Intel Bleeds Red, Plans 15% Workforce Layoff and $10B Cuts For 2025
by Ryan Smith on August 1, 2024 7:15 PM EST
Amidst the backdrop of a weak quarterly earnings report that saw Intel lose money for the second quarter in a row, Intel today has announced that the company will be cutting costs by $10 billion in 2025 in an effort to bring Intel back to profitability. The cuts will touch almost every corner of the company in some fashion, with Intel planning to cut spending on R&D, marketing, administration, and capital expenditures. The most significant of these savings will come from a planned 15% reduction in force, which will see Intel lay off 15,000 employees over the next several months – thought to be one of Intel’s biggest layoffs ever.
In an email to Intel’s staff, which was simultaneously published to Intel’s website, company CEO Pat Gelsinger made the financial stakes clear: Intel is spending an unsustainable amount of money for their current revenues. Citing the company’s current costs, Gelsinger wrote that “our costs are too high, our margins are too low,“ and that “our annual revenue in 2020 was about $24 billion higher than it was last year, yet our current workforce is actually 10% larger now than it was then.” Consequently, Intel will be enacting a series of painful cuts to bring the company back to profitability.
Intel is not publicly disclosing precisely where those cuts will come from, but in the company’s quarterly earnings release, the company noted that it was targeting operating expenses, capital expenditures, and costs of sales alike.
For operating expenses, Intel will be cutting “non-GAAP R&D and marketing, general and administrative” spending, with a goal to trim that from $20 billion in 2024 to $17.5 billion in 2025. Meanwhile gross capital expenditures, a significant expense for Intel in recent years as the company has built up its fab network, are projected to drop from $25 billion to $27 billion for 2024, to somewhere between $20 billion and $23 billion in 2025. Compared to Intel’s previous plans for capital expenditures, this would reduce those costs by around 20%. And finally, the company is expecting to save $1 billion on the cost of sales in 2025.
| Intel 2025 Spending Cuts | |||
| 2024 Projected Spending | 2025 Projected Spending | Projected Reduction | |
| Operating Expenses (R&D, Marketing, General, & Admin) |
$20B | $17.5B | $2.5B |
| Capital Expenditures (Gross) | $25B - $27B | $20B - $23B | $2B - $7B |
| Cost of Sales | N/A | $1B Savings | $1B |
Separately, in Intel’s email to its employees, Gelsinger outlined that these cuts will also require simplifying Intel’s product portfolio, as well as the company itself. The six key priorities for Intel will include cutting underperforming product lines, and cutting back Intel’s investment in new products to “fewer, more impactful projects”. Meanwhile on the administrative side of efforts, Intel is looking to eliminate redundancies and overlap there, as well as stopping non-essential work.
- Reducing Operational Costs: We will drive companywide operational and cost efficiencies, including the cost savings and head count reductions mentioned above.
- Simplifying Our Portfolio: We will complete actions this month to simplify our businesses. Each business unit is conducting a portfolio review and identifying underperforming products. We are also integrating key software assets into our business units so we accelerate our shift to systems-based solutions. And we will narrow our incubation focus on fewer, more impactful projects.
- Eliminating Complexity: We will reduce layers, eliminate overlapping areas of responsibility, stop non-essential work, and foster a culture of greater ownership and accountability. For example, we will consolidate Customer Success into the Sales, Marketing and Communications Group to streamline our go-to-market motions.
- Reducing Capital and Other Costs: With the completion of our historic five-nodes-in-four-years roadmap clearly in sight, we will review all active projects and equipment so we begin to shift our focus toward capital efficiency and more normalized spending levels. This will reduce our 2024 capital expenditures by more than 20%, and we plan to reduce our non-variable cost of goods sold by roughly $1 billion in 2025.
- Suspending Our Dividend: We will suspend our stock dividend beginning next quarter to prioritize investments in the business and drive more sustained profitability.
- Maintaining Growth Investments: Our IDM2.0 strategy is unchanged. Having fought hard to reestablish our innovation engine, we will maintain the key investments in our process technology and core product leadership.
The bulk of these cuts, in turn, will eventually come down to layoffs. As previously noted, Intel is planning to cut about 15% of its workforce. Just how many layoffs this will entail remains to be seen; Gelsinger’s letter puts it at roughly 15,000 employees, while Intel’s most recent published headcount would put this figure at closer to 17,000 employees.
Whatever the number, Intel is expecting to have most of the reductions completed by the end of this year. The company will be using a combination of early retirement packages and buy-outs, or what the company terms as “an application program for voluntary departures.”
Intel’s investors will be taking a hit, as well. The company’s generous quarterly dividend, a long-time staple of the chipmarker and one of the key tools to entice long-term investors, will be suspended starting in Q4 of 2024. With Intel losing money over multiple quarters, Intel cannot afford (or at least, cannot justify) paying out cash in the forms of dividends when that money could be getting invested in the company itself. Though as the long-term health of the company is still reliant on offering dividends, Intel says that the suspension will be temporary, as the company reiterated its “long-term commitment to a competitive dividend as cash flows improve to sustainably higher levels.” For Q2 2024, Intel paid out $0.125/share in dividends, or a total of roughly $0.5B.
Ultimately, the message coming from Intel today is that it is continuing (if not accelerating) its plans to slim down the company; to focus on a few areas of core competencies that suit the company’s abilities and its financial goals. Intel is throwing everything behind its IDM 2.0 initiative to regain process leadership and serve as a world-class contract foundry, and even with Intel’s planned spending cuts for 2025, that initiative will continue to move forward as planned.
On that note, cheering up investors in what’s otherwise a brutal report from the company, Intel revealed that they’ve achieved another set of key milestones with their in-development 18A process. The company released the 1.0 process design kit (PDK) to customers last month, and Intel has successfully powered-on their first Panther Lake and Clearwater Forest chips. 18A remains on track to be “manufacturing-ready” by the end of this year, with Intel looking to start wafer production in the first half of 2025. 18A remains a make-or-break technology for Intel Foundry, and the company as a whole, as this is the node that Intel expects to return them to process leadership – and from which they can improve upon to continue that leadership.
Sources: Intel Q2'24 Earnings, Intel Staff Letter
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Oxford Guy - Wednesday, August 7, 2024 - link
I don't hate Apple nor do I love Apple.Silver5urfer - Wednesday, August 7, 2024 - link
Apple since its inception was like this. Steve Jobs stole a lot of technology back when Xerox was alive, same for Bill Gates, M$. Apple however jumped above and beyond on screwing the companies. They stole Imagination IP by poaching, the ruined GT Advanced.They almost got Qualcomm shot by that Broadcom takeover. The silent yet most dangerous part is influencing the California or more like Tech sector by making their junk with soldered parts and impossible to service plus the design philosophy of sealing the li-ion battery packs in the laptops.
Remember when we had old Precision machines with user accessible battery packs that are hotswappable ? Gone. Intel used to make rPGA processors with sockets to replace, gone. MXM GPUs gone. Now everything is thin and light and made to fail. Apple started this.
OS design philosophy once Steve was gone, the one massive downgrade was Skeuomorphic design death, that made the Software absolute generic slop. Plus removing UI power features. Android got inspired so bad that by Android 10 Google forced Scoped Storage killing all powerful nature of Android, they also abandoned Nexus for Pixel which was a fail since start todate. Apple corporation is the most dangerous of all, privacy in the face meanwhile NSO Spyware Pegasus got free pass, Israeli tech. Another software Pegasus same story. As Oxford guy here mentioned how Apple makes their technology accessible to forensics far more than users is also a resounding yes.
Yep, they benefitted from Intel as long as they could they even made the eDRAM Crystalwell exclusive for them while Intel squandered that technology with i7 5775C being last and now we have AMD doing similar stuff, but on Intel side it was not having any limitation of heat or OC blocking back then. Intel was too close to Apple, also the Investors on Intel as well are super greedy they let the ship rot for decades while they can and jumped off leaving mismanaged company, ever since they put money into Intel Israel fabs 10nm was delayed and they even killed Optane. Although Intel is to blame but the Investors, mismanagement, Apple's WallSt stalwart state everything caused Intel to corrode overtime. Add the California politics into the picture by forcing the C suites and exec positions go based on political aspects than skill, ultimately leading to the leaving of Jim Keller Royal Core project.
Oxford Guy - Wednesday, August 7, 2024 - link
Jobs had his good points but one thing that wasn't good was his closed system + massively fast (even fraudulently at times) planned obsolescence model.For instance, the first Mac (the 128K non-expandable RAM model) wasn't unveiled to the tech press. It was actually the second Mac (the 512K model) in disguise.
GeoffreyA - Thursday, August 8, 2024 - link
There's a famous joke; I don't know if Gates actually said it. When Jobs criticised Microsoft for copying Apple, Gates said, "No, Steve. I think we both had a rich neighbour named Xerox, and when you went to burgle their house, you were angry that we had already been there."Unfortunately, whatever Apple does these days, the rest will copy like robots; for example, Samsung. I think the computer industry is becoming increasingly anti-consumer and anti-democratic, and people reward these corporations uncritical belief. Actually, the roots go deep; it is a societal problem; the world is built on rotten foundations.
Blastdoor - Saturday, August 3, 2024 - link
What does “optimizing their fabs for GHz” mean?Oxford Guy - Saturday, August 3, 2024 - link
One can prioritize performance per watt (lower power consumption, lower absolute performance relative to the competition, higher performance per watt, and higher density) or one can prioritize performance (higher power consumption and higher absolute performance relative to the competition, lower density and lower performance per watt).This is complicated by the ability to clock chips outside of the ideal voltage curve for the node. It's possible, for instance, to 'overclock' chips designed on a lower-power higher-density process. Higher-density nodes, though, don't have as much overclocking headroom. Overclocking comes in two forms: factory and user. The one I just mentioned would be factory-level.
In an old article about Nvidia's Fermi architecture here, it was claimed that Nvidia intentionally prioritized a lower density transistor that not only had worse performance per watt but also could handle higher temperatures. The goal was higher absolute performance, with performance per watt and density being deprioritized. My recollection of the '28nm bulk' process versus Global Foundaries' 32nm SOI process was that it was cheaper and denser, at the expense of lower absolute performance. That helps to explain why AMD produced its Bulldozer/Piledriver desktop parts using the latter and the lower-power Steamroller and Excavator parts using the former.
Chip designs can also employ dead space to spread heat around, reducing the problem of hot spots limiting the clock rate. That limits the chip's total density but can increase performance.
One of my criticisms of AMD's GPU designs (post-Fiji), especially Radeon VII, is that the company pursued smaller chip size and increased the clock well beyond the optimal performance per watt range. That seemed to be nakedly a margin-pursuing move rather than one that benefits customers. A more balanced design featuring a larger chip and a lower clock would have offered better performance. AMD also used loud cheap cooling for cards like Radeon VII. Part of the blame rests on consumers, as many rejected AMD's use of an AIO with Fury X. However, the majority of the blame rests on AMD for not making Fury X competitive enough against Nvidia's GPU.
Oxford Guy - Saturday, August 3, 2024 - link
(Foundries not Foundaries.)Blastdoor - Sunday, August 4, 2024 - link
Aren’t the trade offs you’re describing at the process or even design level, not the fab level? Is there some reason low power and high power chips can’t be made in the same building?I’m not an expert, but my read of descriptions of the 18A process is that it can be used either for high density, low power designs or high power less dense designs. Just because the word “power” appears in “backside power delivery” doesn’t mean that it can’t be low power.
eloyard - Saturday, August 3, 2024 - link
According to report by GN Intel's Customer Support is not really granting the RMA for the issues.It means that Intel's "defaults" are on the same level as "AMD RAM overclocking" which Anandtech multiple time deemed unacceptable in benchmarks, making essentially all Intel affected processors benchmarks by Anandtech garbgage...
All other benchmarks for Intel are garbage too, but other publications didn't have that silly "AMD RAM overclocking" rule.
Oxford Guy - Wednesday, August 7, 2024 - link
AMD is trying to have its cake and eat it. They rate the 9700X for DDR5 5600 and tell reviewers that the 'sweet spot' is 6000.AMD should rate the chips for 6000 if it expects reviewers to use 6000 for the sweetness of the spot.