically opposed in their attachment dynamics, leading to endless problems and the eventual dissolution of the relationship or marriage. The anxious is rarely attracted to the anxious, nor avoidant to avoidant.
(I agree that religion is often irrational. But belief in a creator, or something else, is a different thing and can exist quite independently from the circus of religion. For my part, I believe in a creator, but don't go by religion, being fed up with the lies and delusions. For a contemporary example, take a look at different groups' views on the Gaza War. Also, irrational people exist everywhere, religion or no religion. But when people try to force their ideas onto others, that is the problem and the spirit of fascism. Anyway, this is another topic in itself.)
GeoffreyA - Saturday, August 24, 2024 - link
Concerning number four, I agree it would be ideal if work were voluntary. Indeed, if one looks at "Star Trek," it is a world without money where work seems to be voluntary. There, technology was used to defeat scarcity. Here, it is used to cut jobs and make the few rich.