Intel to cut 15% of workers as chipmaker grapples with manufacturing challenges
The plans are part of the effort by Tan, who took the helm in March, to turn around the storied U.S. chipmaker. Intel has divested businesses, laid off employees and redirected resources.
The company has underperformed due to years of strategic missteps. Intel has virtually no foothold in the booming AI chip industry that is dominated by Nvidia (NVDA.O), opens new tab and its longtime rival AMD (AMD.O), opens new tab has been gaining share in Intel's mainstay personal computer and server semiconductor markets.
As part of the cuts, Intel attempted to take a 'surgical' approach and remove layers of middle management, finance chief David Zinsner told Reuters on Thursday. 'We took out about 50% of the layers of the company,' Zinsner said. The company is cutting its workforce by 15% from 96,400 that it reported at the end of June, and plans to further reduce the company's headcount to 75,000 by the end of the year.
The remainder of the cuts to bring the headcount to 75,000, down 22% from the end of 2024, will be through attrition and "other means," according to the company.
Intel's shares were down 1.9% in choppy extended trading.
In a memo to employees, Tan said Intel is changing its strategy for building manufacturing capacity and now plans to build factories only when the demand for its chips is there. Previously, the company had built factories ahead of demand.
"There are no more blank checks," Tan wrote in the memo. "Every investment must make economic sense. We will build what our customers need, when they need it, and earn their trust through consistent execution."
Intel is now working to bring its so-called 18A manufacturing process, which has few external customers, to high volume. In the memo, Tan said the company plans to take a disciplined approach to investments in the next-generation 14A manufacturing process.
In its securities filings, Intel said that if it fails to find a significant external customer for 14A, it may be forced to exit the chip manufacturing business. The company said it is retaining the option to make all products that need performance beyond its 18A generation at external foundries.
Prior to Tan's tenure, Intel had committed to tens of billions of dollars of new factory construction in the U.S. and elsewhere. On Thursday, Tan wrote the company now plans to slow construction work on new factories in Ohio and halt planned factories in Poland and Germany.
Tan also said the company would consolidate chip packaging operations in Costa Rica with its other packaging operations in Vietnam and Malaysia, breaking with a longtime Intel practice of maintaining operations in separate global regions for supply-chain resiliency.
On a conference call with analysts, Tan's tone suggested he has taken charge of the company and was trying to wrest it back from what he viewed as previous missteps.
"I do not subscribe to the belief that if you build it, they will come," he said on the call. He later added that he will personally review and approve each of Intel's major chip designs.
Tan also said on the call he believes that Intel's 18A technology could generate a reasonable return on investments even if it is used only for Intel's own products. Reuters reported earlier this month that Tan is debating whether to quit offering that technology to external customers.
The Santa Clara, California-based chipmaker disclosed the layoff goals as it forecast steeper third-quarter losses than Wall Street estimates on Thursday, despite anticipating higher sales than analysts expected.
The company said it expects a third-quarter loss of 24 cents per share, steeper than estimates of losses of 18 cents per share, according to data from LSEG.
Intel expects revenue of $12.6 billion to $13.6 billion for the September quarter, with a midpoint of $13.1 billion that was higher than analysts' average estimate of $12.65 billion, according to data compiled by LSEG.
Growth in the PC market is uncertain after customers pulled shipments forward to the first half of the year amid ongoing trade negotiations, analysts have said. Shipments of PCs rose 6.5% in the June quarter according to data from International Data Corporation.
While semiconductors are currently exempt from U.S. President Donald Trump's sweeping global tariffs, Intel and its fellow chipmakers are facing customers who are reluctant about spending commitments amid widespread macroeconomic uncertainty.
Intel's second-quarter revenue for the period ended June 28 was flat at $12.9 billion, snapping a four-quarter streak of sales declines. The result beat estimates of $11.92 billion, according to LSEG data.
In April, Intel agreed to sell a 51% stake in its Altera programmable chip business for $4.46 billion.
Intel said job cuts contributed to restructuring costs of $1.9 billion in the second quarter.
It recorded June quarter adjusted losses of 10 cents per share, compared with estimates of a profit of 1 cent per share. Its unadjusted loss was 67 cents per share in the second quarter, steeper than analyst estimates of a 26-cent-per-share loss.
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