Munich Dismantling instead of upswing: Intel boss Pat Gelsinger apparently wants to cut several thousand jobs in the coming weeks. According to a report by the Bloomberg news agency on Wednesday, the far-reaching cuts are to be announced by the end of the month. The US chip company is reacting to the massive slump in its core business, the computer market.
Intel did not comment on the plans. The layoffs, however, would be a reversal. Since taking office a good year and a half ago, Gelsinger had spread a spirit of optimism among the former industry leader.
The 61-year-old launched the largest investment program of all time at the semiconductor manufacturer. The manager wants to catch up with TSMC, the technology leader in the chip industry. New plants are being built in America and Europe for tens of billions. Gelsinger raised billions in state support for this.
In the meantime, however, the environment has clouded over considerably. According to market researchers from Gartner, PC manufacturers shipped almost a fifth fewer devices in the third quarter than in the previous year. They are Intel’s most important customers.
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“This quarter’s results could mark an historic slide in the PC market,” warned Gartner analyst Mikako Kitagawa. This is the sharpest market slump on record and the fourth straight quarter of a year-on-year decline.
The delivery volume of the PC producers in the third quarter is comparable to the figures before the pandemic, according to Canalys experts. What is unusual, however, is the rapidly declining demand. This is a worrying sign for the entire supply chain. “Intel and AMD face headwinds from weakness in their PC businesses,” Canalys said.
The Intel boss at the laying of the foundation stone for the new plant in Ohio in September. The facility costs billions.
(Photo: IMAGO/ZUMA Wire)
Intel essentially lives from processors for PCs, notebooks and servers. They are the brain of every computer. For decades, the group dominated the billion dollar market almost at will. But the distance to the competition is shrinking, the rival AMD has recently gained massive market share.
Intel is in the red
That leaves traces in Intel’s figures. In the second quarter, sales collapsed by a fifth, and the group fell into the red. Worse still: Gelsinger had to reduce the annual forecast by a good ten percent. “The results for the quarter are below the standards that we have set for our company and shareholders,” the manager said in the summer. “We have to get better, and we will get better.”
Intel is changing like seldom before in its more than 50-year history. “Gelsinger wants to go down in history as the one who brought Intel back to the number one spot in chip technology,” said Richard Gordon, Gartner’s semiconductor analyst. But that is associated with investments worth billions – and is not well received on the stock exchange. Because investors no longer believe in the tech legend.
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In the past three years, the group has lost more than half of its value on the stock exchange. No other major US chip company had it so bad. Despite the recent fall in prices, Nivida has increased its stock market value by 150 percent in the same period, AMD is up 90 percent.
Intel is now valued at just five times expected annual earnings. Nvidia has a price-to-earnings ratio of 30, AMD 25.
Now the approximately 113,000 employees once again have to tremble for their jobs. Bloomberg reports that up to a fifth of jobs could be eliminated in areas such as marketing and sales. In the last big wave of layoffs six years ago, Intel laid off 12,000 employees, at that time eleven percent of the workforce.
The chip boom is over
Intel has not yet released third quarter figures. Competitor results, however, suggest things didn’t go well. AMD announced last week that sales between July and the end of September were around 15 percent lower than forecast in the summer.
Instead of 6.7 billion dollars, the US group only posted revenues of 5.6 billion. “Macroeconomic conditions led to lower-than-expected PC demand and a significant inventory correction,” said CEO Lisa Su.
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It was clear that the chip boom would one day come to an end. But now sales are collapsing at a rate that is surprising companies and investors alike. Intel is now the first major chipmaker to push ahead with large-scale job cuts. Other leading producers such as Micron have so far only announced that they will invest less than planned.
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