Today's Edition
San Jose (dpa)
US chip-maker Intel on Thursday announced that it is planning on reducing its workforce by 15% as part of a cost-cutting programme worth billions of dollars.
Intel said the majority of the layoffs, expected to exceed 18,000, were set to be completed by the end of 2024. The move is part of a new $10 billion cost savings plan amid losses for the chipmaker.
From the fourth quarter onwards, Intel also intends to stop paying a dividend for the time being, the US company announced after the close of the US stock market.
In the second quarter, Intel posted a loss of just over $1.6 billion compared to a profit of $1.48 billion a year earlier.
Turnover fell by 1% year-on-year to $12.8 billion, falling short of analysts' expectations.
Intel once dominated the chip industry, but then fell behind.
Currently, competitor Nvidia is the benchmark in the chip industry. Intel chief executive officer Pat Gelsinger said he wants to turn things around with new production processes for more efficient chips, but still has a lot of work ahead of him.
"Our Q2 financial performance was disappointing, even as we hit key product and process technology milestones," he said.
"Second-half trends are more challenging than we previously expected, and we are leveraging our new operating model to take decisive actions that will improve operating and capital efficiencies while accelerating our IDM 2.0 transformation."
In the US, Intel shares plunged by nearly 30% at the beginning of trading on Friday.
In Germany fears are growing that the cost-cutting drive will also impact plans for a new chip factory in Magdeburg. While Gelsinger underlined Intel aims to stick to its Integrated Device Manufacturing 2.0 strategy to expand manufacturing capacity, he did not mention specific investment projects in Germany, France, and Italy.
He also said Intel will adjust investments more closely to demand. But the the state government in Magdeburg took an optimistic view on Friday. "According to Intel, nothing changes in the plan for the Magdeburg site," Matthias Schuppe, spokesman for state premier Reiner Haseloff told dpa.
The job cuts could be even higher than Gelsinger announced in the email to the workforce after the press release mentioned cuts of "more than" 15%, with the number of employees given as 116,500 at Intel and roughly 125,000 in the group, including subsidiaries.
Gelsinger's strategy for Intel's future is to make it more of a contract manufacturer for other chip developers. He aims for the company to master the most advanced production processes in order to compete against established producers such as TSMC of Taiwan.
Gelsinger has also positioned the company as a key actor in plans to bring more chip production from Asia back to the West. Building the Magdeburg plant falls under these plans. The plant is due to cost around 30 billion euros ($32 billion) and use the most advanced production processes according to earlier reports.
Intel is still waiting for approvals, including for billions in subsidies to offset some of the costs. The groundbreaking ceremony is due to be held at the end of the year, with production to start in 2027.
Gelsinger said the company's contract manufacturing strategy remains fundamentally unchanged but that until firm orders are in place, Intel would ensure it does not build up too much capacity.
He said investment plans had been adjusted to the expected market development, without providing further details. The company also wants to reap the benefits of high investments more quickly. Intel also plans to build new factories in the US and secure billions in funding.
Intel once dominated the chip industry but fell behind as it lost the battle for a place in the smartphone market. Intel sought to transfer its strength in the PC business to mobile devices but lost out to rivals such as Qualcomm or TSMC.
Meanwhile, Intel has seen one-time smaller rival Nvidia become one of the industry's hottest names thanks to chip systems for training artificial intelligence. Intel is also moving into this market but remains far behind Nvidia.
The Intel savings programme means no dividends are to be paid from the fourth quarter onward and capital expenditures are now expected to be 20% lower than initially targeted.
