As the second quarter draws to a close, Intel, which has completed its management transition, has immediately launched a large-scale adjustment to its business departments, which is the layoff plan that the new CEO Lip-Mo Chen had previously warned would "last several months."
Recently, according to multiple foreign media reports, Intel announced in a memo to employees that it would shut down its automotive business and lay off most of the department's employees. This is the latest move in Intel's recent large-scale layoffs and business restructuring plan, aimed at accelerating cost reductions and focusing on core chip business.
Ambitious in the past
"We are refocusing our core client and datacenter portfolio to strengthen our product offerings and meet customer needs. As part of this effort, we have decided to phase out our automotive business within the Client Computing Group. We are committed to ensuring a smooth transition for our customers," Intel said in an internal memo sent to employees on June 24.
The automotive business is not Intel's main business, and the company has never disclosed the revenue or employee size of the department. However, Intel executives have mentioned that 50 million cars in the world use Intel chips in their infotainment systems. Intel also holds a majority stake in Israeli self-driving technology company Mobileye, and the decision to shut down the automotive business does not seem to have a direct impact on Mobileye's operations.
As one of the world's largest chip manufacturers, Intel previously monopolized the global computer market through an alliance with Microsoft. In recent years, as global computer shipments have declined and the demand for chips in the automotive market has grown, Intel has sought to break out and enter the automotive market. To this end, Intel has made a multi-faceted strategic layout in the automotive field.
Among them, in 2017, through the acquisition of Mobileye, Intel entered the first camp of automotive parts suppliers in one fell swoop. Later, facing the increasingly intelligent trend in the automotive industry, at the 2024 CES, Intel announced its entry into the automotive market and formulated a strategy to expand AI capabilities into the automotive field. Intel focuses on three major directions: smart cockpit chips, electric vehicle energy AI management, and open automotive chip customization platform. Among them, smart cockpit chips are the main business. To this end, Intel launched a new AI-enhanced software-defined automotive system-on-chip (SoC) and announced that Zeekr will become the first car company to adopt this technology to create an AI-driven smart cockpit experience. At the same time, Intel also announced the acquisition of chip design and software company Silicon Mobility.
In Intel's view, automobiles are a good track that can help it break through and bring growth. The booming Chinese market is naturally a position that Intel cannot give up. At the 2024 Beijing Auto Show, Intel announced that its automotive business headquarters will officially settle in China, and expressed its intention to continue to invest in the automotive business and deepen its presence in the Chinese market. This year, Intel also participated in the Shanghai Auto Show for the first time, released its second-generation AI-enhanced software-defined automotive SoC, and announced that it will cooperate with companies such as Mianbi Intelligence and Black Sesame in the fields of smart cockpits and cabin-driving fusion platforms.
Now that Intel has chosen to close its automotive business, the future direction of its automotive business in China and how it will handle its business with various partners are the focus of industry attention.
Focus on core business self-help
Of course, Intel's move is not without reason. At the end of March this year, Intel's new head, Lip-Wu Tan, made his first appearance as CEO at the "Intel Vision 2025 Conference" and said that he would divest non-core assets and focus on AI-specific chips and foundry business. Lip-Wu Tan said that Intel's goal is to "build the best products and become the best wafer foundry in the next few years."
In April this year, Chen Liwu warned employees that the company would carry out a new round of large-scale layoffs in the coming months to cope with declining sales and bleak revenue prospects. In mid-June, news came out that Intel notified employees in the chip production department that it would lay off 15%-20% of the employees in the business unit starting in July, and the scale of layoffs may exceed 10,000 people. In addition, it is worth mentioning that Intel has implemented a round of layoffs in 2024, involving 15,000 employees. According to the company's financial report, by the end of 2024, Intel will have a total of 109,000 employees.
The reason for this is that although Intel was once the darling of the computer age, it is now struggling in the quagmire of transformation. A series of strategic misjudgments, including refusing to provide chips for the iPhone, abandoning early GPU research and development, unwilling to use expensive EUV lithography machines, and refusing to invest in OpenAI, have gradually led Intel into passivity and decline.
Financial report data shows that from 2021 to 2023, Intel's annual revenue will be US$79 billion, US$63.1 billion, and US$54.2 billion, respectively, gradually declining. In particular, in 2024, Intel's revenue will drop to US$53.1 billion, and its net profit will turn from profit to loss, with a loss of up to US$18.8 billion. The core foundry business lost US$13.4 billion, becoming the main reason for the performance drag.
In September 2024, there was even news that Qualcomm was interested in acquiring Intel. On December 1, 2024, Intel suddenly announced that then-CEO Patrick Gelsinger officially retired and resigned from the board of directors, and the decision took effect immediately. After that, Intel announced in March this year that it had appointed Lip-Bu Tan as its new CEO to promote Intel's transformation.
After taking office, Lip-Wu Chen promoted all-round reforms at Intel, including divesting non-core businesses and focusing on core businesses. In addition, Intel continued to focus on its foundry business. The chip design and manufacturing businesses were previously announced to be split, and the foundry division responsible for chip manufacturing business was independent, with the goal of surpassing Samsung to become the world's second largest chip foundry by 2030.
Now, Intel has begun to cut non-core automotive business, although the business has a bright future, but Intel's current focus is not here. These cuts that have been launched and are being planned are expected to significantly reduce Intel's spending and will have a significant impact on the global chip industry landscape.