Intel is reportedly planning to lay off up to 20% of its factory workforce, a move driven by declining demand for its core products. This decision suggests that the company is running out of options to achieve profitability. The layoffs will occur globally, but a significant number will be in Oregon, where Intel has around 20,000 employees, making it the state’s largest employer.
According to an internal memo from Intel manufacturing Vice President Naga Chandrasekaran, the reductions come as Intel’s new CEO, Lip-Bu Tan, confronts faltering demand for next-generation AI PC chips and grappling with a struggling foundry business. Many customers are delaying upgrades, while others are stockpiling legacy chips due to global trade tensions and tariffs. As a result, Intel’s share of data center sales has decreased to an estimated 65%, leading to an urgent need for further cost rationalization.
Industry analysts suggest that while tariffs do play a role in the layoffs, the primary reason is the financial challenges stemming from dwindling revenues. The layoffs align with the company’s earlier announcements about aligning expenses with revenue. This painful but necessary action could pave the way for Intel’s comeback by focusing on producing quality chips efficiently.
Intel’s turnaround began a few years ago under former CEO Pat Gelsinger, who laid out a plan to revamp the company’s manufacturing capabilities. Though progress has been made, tangible results are still forthcoming. Analysts believe that despite restructuring efforts, Intel will prioritize its mission-critical functions to ensure high-quality chip delivery to customers.
In summary, the layoffs, along with delayed construction of new chip fabs, are strategic attempts to buy time for Intel as it aims to rejuvenate its design and manufacturing processes, hoping to attract new business in a competitive landscape.
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