Intel is expected to cut 15,000 employees in its branches worldwide, comprising around 15% of its workforce. This is a dramatic and unprecedented number in the company's history, with an enormous impact on the Israeli economy.
Intel is responsible for 5.5% of the country’s high-tech exports and about 1.75% of its GDP. In the delicate state of the Israeli economy — after nine months of war in the south and with the potential for a full-scale regional war in the near future — this is alarming news.
From an Israeli perspective, the worst-case scenario is that the scale of layoffs in all the company's branches worldwide will be proportionate. Intel employs around 11,000 people in Israel, meaning that over 1,600 people at the company's branches in Haifa, Petah Tikva, and Kiryat Gat are expected to lose their jobs soon.
However, sources in the industry estimate the move isn’t a uniform broad measure but a release of employees related to less profitable areas of its activity. Israel is considered a central strategic development and production hub for the company.
Computer chips designed in Haifa have powered computers and devices worldwide for decades, including the newest processor the company is about to unveil, the Lunar Lake for Copilot Plus computers. Meanwhile, investment in manufacturing plants in Kiryat Gat has proven profitable and has stood up to tough tests over the years.
In any case, it’s clear the move won’t pass over Israel even according to optimistic forecasts. In June, Intel froze part of its plans to expand its plant in Kiryat Gat, which was set to cost $25 billion—the largest construction project currently planned in the country.
This freeze already has economic consequences: following the agreement signed with the Israeli government, Intel is obligated to reciprocal procurement in Israel amounting to NIS 60 billion over the next decade. And this without considering its current crisis.
"I have no illusions about the road ahead,", "and neither should you. Tough days are ahead. As hard as it is, we are making necessary changes to usher in a new era of growth."
“I have no illusions that the path in front of us will be easy,” Intel CEO Pat Gelsinger wrote to his employees last week. “You shouldn’t either. This is a tough day for all of us and there will be more tough days ahead. But as difficult as all of this is, we are making the changes necessary to build on our progress and usher in a new era of growth."
It’s hard to say that the company's poor reports, published on Friday and leading to a 26% collapse in its stock, surprised the tech industry. The company’s revenues have been gradually declining over the past four years, its stock has been faltering, and its losses have been increasing.
The company, which for decades almost unchallenged dominated the global processor market, is taking hit after hit.
There’s no doubt that Intel is paying a heavy price for years of technological lagging behind its competitors due to a series of managerial failures and bad decisions. Due to its size and cumbersome organizational culture, it struggles to get out of the spiral with the required grace.
Gelsinger explicitly admitted on Friday, “It takes too long for decisions to be made, so we need to eliminate bureaucracy. And there’s too much inefficiency in the system, so we need to expedite workflows.”
Gelsinger is carrying out an aggressive overhaul at Intel, including a multi-year plan aimed at coming out of the current crisis within four years. During this period, five significant product lines are supposed to be released to the market to close the gap with Intel’s competitors.