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Intel Corp is facing a steep decline in demand for personal computer processors, its main business. Photo: Shutterstock

Semiconductor giant Intel said to plan lay-offs affecting thousands of employees to cut costs, cope with PC market slowdown

  • The lay-offs are expected to be announced around the same time as Intel’s third-quarter earnings report on October 27
  • The US semiconductor manufacturer had 113,700 employees as of July
Intel
Semiconductor giant Intel Corp is planning a major reduction in headcount, likely numbering in the thousands, to cut costs and cope with a sputtering global personal computer (PC) market, according to people with knowledge of the situation.

The lay-offs will be announced as early as this month, with the company expected to make the move around the same time as its third-quarter earnings report on October 27, said the people, who asked not to be identified because the deliberations are private. The US chip maker had 113,700 employees as of July.

Some divisions, including Intel’s sales and marketing group, could see cuts affecting about 20 per cent of staff, according to the people.

Intel is facing a steep decline in demand for PC processors, its main business, and has struggled to win back market share lost to rivals like Advanced Micro Devices (AMD). In July, Intel warned that 2022 sales would be about US$11 billion lower than it previously expected.

Intel chief executive Pat Gelsinger holds an integrated circuit die during a US Senate Commerce, Science and Transportation Committee hearing in Washington on March 23, 2022. Photo: Bloomberg

Analysts are predicting Intel to post a third-quarter revenue drop of roughly 15 per cent. And the firm’s once-enviable margins have shrivelled: they are about 15 percentage points narrower than historical numbers of around 60 per cent.

During its second-quarter earnings call, Intel acknowledged that it could make changes to improve profits.

“We are also lowering core expenses in calendar year 2022 and will look to take additional actions in the second half of the year,” Intel chief executive Pat Gelsinger said at the time.

Intel, based in Santa Clara, California, declined to comment on the lay-offs.

Intel Corp’s headquarters in Santa Clara, California. Photo: EPA

The last big wave of lay-offs at Intel occurred in 2016, when it trimmed about 12,000 jobs, or 11 per cent of its total. The company has made smaller cuts since then and closed several divisions, including its cellular modem and drone units.

Like many companies in the technology industry, Intel also froze hiring earlier this year, when market conditions soured and fears of a recession grew.

The latest cutbacks are likely meant to reduce Intel’s fixed costs, possibly by about 10 per cent to 15 per cent, Bloomberg Intelligence analyst Mandeep Singh said in a research note. He estimates that those costs range from at least US$25 billion to US$30 billion.

Gelsinger took the helm at Intel last year and has been working to restore the company’s reputation as a Silicon Valley legend. But even before the PC slump, it was an uphill fight. Intel lost its long-held technological edge, and its own executives acknowledge that the company’s culture of innovation withered in recent years.

Intel Corp’s latest range of Core i9, Core i7 and Core i5 personal computer processors. Photo: Shutterstock
Now, a broader slowdown is adding to those challenges. Intel’s PC, data centre and artificial intelligence (AI) groups are contending with a technology spending downturn, weighing on revenue and profit.
Global PC sales tumbled 15 per cent in the third quarter from a year earlier, according to research firm IDC. HP, Dell Technologies and Lenovo Group, which use Intel’s processors in their laptops and desktop PCs, all suffered steep declines.
With PC prices stagnating and demand weakening, Intel also may need to pursue a dividend cut to offset cash-flow headwinds, analyst Singh said. But Intel’s plan to sell shares of its Mobileye self-driving technology business in an initial public offering may ease those concerns, he said.
It is a particularly awkward moment for Intel to be making cutbacks. The company lobbied heavily for a US$52 billion chip-stimulus bill this year, vowing to expand its manufacturing in the US. Gelsinger is planning a building boom that includes bringing the world’s biggest chip-making hub to Ohio.

Intel, Brookfield to invest up to US$30 billion in Arizona chip factories

At the same time, Intel is under intense pressure from investors to shore up its profits. The company’s shares have fallen more than 50 per cent in 2022, with a 20 per cent plunge occurring in the last month alone.

The company’s shares slipped 0.6 per cent to US$25.04 in New York on Tuesday.

US tensions with China also have clouded the chip industry’s future. The Biden administration announced new export curbs on Friday, restricting what US technologies companies can sell to China.

That news sent shares of chip makers tumbling anew, with Intel falling 5.4 per cent on the same day.

Intel has been trying to regain its footing in the industry by releasing new PC processors and graphics semiconductors. A key part of its strategy is selling more chips to the data centre market, where rivals AMD and Nvidia Corp have made inroads.
An up-close look at Intel Corp’s Infrastructure Processor Unit, co-developed by Google and to be used at the US internet giant’s server farms. Photo: Reuters
On Tuesday, Google unveiled new Intel-powered technology for its server farms that will help speed AI tasks.

Intel is now looking to pursue those goals as a leaner company.

David Zinsner, Intel’s chief financial officer, said after the company’s latest quarterly report that “there are large opportunities for Intel to improve and deliver maximum output per dollar”. The chip maker is expected to see restructuring charges in the third quarter, he said, signalling that cuts were looming.

Some chip makers, including Nvidia and Micron Technology, have said they are steering clear of lay-offs for now. But other tech companies, such as Oracle Corp and SoftBank Group Corp-owned Arm, have already been cutting jobs.
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