BENGALURU – Chipmaker Intel on Thursday cut its full-year profit and revenue forecast, and chief executive Pat Gelsinger, when asked about potential layoffs, told Reuters that “people actions” would indeed be part of a cost reduction plan.

In its earnings release, Intel said it was focused on driving US$3 billion (S$4.2 billion) in cost reductions in 2023, with annual cuts swelling to as much as US$10 billion by the end of 2025.

It also cut its capital spending forecast for this fiscal year to US$25 billion from a previous forecast of US$27 billion.

Mr Gelsinger, who predicted three months ago that the third quarter would be the nadir for the company’s performance, instead said demand for Intel’s computer processors had fallen off even more sharply than projected and that the outlook remained dour.

“The worsening macro was the story and is the story,” Mr Gelsinger said in an interview. “There is no good economic news.”

Predicting a bottom for the market for computer chips currently would be “too presumptive”, he said. 

Third-quarter net income was US$1 billion, or 25 cents a share, down from US$6.8 billion, or US$1.67 a share, in the same period a year ago. Revenue dropped 20 per cent to US$15.3 billion.

“The amount that we can do with respect to people cost is a minority of our overall cost structure. So driving efficiency in the factory network is way more important to our economics than people cost,” Mr Gelsinger told Reuters, adding that adjustments of flexible workforces can be “quite immediate”.

The adjustments would start in the fourth quarter, he said, without specifying how many employees would be affected.

Intel had 110,600 employees in late 2020, right before Mr Gelsinger took the helm. This ballooned to 131,500 by early October this year.

Intel shares jumped 6 per cent in after-hours trade. They had slumped roughly 47 per cent so far this year, underperforming both the S&P 500 index and the Philadelphia SE Semiconductor index.

A slump in PC demand and recession fears have muddied the outlook for the data centre market, both big markets for Intel.

“(Intel’s) PC client business was the silver lining as sales grew sequentially, giving investors some hope that share loss has moderated materially,” said Summit Insights Group analyst Kinngai Chan.

Revenue from the client computing group, which accounts for Intel’s PC sales, rose to US$8.1 billion in the third quarter from US$7.7 billion in the second.

“We believe its data centre share loss should also moderate going into next year,” said Mr Chan.

Intel has been losing market share in the data centre market and Mr Gelsinger said it lost share there again in the third quarter.

But he said Intel gained “meaningful” market share improvement in the PC segment in the third quarter.

Surging inflation has hit demand for computers and other gadgets, forcing electronics companies to cancel orders for components such as chips as they struggle to clear inventory.

PC shipments fell 15.5 per cent in the third quarter, data from Counterpoint Research showed. Intel said it expected the PC market in 2022 to decline in the mid- to high teens.

Still, Mr Gelsinger said Intel expected its total addressable market in 2023 to stand at 270 to 295 million units.

The company now expects 2022 annual revenue of about US$63 billion to US$64 billion, compared with the US$65 billion to US$68 billion estimated earlier. Its original forecast was for about US$76 billion. Analysts on average expected an annual revenue of US$65.26 billion, according to Refinitiv data. REUTERS, BLOOMBERG