Intel responded to our queries about rumors that the company is embarking on a fresh wave of layoffs that come as a result of a new 10% budget cut to its client computing group (CCG), the division responsible for producing consumer CPUs, and its data center group (DCG). The reports come as Intel continues its company-wide belt-tightening as it grapples with the worst CPU market in 30 years.
We heard a rumor of an impending 10% budget cut last week but could not confirm the information. However, Dylan Patel of consulting firm SemiAnalysis tweeted that Intel planned to reduce its budget by 10%, resulting in "as much as" 20% layoffs in the impacted groups (CCG and DCG). We followed up with Intel, and the company issued the following statement to Tom's Hardware:
"Intel is working to accelerate its strategy while navigating a challenging macro-economic environment. We are focused on identifying cost reductions and efficiency gains through multiple initiatives, including some business and function-specific workforce reductions in areas across the company.
"We continue to invest in areas core to our business, including our U.S.-based manufacturing operations, to ensure we are well-positioned for long-term growth. These are difficult decisions, and we are committed to treating impacted employees with dignity and respect." Intel Spokesperson to Tom's Hardware.
Intel's statement confirms it is reducing its workforce in specific areas but doesn't state the number of employees impacted, or in what areas of the company. It also doesn't define the magnitude of the budget reductions. The company says it will continue investing in its chip-manufacturing operations, a common refrain in many of its statements as it has exited several businesses yet remains focused on its IDM 2.0 objectives.
Like most companies of its size, Intel's budget is used for both internal and external teams — it often contracts some functions, even chipmaking, to outside firms. As with many broad budget cuts, it's possible that some of the reduced spending will be accomplished through the curtailed use of those outside firms. As such, the magnitude of the layoffs remains to be seen and might not result in a 20% reduction in headcount in the impacted business units.
Large workforce reductions trigger reporting requirements, like WARN, in certain localities. Intel's most recent WARN notice came on May 3, 2023, when the company announced that it plans to lay off 60 more employees at its Folsom campus by the end of this month. That brings the total layoffs in Folsom to 516 over the last five months. The notice also says, "Additional separations are expected after the 30-day period beginning May 31, 2023."
For now, we're not aware of any other Intel WARN notifications. Intel's workforce reduction comes as it continues to cut costs across the company, including using methods like reducing headcount, as we saw in October of last year, reducing pay and bonuses in January, cutting its dividend, and offering furloughs to some workers.
Intel has also exited several businesses, like its server-building efforts, networking switches, 5G modems, Optane Memory, Bitcoin-mining chips, drone business, and SSD storage unit.
We could see the PC market recover next quarter, as several chipmakers now predict the bottom occurred during Q1 and recovery could begin in the second quarter of the year. Regardless, Intel faces stiff competition from a host of companies across the breadth of its portfolio and it has predicted that it will trim up to $10 billion in spending by the end of 2025 as it executes its turnaround plan.
