Recently, Intel announced a decision that has sent shockwaves through the industry: a global layoff of 15,000 employees, part of their plan to save $10 billion in costs by 2025. This layoff is expected to begin in the fourth quarter of this year.
Intel currently employs over 125,000 people, and this layoff represents a staggering 15% reduction. The news sent the company's stock price tumbling, with a nearly 20% drop in after-hours trading. Intel stated that by 2026, the company will significantly cut research and development as well as marketing expenses, and this year's capital expenditures will be reduced by more than 20%. The company will undergo restructuring, halt non-essential work, and review all ongoing projects and equipment to avoid unnecessary high-cost expenditures.
Intel CEO Pat Gelsinger admitted in a memo to employees that this was a painful decision. He pointed out that despite milestone achievements in key products and process technologies, the financial performance in the second quarter was still disappointing. Intel reported a staggering $1.6 billion loss for the second quarter of 2024, a significant increase compared to the $437 million loss in the previous quarter.
Intel's revenue was $12.8 billion, a 1% decrease year-over-year, and net income plummeted 85% to just $83 million. The losses were primarily due to the chip manufacturing foundry business, involving substantial investments in new factories and extreme ultraviolet (EUV) lithography technology. Although Intel's PC and server businesses remain profitable, investors have lost patience with the company's fluctuating performance between losses and profits.
In today's industry where AI technology is increasingly becoming the core, Intel's布局 in the AI PC field is not sufficient to turn around its market position. Gelsinger stated during the company's earnings call that Intel's AI PC chip, Lunar Lake, is not enough to change the status quo, despite plans to significantly increase its production next year. However, Lunar Lake still relies on external wafer manufacturing and requires additional purchases for memory on each chip.
Moreover, Intel has fallen behind NVIDIA and AMD in the race for technological leadership. Microsoft's choice of Qualcomm chips over Intel was a heavy blow to the company. Meanwhile, Intel is struggling to address the crashes in its 13th and 14th generation CPUs but does not plan to recall them, instead hoping to resolve the issues through microcode updates.
Intel's market capitalization is currently around $121.2 billion, a significant gap compared to chip giant NVIDIA's $2.38 trillion market cap. Gelsinger stated that Intel's top priority is to accelerate efforts to close the technology gap caused by years of underinvestment. Intel plans to regain market share by investing billions of dollars each quarter and hopes to keep up with the market by 2026.
Intel's predicament stems from various accumulated mistakes over the years, missing opportunities for technological change, such as the mobile chip boom triggered by the release of the iPhone in 2007 and the recent AI boom. Intel co-founder Andy Grove once proposed the concept of a "strategic inflection point," and Intel is now facing such a point.
In the field of semiconductor manufacturing, Intel has gradually lost its leading position due to the slow progress in the advancement of transistor processes. Although Intel's situation with declining personal computer sales has ended and it is expected to receive up to $8.5 billion in funding from the US government, Wall Street's confidence in Intel has been shaken.
Intel's future is full of challenges, but the company is striving to reshape itself in the AI era through a series of transformative measures, ushering in a new era of growth.