In an unexpected reversal, the technology industry, once the relentless engine of modern innovation, will lay off almost 124,000 people in 2024 alone. What is causing this wave of layoffs, and what does it indicate for the future of employment in one of the world's most dynamic industries are questions we answer in this article?
What is a layoff?
A layoff can be either a permanent termination of someone's job (typically for cost-cutting reasons) or a temporary one because there isn't enough work to support a full workforce. A mass layoff occurs when a large number of a company's employees are let go in a short period of time, usually due to economic difficulties.
Who is Intel
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Intel Corporation is the world's leading manufacturer of CPUs and semiconductors. The firm is best known for CPUs based on the x86 architecture, which was developed in the 1980s and has since been regularly changed, revised, and modernized. The company's main products are microprocessors, embedded processors, chipsets, and microcontrollers, flash memory, graphics, network and communication, systems management software, conferencing, and digital imaging technologies. Intel also provides graphics processing units (GPUs), networking accelerators, and communication and security solutions.
Does Intel do a lot of layoffs?
In August 2024, Intel shocked the market by revealing a 15% cut in its global workforce, or around 15,000 jobs. Just a few days later, Cisco Systems revealed intentions to lay off 7% of its workforce, marking the company's second wave of job layoffs this year as it focuses on quickly rising sectors such as artificial intelligence and cybersecurity. According to Layoffs.fyi, 384 IT organizations let off over 124,000 people in 2024, adding to the 428,449 technological employees who lost their employment in 2022 and 2023. While the wider labor market has showed some resiliency, the IT sector's layoffs are particularly evident due to their vast volume.
Is Intel laying off employees 2024?
Intel has announced intentions to lay off 15,000 people in 2024, a disturbing indication for the Biden administration's multibillion-dollar ambition to restore the US chip manufacturing industry. Intel stated the layoffs will impact over fifteen percent of its staff. The statement comes as Intel CEO Pat Gelsinger informed investors and employees that the business required a substantial restructure to cut expenses after recording a $1.6 billion loss in Q2.
From 2020 to 2023, Intel's yearly sales declined by $24 billion, despite a 10% increase in its personnel, a pattern Gelsinger described as unsustainable. The majority of layoffs will be done before the close of this calendar year, Intel stated. In recent years, other businesses have outperformed Intel in a variety of sectors. The business failed to establish itself in mobile devices when cellphones took off in the 2000s, began losing position in PCs and data centers to Advanced Micro Devices in the late 2010s, and is now well behind Nvidia in the thriving artificial intelligence field.
However, the majority of Intel's competitors' chips are made overseas, primarily by Taiwan Semiconductor Manufacturing Company. Intel emerged as the clear winner of President Biden's Chips for America initiative, with the administration declaring $8.5 billion in grants and $11 billion in loans for the firm this year to assist bring certain manufacturing operations back to the United States.
However, Intel has yet to receive the funding, and a Commerce Department official declined to comment on whether Thursday's statement will alter the grants. When the $8.5 billion Intel awards were announced in March, the department referred to them as a "non-binding preliminary" arrangement, with the cash to be distributed only after a due diligence procedure was completed. Intel had predicted that its new US plants will generate 10,000 manufacturing jobs and 20,000 construction jobs.
The job layoffs are part of a commitment to eliminate $10 billion in costs by 2025. Intel also intends to reduce the number of devices it produces, discontinue "non-essential work," and suspend its dividend, beginning in the fourth quarter. As the US-China competition heats up, semiconductors have resurfaced as a policy target in Washington. Chips are the brains of all computing devices, from smartphones to supercomputers to smart weaponry, and US authorities are concerned that so much of the American supply is manufactured in East Asia.
However, there have been some naysayers. Chips are a famously tough business that requires billions of dollars of investment. Even if Intel eventually receives federal funding for growth, its U.S. plants will continue to have higher labor costs than competitors in South Korea, Taiwan, and China. Gelsinger stated in March that Biden was pressuring him to get the new federally sponsored plants up and operating sooner, and that Commerce Secretary Gina Raimondo "now has sales targets for me." Intel's shares fell by nineteen percent to $23.54 in trading following regular hours Thursday.
Intel previously announced a large round of layoffs in October 2022, as well as a cost-cutting plan of $8 billion to $10 billion each year until 2025. However, the firm did not see significant shrinkage as a result. While headcount fell by almost 5% in 2023 (from 131,900 to 124,800 people), Intel clawed its way back up to 130,700 by March 30th, 2024, according to financial data.
Intel claims the majority of the layoffs announced today will be completed by the end of 2024, and representative Penelope Bruce adds that these are fresh layoffs – the 4 percent drop from 130,700 employees in March to 125,300 personnel in June is not reflected in the tally.
According to Gelsinger, Intel will begin giving a "companywide improved retirement offering for eligible employees" and allowing staff to apply for voluntary layoffs next week; not every employee leave will be a sad surprise.
Intel says it is reorganizing, suspending its dividend, and spending less, but will "maintain its core expenditures to carry out its strategy and build a strong and financially viable semiconductor distribution system in the U.S. and around the world."
Why Are Layoffs Happening?
A combination of variables has produced the ideal climate for the current wave of layoffs in the IT sector:
1. Inflation and Higher Interest Rates: The US Federal Reserve's rapid rate rises in 2022, designed at bringing down the highest inflation rates in 40 years, have had far-reaching planned and unexpected implications. While these steps have started to bring inflation under control, they have also dramatically raised the cost of borrowing and debt payments. Companies, particularly those in the technology industry, are being compelled to reduce growth expenditures and employment as they redirect hard-earned capital to meet debt commitments. The impact has been severe for software corporations that borrowed significantly over a decade of near-zero interest rates and ample cash, resulting in substantial costs
2. Economic Downturn: Despite pockets of resilience, the U.S. economy remains unstable, exacerbated by the uncertainty of an impending presidential election. Recession worries, exacerbated by government debt concerns, geopolitical tensions in Ukraine and the Middle East, and the pandemic's lasting impacts, have caused businesses to cut down on spending. In the technology industry, where profitability per employee is important, layoffs have become a vital cost-cutting tactic as businesses prepare for economic instability.
3. The AI Factor: Artificial intelligence is fundamentally changing the technological environment, presenting both possibilities and risks. While AI has the potential to create new employment and increase productivity, those who fail to adapt will face severe risks. IBM's decision to remove 3,900 jobs in its marketing and communications group while restricting hiring for positions that may be replaced by AI is a striking example of this tendency. The transition to AI-driven efficiency is driving businesses to reconsider their personnel strategy.
4. Pandemic Over Hiring: During the pandemic, IT businesses went on an excessive hiring binge, believing that the increase in digital demand would last indefinitely. In response to issues such as the Great Resignation and the growth of Quiet Quitting, businesses hurried to fill positions, providing unprecedented benefits, work-from-anywhere arrangements, and hefty incentives. Companies like Meta almost quadrupled their personnel, only to find themselves overstaffed when the globe returned to pre-pandemic levels. These corporations are now urgently reversing their course, resulting in significant layoffs.
5. Outsourcing and Offshoring: The American worker may have unwittingly harmed its position during the Great Resignation and Quiet Quitting movements, which were exacerbated by the continuous debate and drama around returning to work. As a result, businesses are increasingly turning to in-house talent in Latin America, Eastern Europe, the Middle East, Africa, and Southeast Asia, where they can employ highly educated personnel at a lower cost. AI is not the only danger to American jobs; there is also a worldwide workforce prepared to work hard, adapt, and produce without the attendant difficulties.