Intel’s Irish workforce will spend the bank holiday weekend nervously awaiting details on how the company’s plan to cut 16,500 jobs globally will impact on its operation in Leixlip as markets delivered a savage verdict on the news.
Shares in the chipmaker slumped 26.5 per cent, its worst decline in more than 40 years, on news of the job cuts and the suspension of dividend payments alongside results and an outlook that were both poorer than expected. The collapse wiped about $32 billion (€29.3 billion) from the group’s stock market value.
“I have no illusions that the path in front of us will be easy,” chief executive Pat Gelsinger said in a memo to the group’s 110,000 employees. “You shouldn’t either.”
He called the moves announced after markets closed on Thursday as “some of the most consequential changes in our company’s history”.
Markets took the news as confirmation that the chipmaker remains ill-equipped to compete in the artificial intelligence era and responded by dragging it to what data compiled by Bloomberg said was Intel’s biggest intraday drop since at least 1982.
The impact of the 15 per cent cut in jobs on Intel’s Irish operation is not yet known. A spokeswoman for the company said the number of impacted roles would vary across each business unit and in each region, and there was no exact number for the Irish business yet. Intel did not comment further.
The news will come as a shock to staff who have already seen staff numbers trimmed in recent years as part of the wider retrenchment in the tech industry. According to Intel’s website, it has 4,900 employees in Ireland. A 15 per cent cut would mean the loss of 735 jobs here.
Minister of State James Lawless, a Kildare North TD, said he was “confident” Intel would continue to provide quality employment here.
“Intel has very recently invested in a multibillion campus expansion at the fabs in Leixlip,” he said. “This is a sign of their continued commitment to this location and their operations here. The EU Chips Act also supports domestic production of microchips within the EU as such crucial assets cannot be dependent on uncertain circumstances with China and other states varying allegiances and priorities.”
Investment group Apollo and its affiliates announced in June that they would provide $11 billion (€10.1 billion) to Intel to buy a 49 per cent stake in a joint venture entity related to its Fab 34 facility in Leixlip. The plant is Intel’s leading-edge high-volume manufacturing facility.
The joint venture will manufacture wafers for sale to Intel on a cost-plus-margin basis. Under the agreement, Intel is required to finish the buildout of Fab 34 on which it has already spent $18.4 billion, and purchase wafers from the joint venture for itself and external customers, with minimum volume commitments for its wafer demand following the substantial completion of the facility.
Intel said it was planning enhanced retirement packages and voluntary redundancy offerings, which will also result in some staff leaving the business. Most of its planned actions will be in place by the end of the year.
It is understood that a number of meetings will take place next week to begin the process. It could be some time before an exact figure is known and the impact on various business units.
“Simply put, we must align our cost structure with our new operating model and fundamentally change the way we operate. Our revenues have not grown as expected – and we’ve yet to fully benefit from powerful trends, like AI,” Mr Gelsinger said.
“Our costs are too high, our margins are too low. We need bolder actions to address both – particularly given our financial results and outlook for the second half of 2024, which is tougher than previously expected.”
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