Intel Cuts Thousands of Jobs. It Faces These Big Questions.

Intel CEO Lip-Bu Tan took charge of the company in March and warned employees to expect layoffs. (Courtesy Intel)

Intel is laying off thousands of workers as it looks to stabilize its finances. However, the cuts raise questions about the chip maker’s strategy under new CEO Lip-Bu Tan.

The company plans to cut 584 jobs in California, according to filings published by the state government. Intel has also increased planned layoffs in Oregon to a total of 2,392 from 529 previously, local media outlet The Oregonian reported late Friday, citing a state filing.

“As we announced earlier this year, we are taking steps to become a leaner, faster and more efficient company,” Intel said in an emailed statement. “Removing organizational complexity and empowering our engineers will enable us to better serve the needs of our customers and strengthen our execution.”

The chip maker’s shares were up 0.8% at $23.49 in Tuesday morning trading.

The cuts don’t come as a huge surprise. Intel previously said it would remove some layers of management after a Bloomberg report suggested the company would slash more than 20% of the workforce. Intel hasn’t confirmed the total numbers.

However, the California and Oregon layoff notices suggest hundreds of engineers and technicians are among those set to lose their jobs.

Tan—who was appointed CEO in March—has yet to give a detailed plan for his strategy on how to manage the company’s costly chip-manufacturing ambitions and balance them with its chip-design business. Under him, Intel has already lowered its operating expense target this year by $500 million, and expects a further $1 billion reduction next year.

“We continue to learn of layoffs at Intel, which may suggest opex cuts beyond the $17 billion guided for the year, a favorable sign,” wrote Susquehanna analyst Christopher Rolland in a research note. Rolland has a Neutral rating on Intel stock with a price target of $22.

Intel is aiming to attract major artificial-intelligence chip designers such as Nvidia and Broadcom to use its new 18A chip-manufacturing process, which it hopes will make it competitive against rival Taiwan Semiconductor Manufacturing. A Reuters report earlier this month suggested the company might largely sideline marketing the 18A process to external clients in favor of putting more resources into its next-generation 14A process.

Analysts at KeyBanc said in a research note on Sunday that the reported plan to skip 18A seems unlikely, as the process appears to be competitive with Taiwan Semiconductor’s current manufacturing technology and 14A isn’t expected to reach mass production until late 2027 at the earliest.

Intel declined to comment on the Reuters report at the time. It is hoping that producing its own Panther Lake chips on the 18A process this year will both show off the success of its chip-manufacturing technology and help it take back market share from rival Advanced Micro Devices.

“We have indicated ‘light’ at the end of the tunnel, but it is a long tunnel and we remain on the sidelines given Intel’s challenged fundamentals across both the Product and Foundry businesses, which may be further exacerbated by tariff-related headwinds,” wrote UBS analyst Timothy Arcuri in a research note on Sunday.

Arcuri expects Intel to report earnings per share of four cents on revenue of $12.28 billion for the June quarter, when it reports earnings on July 24. That is slightly ahead of consensus expectations of earnings of two cents a share on revenue of $12 billion.

Arcuri kept a Neutral rating on the stock, but raised his target price to $25 from $21.

Write to Adam Clark at adam.clark@barrons.com