18,000 Employees Likely To Get Fired Soon! US-Based Tech Giant Intel Plans To Cut $20 Billion Expenses In 2024

A mass layoff of thousands of employees at American multinational corporation and technology company, Intel looks inevitable. Intel's CEO Pat Gelsinger says the mass reduction in headcount is painful but the company is looking at more tough days ahead. To be precise, about 15,000 to 18,000 job cuts are likely to take place at Intel. The announcement comes after Intel announced disappointing second-quarter earnings for 2024, and an intense cost reduction plan to increase efficiency and market competitiveness.

The leading chipmaker has stated that about 15% or 18,000 people of its total workforce, will be laid off as part of its plan to streamline operations with meaningful cuts. By doing so, Intel plans to reduce its operating expenses by a leap.

As of June 29, 2024, Intel's total headcount is at 125,300 employees. Of the total, 116,500 employees worked under the Intel, and rest of them were under Mobileye and other subsidiaries, and NAND.

Also, the company plans to suspend dividend payouts and push income generation for turnaround.

Pat Gelsinger, Intel CEO said, "Our Q2 financial performance was disappointing, even as we hit key product and process technology milestones."

He added, "Second-half trends are more challenging than we previously expected, and we are leveraging our new operating model to take decisive actions that will improve operating and capital efficiencies while accelerating our IDM 2.0 transformation."

Thereby, in its financial results statement, on August 1, Intel said that as the company nears the completion of rebuilding a sustainable engine of process technology leadership, it announced a series of initiatives to create a sustainable financial engine that accelerates profitable growth, enables further operational efficiency and agility, and creates capacity for ongoing strategic investment in technology and manufacturing leadership.

These initiatives follow the establishment of separate financial reporting for Intel Products and Intel Foundry, which provides a "clean sheet" view of the business and has uncovered significant opportunities to drive meaningful operational and cost efficiencies, Intel added.

Accordingly, Intel announced that the cost reduction plan includes structural and operating realignment across the company, headcount reductions, and operating expense and capital expenditure reductions of more than $10 billion in 2025 compared to previous estimates.

Intel aims to achieve a clear line of sight toward a sustainable busines model with the ongoing financial resources and liquidity needed to support the company's long-term strategy.

As per Intel, the plan will enable the next phase of the company's multiyear transformation strategy and is focused on four key priorities. These are:

1. Reducing Operating Expenses:

Intel to streamline its operations and meaningfully cut spending and headcount, reducing non-GAAP R&D and marketing, general and administrative (MG&A) to approximately $20 billion in 2024 and approximately $17.5 billion in 2025, with further reductions expected in 2026. Intel expects to reduce headcount by greater than 15% with the majority completed by the end of 2024.

2. Reducing Capital Expenditures:

Intel is also shifting its focus toward capital efficiency and investment levels aligned to market requirements. This will reduce gross capital expenditures* in 2024 by more than 20% from prior projections, bringing gross capital expenditures in 2024 to between $25 billion and $27 billion.

Further, Intel expects net capital spending in 2024 of between $11 billion and $13 billion. In 2025, the company is targeting gross capital expenditures between $20 billion and $23 billion and net capital spending between $12 billion and $14 billion.

3. Reducing Cost of Sales:

Moreover, Intel is also expecting to generate $1 billion in savings in non-variable cost of sales in 2025. Product mix will continue to be a headwind next year, contributing to modest YoY improvements to 2025's gross margin.

4. Maintaining Core Investments to Execute Strategy:

Finally, Intel remains focused on advancing its long-term innovation and path to leadership across process technology and products, and the increased efficiency from its actions is expected to further support its execution. Additionally, Intel continues to sustain investments to build a resilient and sustainable semiconductor supply chain in the United States and around the world.

In another step to tap its income, Intel has decided to suspend its dividend starting in the fourth quarter, recognizing the importance of prioritizing liquidity to support the investments needed to execute its strategy. Nonetheless, Intel also reiterated its long-term commitment to a competitive dividend as cash flows improve to sustainably higher levels.

In the second quarter of 2024, Intel reported revenue of $12.8 billion, down 1% year over year (YoY). While second GAAP earnings (loss) per share (EPS) attributable to Intel was $(0.38); non-GAAP EPS attributable to Intel was $0.02.