Intel to lay off 15,000 employees as CPU strategy shifts

Intel said Thursday that the company will lay off more than 15 percent of its workforce, layoffs that were forced upon it by unused manufacturing capacity and charges associated with the launch of its AI PCs.

Intel positioned it as part of the “next phase of its multiyear transformation strategy,” but the cuts are fairly severe. Intel intends to reduce R&D and marketing, and general spending to $20 billion in 2024, $17.5 billion in 2025, and even lower in 2026. Intel will cut roughly 15,000 of its 131,000-employee headcount, most by the end of the year.

“Our Q2 financial performance was disappointing, even as we hit key product and process technology milestones,” Pat Gelsinger, Intel’s chief executive, said in a statement. “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.”

Intel said that it’s nearing the completion of its plan to push through five manufacturing nodes in four years, and is therefore moving to a focus toward capital efficiency. That means that Intel will spend less on manufacturing than it expected: down 20 percent in gross capital expenditures in 2024. Right now, the company’s product roadmap appears unchanged, but company executives will provide more detail in a conference call Thursday afternoon.

In a memo to employees, Gelsinger said that the news was “painful” for him to share. Intel will hold a company-wide conference call following its earnings call on Thursday afternoon, where Gelsinger will talk specifics.

“This is the most significant rebuilding at Intel since the transition from memory to microprocessors,” Gelsinger told analysts in a conference call.

Products will be reviewed, but remain unchanged for now

Intel’s roadmap remains in place. But it sounds like changes could be coming.

One of the company’s goals, Gelsinger said, is to eliminate complexity and specifically simplify the company’s product portfolio. “We will complete actions this month to simplify our businesses,” Gelsinger wrote in his memo to employees. “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.”

Intel has recently suffered through issues associated with its 13th-gen Core chips, which it recently attributed to voltage problems. Intel plans to launch its next-gen Core Ultra chip, Lunar Lake, at the IFA show at the beginning of September. Gelsinger said that Lunar Lake is actually ahead of schedule, he said. David Zinsner, Intel’s chief financial officer, added that Lunar Lake would be “ramping” next year, in 2025, however.

Intel has shipped more than 15 million Core Ultra chips to date, Gelsinger said. The industry has shipped 40 million AI PCs to date and 100 million by the end of the year, he said. Arrow Lake, Intel’s next chip, will add AI to the desktop, Gelsinger said. (Intel has not said if Arrow Lake will be branded as a Core Ultra chip.)

Panther Lake, Intel’s next mobile chip, will ship in the second half of 2025, as Intel shifts to its 18A process. “We are well on our way toward 14A and 10A development,” Gelsinger said, though Intel will be moving toward a less aggressive process roadmap.

While Intel’s Lunar Lake was essentially made at TSMC, Panther Lake will “be internally sourced at 18A,” David Zinsner, Intel’s chief financial officer said, helping its profitability. Intel executives that turning to outside foundries was necessary to enable its aggressive plan to move through five production nodes in four years. In 2026, that production will move back inside Intel, he said.

Interestingly, Intel took $1 billion in charges by moving Intel 4 and Intel 3 wafers from its development fab in Oregon to its production fab in Ireland, with higher costs. But that decision may pay off with an accelerated schedule in the future, executives said.

Gelsinger said that Intel will incrementally build its business over the course of 2024. Normally, the fourth quarter is the high point of the year. Gelsinger said that fourth-quarter revenues should be about 5 percent higher than the same quarter last year, lower than anticipated.

Updated at 2:55 PM with additional details.