On Thursday, July 24th, American chip giant Intel released its second-quarter financial report, announcing a series of deep reforms including large-scale layoffs, global capacity adjustments, and investment reviews. The company also revealed that if it fails to secure a major customer, its cutting-edge manufacturing business – involving the 14A (1.4 nanometer) manufacturing process – may be completely shut down.
Exiting the cutting-edge manufacturing business would mark a historic shift for Intel, a company adhering to Moore’s law. Currently, the company is the only U.S.-based chip manufacturer capable of producing advanced computing chips. Abandoning the 14A process would not only significantly impact Intel but also deal a devastating blow to the U.S. chip manufacturing industry, potentially leading to increased reliance on companies like TSMC for wafer foundry services.
The financial report indicated that by the end of 2025, the global workforce at Intel would decrease from 96,000 to 75,000, representing a 22% reduction. CFO David Zinsner disclosed that a significant portion of the layoffs had been completed, with approximately 50% reduction in middle management positions to enhance efficiency and streamline decision-making processes.
Intel’s CEO, Chen Liwu, stated in a memo to employees on Thursday, “We are making tough but necessary decisions to streamline organizational structure, improve efficiency, and enhance accountability at all levels of the company.”
“We are no longer offering blank checks – every investment must be economically justified. We will build what our customers truly need when they need it and earn their trust through consistent execution,” he added.
Intel also announced the cancellation of plans to build new wafer fabs in Magdeburg, Germany, and Poland. Further, the company will consolidate packaging and testing operations in Costa Rica to facilities in Vietnam and Malaysia, while the construction of a new factory in Ohio, USA, will be significantly slowed down.
Chen Liwu emphasized during the financial conference call, “I don’t subscribe to the idea that ‘if you build it, they will come.’ Each future factory construction must be supported by clear customer demand.”
The quarterly financial report revealed that the 14A fabrication technology is facing a life-or-death decision. If Intel fails to secure significant external wafer foundry clients, the company may pause or terminate the 14A development plan, potentially leading to an exit from the cutting-edge wafer foundry market.
Intel warned in its filings, “If we can’t secure significant external customers to reach critical milestones for Intel’s 14A, developing and manufacturing Intel 14A and subsequent advanced processes may no longer be economically feasible. We may suspend or terminate the R&D of Intel 14A and subsequent technologies in this scenario.” Intel indicated that chips would be manufactured using 18A (1.8 nanometer) technology until 2030 and hinted at the potential use of external wafer foundries if the 14A process isn’t advanced.
This news has rocked the market, with Matt Bryson, Senior Vice President at financial services company Wedbush Securities, stating that abandoning the 14A process if investment isn’t secured is a pragmatic move. He mentioned, “I think it also suggests they (Intel) are trying to force other major chip design companies to consider using Intel’s foundry services, but if ultimately, we can’t compete with TSMC, then we won’t invest further. It’s a pragmatic move.”
Chip industry analysis firm Semianalysis remarked, “Intel, the company that nurtured Moore’s Law, is evaluating for the first time whether it can maintain its leading advantage.” If it can’t compete with TSMC, “then, we may forever discuss TSMC’s monopoly and the demise of U.S. semiconductor manufacturing.”
Currently, Intel holds up to $100 billion in chip manufacturing equipment. If the plan is terminated, it will face “significant asset impairments.”
The second-quarter revenue was $12.86 billion, exceeding expectations. Intel’s foundry business grew by 3%, reaching $4.4 billion, higher than expected. However, the adjusted net loss was $441 million, or 10 cents per share. In the same period last year, the profit was $83 million, or 2 cents per share.
The financial report’s forecast for the third quarter’s loss far exceeded Wall Street expectations, leading to an 8.53% drop in the stock price by the end of Friday, July 25th. The company estimates a loss of $0.24 per share in the next quarter, higher than the expected $0.18.
For years, due to management missteps, Intel has been struggling, falling behind in the AI chip race, losing market share in core segments, and seeing little return on massive capital expenditures while conceding market share to its long-time competitor AMD.
Months ago, under the leadership of the new CEO Chen Liwu, Intel entered a comprehensive restructuring phase. “We will no longer invest blindly, nor will we inflate ourselves,” Chen Liwu said. “We will let the market and customers decide our path and investments.”
Moore’s Law is based on observations and predictions from Intel’s co-founder Gordon Moore over decades of rapid developments in the chip industry. It predicts that the number of transistors on a chip of the same size will double every 18 to 24 months, roughly doubling processor performance every two years while halving prices.