Intel plans thousands of job cuts in face of PC slowdown

The layoffs will be announced as early as this month. PHOTO: REUTERS

LOS ANGELES - Intel is planning a major reduction in headcount, likely numbering in the thousands, to cut costs and cope with a sputtering personal computer market, according to sources with knowledge of the situation.

The layoffs will be announced as early as this month, with the company planning to make the move around the same time as its third-quarter earnings report on Oct 27, said the sources, who asked not to be identified because the deliberations are private. The chipmaker had 113,700 employees as at July.

Some divisions, including Intel's sales and marketing group, could see cuts affecting about 20 per cent of staff, according to the sources.

Intel is facing a steep decline in demand for PC processors, its main business, and has struggled to win back market share lost to rivals like Advanced Micro Devices.

In July, the company warned that 2022 sales would be about US$11 billion (S$15.8 billion) lower than it previously expected. Analysts are predicting a third-quarter revenue drop of nearly 20 per cent. And Intel's once-enviable margins have shrivelled: They are about 15 percentage points narrower than historical numbers of around 60 per cent.

During its second-quarter earnings call, Intel acknowledged that it could make changes in its business to improve profits.

"We are also lowering core expenses in calendar year 2022 and will look to take additional actions in the second half of the year," chief executive Pat Gelsinger said at the time.

Intel declined to comment on the layoffs, and whether Singapore would be affected.

Its last big wave of layoffs occurred in 2016, when it trimmed about 12,000 jobs, or 11 per cent of its total.

The company has made smaller cuts since then and shuttered several divisions, including its cellular modem and drone units. Like many companies in the technology industry, Intel also froze hiring earlier this year, when market conditions soured and fears of a recession grew.

Mr Gelsinger took the helm at Intel last year and has been working to restore the company's reputation as a Silicon Valley legend. But even before the PC slump, it was an uphill fight.

Intel lost its long-held technological edge, and its own executives acknowledge that the company's culture of innovation withered in recent years.

Now a broader slump is adding to those challenges. Intel's PC, data centre and artificial intelligence groups are contending with a tech spending slowdown, weighing on revenue and profit.

Worldwide shipments of desktop and laptop computers fell by 19.5 per cent in the third quarter of 2022 compared with the year-ago period, according to research firm Gartner. It was the biggest drop Gartner has documented in more than two decades of tracking the market.

HP, Dell Technologies and Lenovo Group, which use Intel's processors in their laptops and desktop PCs, all suffered steep declines.

It is a particularly awkward moment for Intel to be making cutbacks.

The company lobbied heavily for a US$52 billion chip stimulus Bill this year, vowing to expand its manufacturing in the United States.

Mr Gelsinger is planning a building boom that includes bringing the world's biggest chipmaking hub to the state of Ohio.

At the same time, the company is under intense pressure from investors to shore up its profits.

The company's shares have fallen more than 50 per cent in 2022, with a 20 per cent plunge occurring in the last month alone.

US tensions with China also have clouded the chip industry's future. The Biden administration announced new export curbs on Friday, restricting what US technologies companies can sell to the Asian nation.

Intel's chief financial officer David Zinsner said after the company's latest quarterly report that "there are large opportunities for Intel to improve and deliver maximum output per dollar".

The chipmaker expected to see restructuring charges in the third quarter, he said, signalling that cuts were looming.

Some chipmakers, including Nvidia Corp and Micron Technology, have said they are steering clear of layoffs for now. But other tech companies, such as Oracle and Arm, have already been cutting jobs. BLOOMBERG

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