Intel, the semiconductor giant, has unveiled a significant restructuring plan aimed at reducing costs by over $10 billion next year. CEO Pat Gelsinger announced the measures following disappointing second-quarter results, with sales of $12.8 billion, down 1% and below analysts' expectations.
Key points of the restructuring:
1. Layoffs: Approximately 15,000 employees, about 13% of Intel's workforce, will be laid off by the end of 2024.
2. Dividend Suspension: Intel will pause dividend payments to preserve cash.
3. Capital Expenditure Reduction: The company plans to cut gross capital expenditures by over 20% this year to between $25 billion and $27 billion, with further reductions planned for next year.
Potential Impact on Israeli Operations:
While specific details about the impact on Intel's Israeli operations have not been disclosed, the restructuring is likely to affect the company's significant presence in Israel. Intel is one of the largest private employers in Israel, with major research and development centers in Haifa and Petah Tikva, as well as a manufacturing facility in Kiryat Gat
The company has been a cornerstone of Israel's high-tech industry for decades, and any significant changes to its operations could have ripple effects throughout the Israeli tech ecosystem. Israeli employees and the local semiconductor industry will be closely monitoring how these global cuts will be implemented in the country.
The restructuring comes as Intel struggles to gain traction in the booming AI chip market, dominated by rivals like Nvidia. While Intel's Gaudi line of AI processors, developed by Israeli-founded Habana Labs (acquired by Intel in 2019), is expected to generate about $500 million in revenue this year, it falls far short of Nvidia's quarterly earnings of over $20 billion from AI chips.
As the tech industry closely watches Intel's turnaround efforts, the company faces the dual challenge of catching up in AI chip production while streamlining its operations to remain competitive in the rapidly evolving semiconductor landscape. The outcome of these efforts could have significant implications for Israel's position in the global semiconductor industry.
* The Wall Street Journal contributed to this report.
