Intel is one of the biggest private employers in Arizona, with more than 12,000 workers here. But, the chipmaker said this summer that it’d be cutting 15% of its global workforce. That came at around the same time the company announced a more than $1.5 billion quarterly loss. More recently, there’ve been reports that San Diego-based rival Qualcomm asked Intel about potentially buying it.
So, what’s behind Intel’s problems, and what might the future hold for the tech giant? Helen Li, a tech fellow at Business Insider, reports on chips and artificial intelligence and joined The Show to talk about the current situation at Intel.
Full conversation
MARK BRODIE: That is the current situation at Intel? Like, how dire is it right now?
HELEN LI: Yeah, so I think it's important to remember that Intel for decades was one of America's preeminent chip manufacturers. However, in the past couple of years, their revenue has kind of dipped below what has been expected. And so most notably, this year, their quarter two revenue fell short.
And after that, their CEO made an announcement about how in order to kind of save around $10 billion that it would be important to make cuts and refocus the company. And so there were announced layoffs that would be approximately 15% of their workforce, which could translate to, I think a little more than 15,000 people. And Intel has, you know, 12,000 workers that are located in Arizona. And it's a really big part, a big employer in many states, such as Arizona and Oregon.
And what we're seeing here is Intel falling short of expectations. But also in the midst of all of this, there's been a big AI boom, a lot of chipmakers that you think of like NVIDIA or certainly blowing up in the news. And Intel trying to capture that AI boom has been struggling a little bit. And so now it's finding itself at a place where it's an important American manufacturer. But it hasn't had the best execution record as of late in terms of what more and more companies are asking from it.
BRODIE: So is it really the situation with AI that is causing Intel, if not all, then most of the problem is, is currently dealing with?
LI: I would say that it's important to look at Intel's business design itself. So Intel, within the chipmaking industry, is both a chip designer and it's a chip manufacturer. When you're looking at other companies such as NVIDIA, they are a designer and they've outsourced a lot of their manufacturing to places like TSMC or Taiwan Semiconductor Manufacturing Company, which also now has a branch in Arizona.
And so the burden and when you make the burden mostly just designing and someone else makes it, that partnership probably can run much smoother. And for a company like Intel trying to design and then trying to also manufacture, there are just a lot of operations that they need to consider to continue to be successful. And then another thing is Intel has for the past couple of generations of their chips had to delay the release of them due to some manufacturing defects.
BRODIE: So you mentioned how big of a player Intel is in places like the Phoenix area, in Oregon. Within the industry, Intel is also obviously a pretty big player. How, how big of a deal is it in the, in the semiconductor, in the chip world that Intel is going through what it's going through right now?
LI: Yeah, so I mentioned that Intel is an American company. And that's really important because right now in the United States and just in the past couple of years, the U.S. is thinking about chip making as sort of a national security issue. They're trying to make the supply chain a lot more refocused in America rather than outsourced abroad.
And so that's why you see things like the CHIPS and Science Act passing, and why you see companies like TSMC now in Arizona as well. It's to try to bring jobs back and focus on domestic manufacturing of these chips.
And so Intel performing well is really important because they're receiving billions of dollars of funding from the government. And also just sort of the image and morale of chipmaking in general in the United States, it's really important for them to succeed.
BRODIE: What is the sense in the industry about whether or not Intel will be able to get through this and, you know, sort of come back at least as strong as it was before.
LI: Yeah, I talked to a couple of analysts when looking at Intel and its history and its future trajectory, and something that they kept noting is Intel missing the the train per se in many important booms, whether it was the mobile phone development in the 2000s or you know, the AI boom, in terms of making chips that would be able to help accelerate and play a big role in it.
Intel's missed a couple of steps here and there and a couple of analysts are really concerned about their execution that while their leadership is announcing, you know, cuts and, and trying to get things back on track execution history, it hasn't helped them as much in terms of, you know, sometimes the delays, other people can overtake you and investing in like chipmaking takes years and years.
But also for the fact that now the technology has sort of shifted and a lot of companies are focusing on GPUs, which are graphics processing units, that are gonna help accelerate computing. And Intel is less focused on that per se right now.
And, and then another thing that they're mentioning is companies like Qualcomm, for instance have, there's been speculation that they've approached maybe buying out Intel, but there's a lot of like antitrust sentiment from the federal government on that side, and to really get things back on track Intel has a lot of hurdles to overcome.
BRODIE: What are leaders within the company saying about how they plan to try to get themselves back on track? You mentioned cuts and other changes they might have to make. What, what are they saying about like how long this might take and how optimistic they are that, that they can make it into what it was?
LI: Yeah. So recently, Pat [Gelsinger], their CEO, made an announcement of that the foundry part of Intel, which I mentioned before is kind of the, the making of chips for customers, is going to become an independent subsidiary, which oftentimes that segment of the business is very fickle and maybe they're losing money on it. So allowing it to be independent allows for them to get investments and, and sort of function a little bit more independently that would maybe help minimize the risk for any shareholders or people who are looking at Intel as potentially risky.
They also announced a new chip partnership with Amazon and designing for them, more newer generation AI-related chips. Those are some moves that they've made to turn things around. But in terms of whether or not that's going to be enough remains to be seen, given that we don't know where the cuts are going to be made yet within the company in terms of workforce.
And then also just the given that it's not just Intel, you have to think about, there are just other companies that are doing the making of chips for, for customers and they, you know, the places like TSMC are getting more, more advanced with their chipmaking processes, and how can a company like Intel keep up? It's not just about them, it's also about their competitors potentially making leaps and bounds when kind of time is of the essence.
