Intel Corporation, the renowned chipmaker, has made headlines with its announcement of layoffs following the payment of $1.5 billion in Q1 dividends. This decision comes in the wake of rumors circulating about budget cuts in Intel’s data center and client computing business divisions. The company had previously implemented cost-saving measures, including pay reductions for senior executives and employees, as it faced challenges posed by the semiconductor industry’s historic downturn affecting chip designers and manufacturers. In response to inquiries from Tom’s Hardware, Intel confirmed that it is undergoing “function-specific workforce reductions.”

The first-quarter earnings report for Intel in 2023 marked a significant setback in the company’s history. With a 36% annual revenue drop and a loss per share of four cents, Intel faced considerable challenges. Despite these losses, the company prioritized investor satisfaction by paying $1.5 billion in dividends out of its own pocket during Q1, maintaining similar payment levels to the previous year’s quarter.

Speculations about Intel layoffs emerged last week when Dylan Patel of Semianalysis tweeted about the possibility. However, at that time, Patel’s tweet was the sole source mentioning the potential business strategy changes, leaving uncertainty about the likelihood of layoffs. Tom’s Hardware sought clarification from Intel, leading to the confirmation of the layoffs. These workforce reductions align with Intel’s overarching strategy to regain the chipmaking dominance from its Taiwanese competitor, Taiwan Semiconductor Manufacturing Company (TSMC), while also expanding its manufacturing facilities in the United States.

This recent development follows the pay cuts implemented in February, which included the suspension of merit bonuses and salary reductions of up to 25% for Intel employees. Chief Executive Officer Mr. Patrick Gelsinger experienced the highest percentage reduction, while grades 7 to 11 faced a 5% pay cut, and vice presidents and senior executives experienced cuts of 10% and 15%, respectively. In addition, quarterly and annual bonuses were suspended, and pension plan payments were halved.

Intel’s struggles in the chip industry have had a significant impact on the company, evident in its current market capitalization of $129 billion, which is lower than that of its smaller rival, Advanced Micro Devices, Inc. (AMD), valued at $145 billion on the stock market. Analysts remain optimistic about AMD’s potential for continued data center market share growth this year, further intensifying the competitive landscape in a division that might witness workforce reductions at Intel.

As Intel takes decisive steps to navigate the challenges in the semiconductor industry, the repercussions of these layoffs and cost-saving measures will undoubtedly shape the company’s future trajectory.

By: Mr. WWK