Semiconductor giant Intel plans to shed thousands of employees in order to finance technological development and reverse its loss of market share, news agency Bloomberg reports.
According to the report, Intel CEO Pat Gelsinger is investing in research and development with the aim of recapturing Intel’s competitive advantage. Bloomberg says that the layoffs may be announced this week.
Intel is the largest employer in Israel’s technology sector, and accounts for a sizeable share of the country’s exports. Its share price rose by 1% in later trading yesterday. So far this year, Intel’s share price is down by nearly 40%, and the stock has become known as the most disappointing semiconductor stock on Wall Street. Since it became clear that Intel’s strategy of expanding production capacity to manufacture chips for other companies had not resulted in a rush of new customers, its troubles have only multiplied. A negative cash flow and huge investment in constructing new foundries (which has meanwhile been halted) have weighed on its cash, while revenue from its core business of chips for personal computers and servers has not grown as expected.
Besides the cash flow and revenue problems, it seems that one of the main factors weighing on Intel’s share price this year has been the fact that it has failed to gain a firm foothold in the artificial intelligence (AI) market, while rivals like Nvidia conquer more and more market share on the way to the next technological revolution. Although Intel has launched AI chips for personal computers and servers, it has not managed to take market share from players such as Nvidia and AMD.
Nevertheless, in early July Intel was given optimistic coverage by Melius Research, which said that the company was likely to launch several new AI capabilities in the second half of the year and to reappear on investors’’ radar.
Intel is due to release its second quarter financials tomorrow. Analysts estimate that revenue will be static in comparison with the corresponding quarter, but will grow moderately in the second half of the year, and that annual revenue will be 3% higher than in 2023, at $55.7 billion. If that happens, 2024 will be the first growth year for the company since 2021.
Intel employs 124,800 people worldwide and, as mentioned, is the largest employer in Israel’s technology industry, with some 11,000 employees altogether in Haifa, Jerusalem, Petah Tikva, and Kiryat Gat. Last month, Intel notified at least twelve suppliers and contractors of the suspension of work on its new $25 billion factory in Kiryat Gat, Fab 38, to produce advanced chips on EUV lithography. The suspension was apparently ordered because of cash flow problems and a decision to delay procurement until customers for the new facility had been recruited.
Published by Globes, Israel business news - en.globes.co.il - on July 31, 2024.
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