Workforce Cuts and Strategic Changes

Intel Corporation is set to significantly reduce its workforce by approximately 20%, impacting over 21,000 employees, as reported by Bloomberg. This action, which will be officially announced this week, marks the largest layoff in the company’s history, aimed at streamlining operations and emphasizing engineering roles.

Leadership Transition

The impending layoffs are part of the first major restructuring initiative led by Intel’s new CEO, Lip-Bu Tan, who assumed the role on March 18th. Tan, a seasoned professional in the chip manufacturing sector and former CEO of Cadence Design Systems, is tasked with revamping Intel’s operations after several years of declining revenues and increasing competition, especially from firms like NVIDIA and AMD.

Financial Challenges and Revenue Decline

Intel has experienced a continuous decline in revenue over the past three years, with annual revenues dropping significantly from $79 billion in 2021 to $54 billion in 2023. The most recent figures indicate a further decrease to $53.1 billion in 2024, a 2% decline compared to the previous year. Notably, the company’s fourth-quarter revenue for 2024 was reported at $14.3 billion, reflecting a 7% year-on-year decrease.

Focus on Engineering and Product Development

In a communication to employees, Tan noted that under his leadership, Intel is poised to transition into a more engineering-centric company. He expressed confidence in the company’s ability to turn its fortunes around by developing superior products and fostering strong customer relationships.

“We are confident that we can turn our business around,” Tan stated. “We push ourselves to develop the best products, listen diligently to our customers, and take responsibility for the commitment we make to build trust.”

Past Workforce Reductions and Future Plans

This latest announcement follows Intel’s announcement in August 2024 regarding a reduction of 15,000 employees, which was implemented by the end of the year after reporting a net loss of $1.6 billion in Q2 2024. According to Intel’s 2024 annual report, the employee count was down to 108,900 by December 2024, a notable decrease from 124,800 in the previous year.

Competition in the AI Chip Market

Intel is currently under pressure in the AI chip market, where NVIDIA holds a substantial share ranging from 70% to 95%. Although the company introduced the Xeon 6 AI chip in June 2024, plans for the Falcon Shores AI chip were shelved in favor of concentrating on data center solutions.

During the past five years, Intel’s stock has plummeted by approximately 65%, with a 40% decline noted in the past year alone. The company is set to release its revenue report for the first quarter of 2025 this Thursday.