Intel’s CEO just revealed why more layoffs are coming. His memo shows the grim impact of course correction

In the midst of an ongoing turnaround effort, Intel Corp. reported $12.9 billion in revenue as part of its second-quarter financial results on Thursday, matching year-over-year (YOY).

The sum beat Wall Street forecasts, according to consensus estimates cited by CNBC, but it wasn’t enough to offset news about higher losses, additional layoffs, and the scaling back of Intel’s foundry business. 

The chip manufacturer saw its stock price (Nasdaq: INTC) briefly rise as the market closed, but shares have since tumbled about 8% in after-hours and premarket trading, as of this writing. 

What did Intel report?

Let’s start with the money: Intel reported a $2.9 billion loss (67 cents per share), compared to $1.6 billion (38 cents per share) YOY.

At the same time, CEO Lip-Bu Tan announced that Intel intends to lay off around 15% of its workers, leaving it with about 75,000 employees worldwide by the end of 2025.

This news follows layoffs of 15% and 20% of Intel’s headcount last year and in April, respectively. 

Intel’s foundry business is also getting a shakeup after investing “too much, too soon—without adequate demand,” Tan stated. 

He continued, “In the process, our factory footprint became needlessly fragmented and underutilized. We must correct our course. Going forward, we will follow a systematic approach to growing our factory footprint that’s fully aligned with the needs of our customers. We will be judicious and disciplined as we allocate capital—because that’s what great foundries do.”

Pulling back on projects, or abandoning them altogether

A large part of this course correction involves slowing or completely eliminating already planned projects. According to Tan, initiatives in Germany and Poland will no longer occur, while Costa Rica’s assembly and test operations will be integrated into Intel’s Vietnam and Malaysia sites. 

In the United States, Intel is “slowing construction” of planned factories in Ohio “to ensure our spending is aligned with demand—while maintaining flexibility to accelerate based on new customer wins,” Tan added.

Intel previously delayed the Ohio factories’ operations by at least half a decade.