Intel, which has lagged behind rivals in chips used in artificial intelligence systems, announced a major plan on Thursday to cut costs by $10 billion by laying off more than 15% of its workforce.
The American giant company specializing in semiconductors had about 125,000 employees at the end of 2023, and therefore about 18,000 people are expected to lose their jobs.
Starting in the fourth quarter, Intel also plans to temporarily suspend dividend payments, the company announced after the U.S. stock market closed.
The group reported revenues of $12.8 billion in the second quarter, a result that fell short of analysts’ expectations and was down 1% year-on-year.
Intel reported a net loss of $1.6 billion, compared to a net profit of $1.5 billion a year earlier.
The company’s shares lost more than 19% in electronic trading after the New York Stock Exchange closed.
“Our financial performance in the second quarter was disappointing despite achieving key technology milestones,” said Intel CEO Pat Gelsinger.
For the third quarter, Intel expects revenues to range between $12.5 billion and $13.5 billion.
Headwinds
The company suffered from “headwinds” in the second quarter that slowed production of components for its next-generation AI-friendly computers, according to its chief financial officer, David Zinsner.
“By streamlining cost reductions, we are taking proactive steps to improve our bottom line,” Zinsner said.
Intel plans to cut its capital spending by more than 20% for the full year, to between $25 billion and $27 billion.
The cost-cutting plan “may support its finances in the short term, but it’s not enough to reposition it in the growing chip market,” said Jacob Born, an analyst at AMarketer.
Intel’s rivals, such as American semiconductor designers AMD and Nvidia, and Taiwanese chipmaker TSMC, are benefiting from the generative AI wave that OpenAI launched with ChatGPT in late 2022.
Demand from giant companies such as Microsoft and Google is expected to increase for these highly advanced components necessary to operate artificial intelligence technology.
