Intel’s Recovery Also Includes Cutting Lots of Costs

The other way Intel hopes to recover from its current financial low point is by significantly cutting costs.

Back in October, the chipmaker announced a massive spending reduction plan that calls for $3 billion in cuts this year and up to $10 billion in cuts both for 2024 and 2025. This would amount to a total of up to $23 billion in reduced spending over the next three years.

On last week’s earnings call, Gelsinger seemed to indicate that the company is moving forward with cuts faster than originally planned. He made sure to point out that the semiconductor giant will not slash investments that are important to his comeback plan.

“We are even more aggressively executing on the cost measures we described in Q3, even as we keep the investments critical to our long-term transformation intact, with a clear eye [toward] making the right capital allocation decisions to drive the most long-term value,” he said.

Intel is cutting costs by reducing its headcount, cancelling products and other projects, and putting in “more stringent cost controls in all aspects of our spending,” among other things.

This campaign has already resulted in some employees getting laid off, as indicated by recent public notices, or accepting voluntary retirement packages, as indicated by staff posts on LinkedIn.

On Tuesday, Intel announced internally that it would cut the base pay of executives and senior employees, including Gelsinger and other executive leadership members.

The cuts have already impacted Intel’s product portfolio too. On last week’s earnings call, Gelsinger said the company will no longer invest in its Tofino network switch chip business, which originated from Intel’s 2019 acquisition of Barefoot Networks.

“[The Network and Edge Group] continues to do well and is a core part of our strategic transformation, but we will end future investments on our network switching product line while still fully supporting existing products and customers,” Gelsinger said.

Intel has made cuts elsewhere, cancelling a $200 million development center in Israel, a $700 million data center cooling lab in Oregon and its Pathfinder RISC-V development program.

Separate from the cost-cutting program, Intel said last week that it plans to save billions of dollars by extending the life of certain production equipment in its fabs from five years to eight years. The company expects this to reduce its total depreciation expenses this year by roughly $4.2 billion.