In a move that has shaken the tech industry, Intel Corp INTC is set to fire about 15,000 employees, amounting to over 15% of its workforce, as part of a drastic cost-cutting measure aimed at saving $10 billion by 2025.
The announcement, which came shortly after Intel’s disappointing earnings report, sparked widespread concern and discussion about the company’s future direction and competitiveness in the semiconductor market.
Read Also: Intel Stock Falls After Weak Q2 Results, New Cost Reduction Plan, 15% Headcount Reduction
Intel Struggling To Keep Up With Competitors
Intel’s decision to lay off such a significant portion of its workforce highlights the company’s struggle to keep pace with competitors that have been more agile in their investment strategies.
Despite Intel’s IDM 2.0 strategy, which emphasizes expanding manufacturing capacity in the U.S. and EU and delivering AI solutions, the company appears to be envious of its rivals’ ability to effectively capitalize on current market trends, particularly in artificial intelligence and cloud computing.
Intel CFO David Zinsner‘s remarks during a recent earnings call underscored this sentiment. “We saw an unfavorable product mix and more competitive pricing than expected, ” he said.
The company’s competitors are executing bold strategies that drive growth and innovation. “I think on pricing, it will really come down to when we have a competitive process and we have competitive products running on a competitive process and we’re delivering what the customers want, that helps us in terms of the pricing dynamic,” Zinsner recognizes.
Zinsner’s comments reflect Intel’s awareness of the need to adapt and evolve. The company has seen its annual revenue drop by approximately $24 billion since 2020, despite a 10% increase in workforce size. The contrast with competitors that have managed to maintain robust growth trajectories by streamlining operations and making strategic investments is stark. “In addition to these near-term actions, we’re also seeing meaningful opportunities to improve financial results, leveraging our new operating model. We remain optimistic that reduced spending, operating efficiencies, and more competitive products will keep us on track to our target model of 60% gross margin and 40% operating margin by the end of the decade.”
A Painful but Necessary Step
Intel CEO Pat Gelsinger echoed Zinsner’s concerns in a note sent to employees. Describing the layoffs as “the hardest thing he’s ever done in his career,” Gelsinger acknowledged that Intel is “yet to fully benefit from powerful trends like AI” and emphasized the need for “bolder actions” to address the company’s financial challenges.
“Our costs are too high, and our margins are too low,” Gelsinger wrote. “We need to simplify our portfolio, eliminate overlapping responsibilities, and halt non-essential work. These changes will make Intel a leaner, more agile company and align us more closely with the strategies of our successful competitors.”
A Critical Juncture for Intel
As Intel grapples with these challenges, the company finds itself at a critical juncture. The decision to cut thousands of jobs reflects a recognition that significant changes are needed to remain competitive in a rapidly evolving industry. Whether these steps will be enough to bridge the gap between Intel and its more nimble competitors remains to be seen.
For now, Intel’s leadership appears determined to emulate the success of its rivals, even if it means making difficult decisions and sacrificing short-term gains for long-term growth.
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