Intel to lay off about 17,500 employees to cut $20 bn in expenses

Intel stock had closed down 7 percent on Thursday, reports said.

According to reports, Intel's plan to cut approximately $20 billion in expenses this year came as the chip maker reported a loss of $1.6 billion in the recently ended quarter.

Intel CEO Pat Gelsinger said in an earnings release that the company's Q2 financial performance was "disappointing" even as the firm "hit key product and process technology milestones".

"Second-half trends are more challenging than we previously expected," Gelsinger said.

The California-headquartered company's chief financial officer (CFO) David Zinsner said second quarter earnings were negatively affected by "headwinds" to the ramp-up of Intel's artificial intelligence PC product and unused capacity at its facilities.

"By implementing our spending reductions, we are taking proactive steps to improve our profits and strengthen our balance sheet," David Zinsner added.

Intel reported having 116,500 employees as of June 29, which means the layoffs could hit around 17,500 positions.

Intel said the majority of the job cuts would be completed by the end of 2024, while the company will announce next week an enhanced retirement offering for eligible employees and offer an application programme for voluntary departures.

"This is painful news for me to share. I know it will be even more difficult for you to read. This is an incredibly hard day for Intel as we are making some of the most consequential changes in our company’s history," the tech major's CEO Pat Gelsinger told his employees.

"These decisions have challenged me to my core, and this is the hardest thing I’ve done in my career," Gelsinger added. "My pledge to you is that we will prioritise a culture of honesty, transparency and respect in the weeks and months to come."

Warning staff of more tough days ahead, the Intel CEO said, "But as difficult as all of this is, we are making the changes necessary to build on our progress and usher in a new era of growth.”

Intel, in June, announced that it was halting the expansion of a major factory project in Israel, which was going to pump an extra $15 billion towards a chip plant, reports AFP.

The chip maker said at the time that "managing large-scale projects, especially in our industry, often involves adapting to changing timelines," adding that "decisions are based on business conditions, market dynamics and responsible capital management."

Intel's cost-saving move reportedly came just a month after the company struck a defiant tone in the face of strong challenges from rivals such as Nvidia, AMD and Qualcomm, unveiling technologies it said would lead the artificial intelligence (AI) revolution, according to AFP.

Intel has been facing financial headwinds that have caused its share prices to fall significantly so far this year as the company reported that its 2023 revenue was $54.2 billion, down $8.8 billion, or 14 percent, from 2022.