Intel Corporation is on the verge of announcing plans to reduce its workforce by more than 20% this week, aiming to minimize bureaucracy at the struggling chip manufacturer, according to a knowledgeable source.
This decision is part of an effort to streamline management and reestablish an engineering-focused culture, the source indicated, requesting anonymity due to the private nature of the plans. This marks the first significant restructuring under the leadership of the new Chief Executive Officer, Lip-Bu Tan, who assumed the role last month.
This round of layoffs follows a previous effort to cut approximately 15,000 jobs last year, which was announced in August. By the end of 2024, Intel’s workforce had decreased to 108,900 from 124,800 the year before.
A spokesperson for Intel chose not to comment on the matter.
Intel’s shares increased by as much as 6.5% in New York trading on Wednesday, marking the largest intraday gain in over a week. The stock has experienced a decline of about 40% over the past year, closing at $19.51 on Tuesday.
CEO Tan is focused on revitalizing the iconic chipmaker, which has lost ground to competitors over the years. The Santa Clara, California-based company has struggled to maintain its technological edge and is trailing behind Nvidia Corp. in the field of artificial intelligence computing. This has resulted in three consecutive years of declining sales and increasing financial losses.
Tan, who has a background with Cadence Design Systems Inc., has committed to divesting Intel assets that are not central to the company’s mission and developing more innovative products. Recently, Intel agreed to sell a 51% stake in its Altera programmable chips unit to Silver Lake Management, moving toward this goal.
The company needs to replace the engineering talent it has lost, strengthen its balance sheet, and align manufacturing processes with potential customer needs, as noted by Tan at the Intel Vision conference last month.
Intel is set to release its first-quarter results on Thursday, providing Tan with an opportunity to elaborate on his strategy. Although Wall Street estimates suggest the worst of Intel’s revenue declines have passed, analysts are not forecasting a return to previous sales levels anytime soon.
The 65-year-old executive was appointed following the previous year’s dismissal of CEO Pat Gelsinger, who had attempted his own turnaround plan for Intel. Gelsinger’s strategy involved a costly expansion of the company’s factory network and an initiative to transform Intel into a bespoke chip manufacturer.
However, Intel has since delayed much of this expansion effort, including plans for an Ohio facility that was once projected to become the world’s largest chip production hub. Intel also anticipated being a significant beneficiary of the 2022 Chips and Science Act funding, but this initiative is now uncertain under President Donald Trump.
A manufacturing partnership with Taiwan Semiconductor Manufacturing Co., which had been subject to investor speculation in recent months, appears increasingly unlikely. Last week, TSMC CEO C.C. Wei stated that the company would continue to focus on its own business.
During this period, Intel missed out on becoming a leader in the increasingly lucrative new field for the chip industry. The company, traditionally dominant in the personal computer and data center processors market, was slow to adapt to the shift toward AI. This allowed Nvidia to transition from a niche player into the world’s most valued semiconductor company, with revenue now surpassing Intel’s sales.
Former CEO Gelsinger acknowledged the loss of Intel’s competitive edge and the slow pace of adapting to market changes. He expressed that he was not afforded the time he had requested to address these issues. In his inaugural public appearance as CEO last month, Tan emphasized that the company’s turnaround would require time and would be challenging to achieve.
“It won’t happen overnight,” he stated. “But I know we can get there.”
This report was originally published on Fortune.com.
