In a significant move to restructure its operations, Intel announced on Thursday that it will cut more than 15 percent of its workforce, amounting to approximately 17,500 jobs. This decision is part of the chipmaker's broader strategy to pivot towards its money-losing manufacturing business.
The company also declared the suspension of its dividend starting in the fourth quarter, as it concentrates on stabilizing its financial health. Intel forecasts third-quarter revenue to fall below market expectations, citing a decline in spending on traditional data center semiconductors and a strategic shift towards AI chips, where it currently trails behind competitors.
Following the announcement, Intel's shares in Santa Clara, California, plummeted by 20 percent in extended trading, resulting in a market value loss exceeding $24 billion. The stock had already dipped 7 percent on Thursday, aligning with a downturn in U.S. chip stocks after Arm Holdings released a conservative forecast on Wednesday.
Despite the turbulence for Intel, the broader semiconductor industry remained largely unaffected. Notably, AI leaders Nvidia and AMD saw their stocks rise after hours, highlighting their strong positioning to capitalize on the AI boom, in contrast to Intel's challenges.
CEO Pat Gelsinger addressed the job cuts, stating, \"I need fewer people at headquarters, more people in the field, supporting customers.\" Regarding the suspension of dividends, he added, \"Our objective is to … pay a competitive dividend over time, but right now, focusing on the balance sheet, deleveraging.\"
As of June 29, Intel employed 116,500 people, excluding some subsidiaries. The company plans to complete the majority of the job cuts by the end of 2024. Earlier this year, Intel had announced a quarterly dividend of 12.5 cents per share.
Intel is actively implementing a turnaround plan that emphasizes the development of advanced AI processors and the expansion of its for-hire manufacturing capabilities. This initiative aims to regain the technological edge that Intel lost to Taiwan's TSMC, the world's largest contract chipmaker. However, the push to bolster its contracting foundry business has increased Intel's costs and pressured profit margins, leading to the recent decision to cut costs.
Reference(s):
cgtn.com
