Last updated on August 29th, 2024 at 02:16 pm
San Francisco — US chip maker Intel announced on Thursday that it would cut more than 15 percent of the workforce as part of a strategic plan to rid itself of unnecessary weight. The move intends to shave off about $20 billion in expenses in the year, coming after reporting a $1.6 billion loss in the second quarter.
Intel CEO Pat Gelsinger said in the release of Q2 earnings, “Our Q2 financial performance was disappointing, even as we achieved key product and process technology milestones. Second-half trends are more challenging than we previously expected.”
Financial Challenges:
The CFO, David Zinsner, announced in an interview that the semiconductor firm faced problems ramping up its artificial intelligence PC product, underutilized capacity in its plants–bad news for second-quarter earnings. “By implementing our spending cuts, we take proactive action to enhance profitability and fortify our balance sheet,” he said.
Intel had 124,800 employees at the close of last year and thus its layoff plan could affect nearly 18,000 employees.
Project Delays, Strategic Decisions
Intel, in June, announced the halt in project development for a key factory in Israel. This is said to infuse the chip plant with $15 billion. Intel elaborated, “Running major projects, especially in our industry, is quite fluid across these timelines. Decisions are constantly made about the state of the business, market trends, and prudent use of capital.”
Competition within Industry
The cost-cutting measures come in the wake of Intel’s bold rebuttal against competitors Nvidia, AMD, and Qualcomm by announcing new technologies targeting to be at the edge in leading the artificial intelligence revolution. Intel has enjoyed decades of supremacy in the market for the chips it designs, but in recent years, it has shown signs of strong competition, especially from Nvidia with its specialized AI processors.
At Computex in Taiwan, Gelsinger announced the newest Xeon 6 processors for servers and previewed next-gen Lunar Lake chips for AI PCs. Gelsinger heralded the news this way: “AI is driving one of the most consequential eras of innovation the industry has ever seen.
Market outlook:
Gelsinger believes that the new equipment from Intel strikes the best price, performance, energy efficiency, and affordability combination. Gelsinger’s presentation followed presentations by keynotes from Nvidia CEO Jensen Huang, AMD CEO Lisa Su, and Qualcomm CEO Cristiano Amon, all of whom were claiming their products as the superior for AI.
This June, Microsoft announced Copilot+ AI PCs and built-in artificial intelligence in the operating Windows. Major computer manufacturers, including Dell, HP, Samsung, and Lenovo, are on their way to embed the AI feature directly on their devices rather than through the internet. According to Intel and the Boston Consulting Group, by 2028, 80% of computers will be AI-powered.
