Intel Corporation, a leading U.S. chipmaker, announced on Thursday that it will reduce its global workforce by more than 15%, amounting to approximately 17,500 employees. The company also revealed plans to suspend its dividend starting in the fourth quarter, as it embarks on a significant turnaround strategy focused on revitalizing its struggling manufacturing business.
The decision comes as Intel grapples with diminishing demand for traditional data center semiconductors and faces intensified competition in the thriving artificial intelligence (AI) chip market, where it lags behind rivals. The company forecasted third-quarter revenue below market expectations, reflecting the challenges ahead.
In the aftermath of the announcement, shares of Santa Clara, California-based Intel plummeted 20% in extended trading hours, potentially erasing over $24 billion from its market value. This decline followed a 7% drop earlier on Thursday, aligning with broader declines in U.S. chip stocks triggered by a conservative forecast from Arm Holdings the day before.
Despite Intel’s setbacks, the broader chip industry remained relatively stable. Competitors such as AI powerhouse Nvidia and Advanced Micro Devices (AMD) saw their stocks tick up after hours, highlighting their stronger positioning to capitalize on the burgeoning AI market compared to Intel’s current stance.
“I need fewer people at headquarters and more people in the field supporting customers,” Intel CEO Pat Gelsinger remarked regarding the workforce reductions. Addressing the dividend suspension, he added, “Our objective is to pay a competitive dividend over time, but right now, we’re focusing on the balance sheet and deleveraging.”
As of June 29, Intel employed 116,500 people, excluding some subsidiaries. The company stated that the majority of the job cuts are expected to be completed by the end of 2024. In April, Intel had declared a quarterly dividend of 12.5 cents per share.
Intel is in the midst of a comprehensive turnaround plan aimed at developing advanced AI processors and expanding its for-hire manufacturing capabilities. The company seeks to reclaim the technological edge it lost to Taiwan Semiconductor Manufacturing Company (TSMC), the world’s largest contract chipmaker.
This strategic push under Gelsinger to invigorate Intel’s contracting foundry business has resulted in increased costs and pressured profit margins. In response, the chipmaker has recently emphasized cost-cutting measures to navigate the financial strains.
Reference(s):
cgtn.com
