Intel’s latest layoffs of 15,000 are part of a recent pattern in tech

Intel’s announcement of 15,000 layoffs is the latest in a wave of workforce reductions impacting the tech sector. Since 2020, major players like Amazon (27,000), Meta (21,000), and Microsoft (14,000) have all significantly reduced their headcounts. Amazon’s cuts have come in several waves, including 18,000 announced in January 2023. Meta’s reductions, part of CEO Mark Zuckerberg’s “Year of Efficiency,” represent about 13% of its workforce. Even tech-focused carmaker Tesla has cut approximately 10% of its staff, citing slowing electric vehicle sales and heightened competition. These trends reflect broader economic pressures, including higher interest rates and recessionary concerns.

Inside Intel’s big cuts

Intel’s situation, however, are the largest in recent memory. The company’s revenue has been on a downward trend over the past few years, with the most notable dip occurring between 2021 and 2023. Revenue fell from $79.0 billion to $54.2 billion, a decrease of roughly 31.4%.

“Our revenues have not grown as expected – and we’ve yet to fully benefit from powerful trends, like AI,” said Intel CEO Pat Gelsinger in a memo. “Our costs are too high, our margins are too low. We need bolder actions to address both – particularly given our financial results and outlook for the second half of 2024, which is tougher than previously expected.”

Gelsinger notes that the company’s annual revenue in 2020 was roughly $24 billion higher than it was in 2023. “There are a lot of reasons for this, but it’s not a sustainable path forward,” he wrote.

While Intel has struggled, with its stock price falling about 46% since January 2020, competitors like NVIDIA, AMD, and Marvell have, for the most part, thrived. NVIDIA’s stock price has soared by roughly 1,728.2%, thanks to its success in AI and data centers, from January 2020 to August 2. AMD’s stock price has risen by about 170% over the same time period while Marvell’s stock price is up about 135.5%.

The scale of recent tech layoffs

The chart above illustrates the scale of recent tech layoffs, with Intel’s announcement adding to the already substantial job losses in the sector.

After reaching a peak of $79 billion in 2021, Intel’s revenue fell to $63 billion in 2022 and further dropped to $54.2 billion in 2023. This slide represents a drop of roughly 31.4% in just two years. In 2023, the company’s revenue of $54.2 billion was roughly in line with unadjusted 2015 levels ($55.4 billion).

A closer look at Intel’s financial and workforce trends

Intel’s strategic response

To address recent challenges, Intel has announced a comprehensive strategy that includes not only the 15,000 layoffs but also a range of other cost-cutting and strategic measures.  The chipmaking giant aims to complete the majority of these 15,000 layoffs by the end of next year, part of a broader cost-cutting initiative targeting over $10 billion in savings and increased capital efficiency by 2025.

In addition to the layoffs, Intel has identified several areas for cost savings, including reducing operating expenses (opex) to approximately $20 billion in 2024 and further to $17.5 billion in 2025. The company also plans to cut capital expenditures (capex) by more than 20% from its initial plan, targeting a range of $25–27 billion for 2024. In additionally, Intel aims to generate around $1 billion in savings from non-variable cost of sales in 2025. Additionally, the company has decided to suspend dividend payments.

Despite the cuts, Intel is maintaining its commitment to investing in key growth areas, particularly AI. Specific focus areas include AI PCs and AI-focused server products. It will also accelerate the ramp of Core Ultra AI CPUs and advance process technology, with the “five nodes in four years” plan on track. Finally, the company said it intends to expand foundry services. “We previously signaled that our investments will define and drive the AI PC category would pressure margins in the near term,” said CEO Pat Gelsinger stated in an earnings call. “We believe the trade-offs are worth it. The AI PC will grow from less than 10% of the market today to greater than 50% in 2026.” 

• Focus on efficiency: The new operating model aims to allow for more effective innovation with fewer resources.
• Strategic prioritization: Key areas like AI, advanced manufacturing processes, and foundry services are protected from cuts.
• Process technology advancements: Intel remains committed to its “five nodes in four years” plan, with Gelsinger noting in an earnings call, “On Intel 18A, we released the 1.0 PDK last month and are on track to be manufacturing-ready by the end of this year with production wafer start volumes in first half ’25.”
• Product roadmap: Ongoing innovation in core product lines, with upcoming products like Lunar Lake, which Gelsinger highlighted as “our next-generation AI PC, which achieved production release ahead of schedule in July, will be the next industrywide catalyst for device refresh.” and Panther Lake.

Impact on innovation and competitiveness

Intel leadership has addressed concerns about the potential impact on innovation, emphasizing their continued commitment to R&D and strategic prioritization. As Gelsinger stated, “We remain confident that we have and will continue to make the investments needed to drive long-term shareholder value, and we view cost discipline as the compass that drives effective execution, helping teams stay on track to both prioritize and achieve measurable results.”

While the GPU market has been a historic traffic driver for rival NVIDIA, Intel’s late 2022 entry into the discrete graphics card market with its Arc lineup was plagued by early software glitches, despite capable hardware. While the firm made strides to address those problems with driver updates, the early performance hiccups were a drag on consumer confidence. Consequently, sales remain sluggish despite competitive pricing and improved performance.